(Bloomberg) — Argentina’s economy grew less than expected in the fourth quarter but still had its best year since 2004 as the country emerged from a long and deep recession exacerbated by the pandemic.
Gross domestic product expanded 1.5% in the final three months of the year from the previous quarter, below economists’ expectations for 1.7% growth. GDP rose 10.3% in 2021, the best performance since the series began in 2004, according to data from the nation’s economic statistics bureau published Wednesday.
The unemployment rate fell to 7%, its lowest level since 2015, according to separate official data also published Wednesday. Salaried employment at the private sector has almost completely recouped losses seen during the pandemic, adding 188,000 jobs last year.
South America’s second-largest economy had been enjoying annual growth rates of about 10% in the past few months as it recovers from a very low base following a recession that started in 2018. Yet consumer prices rising more than 50% a year have largely eclipsed such gains, prompting President Alberto Fernandez to recently declare “war on inflation.” The central bank on Tuesday raised its key interest rate to 44.5%.
Read More: Stiglitz Chided After Praising Argentina’s ‘Miracle’ Economy
Argentina’s recovery gained steam in the second half of 2021, when an accelerated vaccination campaign allowed the economy to safely reopen after months of strict lockdown. Investment and public consumption drove growth in the fourth quarter, compared with the previous three months.
Growth is now expected to cool down. The government forecast activity to expand between 3.5% and 4% this year in a staff-level agreement to reschedule over $40 billion in debt payments with the International Monetary Fund. But private economists surveyed by the central bank in February see more modest growth of 3% for 2022, even before taking into account the impact that Russia’s invasion of Ukraine is having on commodity prices and inflation.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
(Bloomberg) — The Norwegian economy recorded a third consecutive quarter of expansion, as a recovery in purchasing power bolstered car purchases and a weak krone underpinned exports.
Mainland gross domestic product, which excludes offshore energy industry and shipping, grew by 0.1% in the second quarter from the previous three months, according to a release from Statistics Norway published Thursday. First-quarter growth was revised lower to 0.1%.
Thursday’s reading was just below the 0.2% growth estimated by both the central bank and economists in a Bloomberg survey.
The outcome shows the energy-rich Nordic nation is dented more than previously assumed by the fallout from interest rates at a 15-year high, even as the slowing inflation and wage growth above 5% fuel consumption.
The weaker-than-forecast figures, together with revision of earlier data, may still increase the odds of Norges Bank reducing borrowing costs before next year. The Norwegian policymakers have kept delaying monetary easing as one of the most aggressively hawkish in the rich world, forecasting no change “for some time ahead” at their meeting last week.
“Negative revisions clearly leave a picture of a weaker mainland economy than Norges Bank projected back in June,” said Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank A/S. “All in all, a report that should keep the door open for a December cut.”
Household consumption grew by 1.6% on quarter due to a “strong upswing” in car purchases, the statistics office said, while noting the figures for the sector can fluctuate “widely.” Trade and power supply also helped boost mainland growth, it said.
The krone is hovering near four-year lows, helping demand for Norwegian exports, as well as its tourism sector. It was little changed following the report, trading 0.1% lower at 11.7233 versus the euro at 8:50 a.m. in Oslo.
Total exports grew 5.6% on quarter, the fastest increase in almost two years, as oil and gas shipments were less affected by maintenance works that are usual for the season.
The country’s largest lender, DNB Bank ASA, on Wednesday kept its forecast for full-year growth of 0.8% in 2024 and projected next year’s growth at 1.6%, largely due to higher purchasing power of consumers. That compares with Norges Bank’s estimates of expansion of 0.8% and 1.3%, respectively, published in June.
Analysts at DNB and Svenska Handelsbanken AB said the deviation from the central bank’s estimates was too small to clearly affect policymakers’ rate outlook.
–With assistance from Joel Rinneby.
(Updates with analyst comment, market reaction from fourth paragraph.)
Last week, Fitch Ratings downgraded Israel’s credit score from A+ to A. Fitch cited the continued war in Gaza and heightened geopolitical risks as key drivers. The agency also kept Israel’s outlook as “negative”, meaning a further downgrade is possible.
After Hamas’s deadly attack on October 7, Israel’s stock market and currency nosedived. Both have since bounced back. But concerns about the country’s economy persist. Earlier this year, Moody’s and S&P also cut their credit ratings for Israel.
So far, Israel’s war on Gaza has killed more than 40,000 Palestinians and decimated the economy in the besieged Palestinian enclave.
There are signs of a blowback in Israel, too, where consumption, trade and investment have all been curtailed.
Separately, Fitch warned that heightened tensions between Israel and Iran could incur “significant additional military spending” for Israel.
The Bank of Israel has estimated that war-related costs for 2023-2025 could amount to $55.6bn. These funds will likely be secured through a combination of higher borrowing and budget cuts.
The upshot is that combat operations are putting a strain on the economy. On Sunday, Israel’s Central Bureau of Statistics estimated that output grew by 2.5 percent (at an annual rate) in the first half of 2024, down from 4.5 percent in the same period last year.
Slowing growth
Before the outbreak of the war, Israel’s economy was forecast to grow by 3.5 percent last year. In the end, output expanded by just 2 percent. An even sharper drop was avoided thanks to the country’s all-important tech sector, which has been largely unaffected by fighting.
Other parts of the economy have taken a significant hit. In the final quarter of last year and in the weeks after the war began, Israel’s gross domestic product (GDP) shrank by 20.7 percent (in annual terms). The slump was driven by a 27 percent drop in private consumption, a drop in exports and a slash in investment by businesses. Household expenditure snapped back at the start of the year, but has since cooled.
Israel also imposed strict controls on the movement of Palestinian workers, forgoing up to 160,000 workers. To tackle those shortages, Israel has been running recruitment drives in India and Sri Lanka with mixed results. But labour markets remain undersupplied, particularly in the construction and agriculture sectors.
According to the business survey company CofaceBDI, roughly 60,000 Israeli companies will close this year due to manpower shortages, logistics disruptions and subdued business sentiment. Investment plans have, in turn, been delayed.
At the same time, tourist arrivals continue to fall short of pre-October levels.
Meanwhile, the war has triggered a steep rise in government spending. According to Elliot Garside, a Middle East analyst at Oxford Economics, there was a 93 percent increase in military expenditure in the last three months of 2023, compared to the same period in 2022.
“In 2024, monthly data suggests military expenditure will be around double the previous year,” Garside said. Much of that increase will be used on reservist wages, artillery, and interceptors for Israel’s Iron Dome defence system.
Garside told Al Jazeera these expenditures “have mostly been financed by issuance of domestic debt”.
Israel has also received some $14.5bn supplemental funding from the United States this year, on top of the $3bn in annual aid that the US provides to the country.
Garside noted, “We are yet to see any major cutbacks to other parts of the budget [like healthcare and education], although it is likely that cuts will be made in the aftermath of the conflict.”
Absent a full-scale regional war, Oxford Economics anticipates that Israel’s economy will slow to 1.5 percent growth this year. Subdued growth and elevated deficits will put further pressure on Israel’s debt profile, which will likely raise borrowing costs and soften investor confidence.
Bruised public finances
Fitch expects Israel to permanently increase military spending by 1.5 percent of GDP compared to prewar levels, with unavoidable consequences for the public deficit. Last week’s rating report noted that “debt [will] remain above 70 percent of GDP in the medium-term”.
What’s more, the rating agency warned that “the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts”.
Regional conflict
On Monday, US Secretary of State Antony Blinken said that Netanyahu had accepted a “bridging proposal” designed to reach a ceasefire between Israel and Hamas and diffuse growing tensions with Iran.
The following day, eight Palestinians were killed in an Israeli attack on a crowded market in Deir el-Balah, in central Gaza.
Hamas has yet to agree to the bridging proposal, calling it an attempt by the US to buy time “for Israel to continue its genocide”. Instead, the Palestinian group has urged a return to a previous proposal announced by US President Joe Biden, which has more guarantees that a ceasefire would bring about a permanent end to the war.
Netanyahu has insisted that the war will continue until Hamas is totally destroyed, even if a deal is agreed. Israeli officials, including Defence Minister Yoav Gallant, have rubbished the idea of a total victory against Hamas.
A decades-old shadow war between Israel and Iran surfaced in April, when Tehran launched hundreds of drones and missiles at Israel in response to the killing of two commanders from Iran’s Islamic Revolutionary Guard Corps (IRGC) in Damascus.
Along its Lebanese border, Israel has traded near-daily attacks with Hezbollah since last October. The armed group began firing on Israel as a show of solidarity with Hamas. Both organisations have close ties with Iran.
More recently, the assassinations of Hamas leader Ismail Haniyeh in Tehran and Hezbollah military commander Fuad Shukr in Beirut have sparked fears that the conflict in Gaza could metastasise into a regional conflict.
“The human toll [of a wider war] could be significant. There would also be huge economic costs,” says Omer Moav, an Israeli economics professor at the University of Warwick.
“For Israel, a long war would come with high costs and greater deficits,” he said.
In addition to undermining Israel’s debt profile, Moav said that prolonged fighting would incur “other costs”, like labour shortages and infrastructure damage, as well as the possibility of international sanctions against Israel.
“Israel is currently ignoring the fact that economics may lead to greater [societal] damage than war itself,” said Moav. “The government is not behaving responsibly. Does it want to avoid the costs of war, or does continued conflict serve political interests?”
