(Bloomberg) — China’s economy is slowing more than people think and the outlook is for weaker growth going forward as the government is unlikely to step in with significant stimulus, according to Leland Miller, chief executive officer of China Beige Book.
“The third quarter was particularly brutal” for China’s economy, Miller said Friday on Bloomberg Television in Singapore. In addition, “we’re going to be looking at much lower growth going forward and it’s going to be because the Party is OK with that.”
There was some stabilization in China’s economic data in October but consumption continues to struggle, with household spending hurt by income losses last year, uncertainty about Covid-19 and rising inflation. Even so, the government and central bank haven’t stepped in with massive stimulus, preferring to “fine-tune” policies rather than flood the economy with support.
Market participants expected policy makers to increase stimulus over the past two years after Covid and then again after there was no rebound in consumer spending, but that didn’t happen, Miller said.
“There was no big stimulus or broad policy easing,” he said, because China’s leaders have decided “to slow things down, to work toward slower, healthier growth of the Chinese economy, rather than deal with the consequences of keeping pushing this model to its limits.”
The government will be able to contain the problems from China Evergrande Group within the property sector, Miller argued, because they have control over the banks and other counterparties, and so there won’t be unconstrained contagion. However, the problem for the economy is that there’s no replacement for the property sector as a driver of growth.
“Structurally, nothing is being done to empower consumers,” either through a much stronger currency or via transferring state assets to households, Miller said. “Investment is falling but consumption is not being empowered.”
“Retail sales haven’t looked good for a while and they’re probably not going to look good going forward,” he said.
©2021 Bloomberg L.P.
Taliban Prime Minister Seeks Global Help to Shore Up Economy – Bloomberg
Afghanistan’s Acting Prime Minister Mullah Mohammad Hassan said his interim administration has inherited a sinking economy and called on the global community to assist the country in preventing a further crisis as inflation spirals.
The former U.S.-backed government of Ashraf Ghani was corrupt and damaged the country’s economic situation, Hassan said in his first national address since assuming office. “The Islamic Emirate wants good relations with all countries and economic relations with them.” Only the audio portion of the speech was broadcast on television.
Afghan Economy Nears Collapse as Pressure Builds to Ease U.S. Sanctions – The New York Times
Afghanistan’s economy has crashed since the Taliban seized power, plunging the country into one of the world’s worst humanitarian crisis.
MAZAR-I-SHARIF, Afghanistan — Racing down the cratered highways at dawn, Mohammad Rasool knew his 9-year-old daughter was running out of time.
She had been battling pneumonia for two weeks and he had run out of cash to buy her medicine after the bank in his rural town closed. So he used his last few dollars on a taxi to Mazar-i-Sharif, a city in Afghanistan’s north, and joined an unruly mob of men clambering to get inside the last functioning bank for hundreds of miles.
Then at 3 p.m., a teller yelled at the crowd to go home: There was no cash left at the bank.
“I have the money in my account, it’s right there,” said Mr. Rasool, 56. “What will I do now?”
Three months into the Taliban’s rule, Afghanistan’s economy has all but collapsed, plunging the country into one of the world’s worst humanitarian crises. Millions of dollars of aid that once propped up the previous government has vanished, billions in state assets are frozen and economic sanctions have isolated the new government from the global banking system.
Now, Afghanistan faces a dire cash shortage that has crippled banks and businesses, sent food and fuel prices soaring, and triggered a devastating hunger crisis. Earlier this month, the World Health Organization warned that around 3.2 million children were likely to suffer from acute malnutrition in Afghanistan by the end of the year — one million of whom at risk of dying as temperatures drop.
No corner of Afghanistan has been left untouched.
In the capital, desperate families have hawked furniture on the side of the road in exchange for food. Across other major cities, public hospitals do not have the money to buy badly needed medical supplies or to pay doctors and nurses, some of who have left their posts. Rural clinics are overrun with feeble children, whose parents cannot afford food. Economic migrants have flocked to the Iranian and Pakistani borders.
As the country edges to the brink of collapse, the international community is scrambling to resolve a politically and legally fraught dilemma: How can it meet its humanitarian obligations without bolstering the new regime or putting money directly into the Taliban’s hands?
In recent weeks, the United States and the European Union have pledged to provide $1.29 billion more in aid to Afghanistan and to Afghan refugees in neighboring countries. But aid can do only so much to fend off a humanitarian catastrophe if the economy continues to crumble, economists and aid organizations warn.
“No humanitarian crisis scan be managed by humanitarian support only,” said Abdallah Al Dardari, the United Nations Development Program’s resident representative in Afghanistan. “If we lose these systems in the next few months, it will not be easy to rebuild them to serve the essential needs of the country. We are witnessing a rapid deterioration to the point of no return.”
Under the previous government, foreign aid accounted for around 45 percent of the country’s G.D.P. and funded 75 percent of the government’s budget, including health and education services.
But after the Taliban seized power, the Biden administration froze the country’s $9.5 billion in foreign reserves and stopped sending the shipments of U.S. dollars upon which Afghanistan’s central bank relied.
The scale and speed of the collapse amounts to one of the largest economic shocks any country has experienced in recent history, economists say. Last month, the International Monetary Fund warned that the economy is set to contract up to 30 percent this year.
Thousands of government employees, including doctors and teachers, have gone months without pay. The wartime economy that employed millions and propped up the private sector has come sputtering to a halt.
By the middle of next year, as much as 97 percent of the Afghan population could sink below the poverty line, according to an analysis by the United Nations Development Program. Many people who were already living hand-to-mouth have been pushed over the edge.
One October morning in Mazar-i-Sharif, dozens of men gathered downtown, carrying shovels cobbled together with rough wood and rusted metal.
For years, day laborers have gathered there to pick up work digging wells, irrigating fields of cotton and grain, or doing construction around the city. The pay was modest — a couple dollars a day — but enough to buy food for their families and pay other small bills. These days, though, the men stay at the square until sunset hoping for even one day of work a week. Most cannot even afford to buy bread during lunch.
“There was work one day — and then suddenly there wasn’t,” said Rahmad, 46, standing in the crowd. “It was so sudden I didn’t have time to plan or save money or anything.”
Even before the Taliban takeover, Afghanistan’s fragile economy was wracked by slow growth, corruption, deep poverty and a severe drought.
Afghanistan has long been dependent on imports for basic foods, fuel and manufactured goods, a lifeline that was severed after neighboring countries closed their borders during the Taliban’s military campaign this summer. Trade disruptions have since caused shortages of crucial goods, like medicine, while the collapse of financial services has strangled traders who rely on U.S. dollars and bank loans for imports.
At the Hairatan port along the Afghanistan-Uzbekistan border, a team of workers unloaded flour bags from a shipping container into trucks, sending clouds of white specks into the air. Since August, their company has slashed its imports in half; people can no longer afford basic goods.
At the same time, the cost of doing business soared. Customs and traffic officers, who have gone unpaid for months, are asking for more in bribes, according to a manager for the company, the Bashir Navid Group.
Understand the Taliban Takeover in Afghanistan
Who are the Taliban? The Taliban arose in 1994 amid the turmoil that came after the withdrawal of Soviet forces from Afghanistan in 1989. They used brutal public punishments, including floggings, amputations and mass executions, to enforce their rules. Here’s more on their origin story and their record as rulers.
“Everything is disorganized,” the manager, Mohammad Wazir Shirjan, 50, said. “Everyone is completely frustrated.”
To avoid a complete currency collapse, the Taliban limited bank withdrawals to first $200 and then $400 a week and have appealed to China, Pakistan, Qatar and Turkey to fill its budget hole, which is billions of dollars large. So far, none have offered the financial backstop that Western donors provided to the former government.
The Taliban have also pressed the United States to release its chokehold on the country’s finances or risk a famine, as well as Afghan migrants flooding into Europe in search of work.
“The humanitarian crisis we have now is the result of those frozen assets. Our people are suffering,” Ahmad Wali Haqmal, a spokesperson for the Ministry of Finance, said in an interview.
In late September, the Biden administration issued two sanctions exemptions for humanitarian organizations to ease the flow of aid, and it is considering additional adjustments, according to humanitarian officials involved in those negotiations. But those exemptions do not apply to paying employees like teachers in government-run schools and doctors in state hospitals, and the decision not to include them risks the collapse of public services and a further exodus of educated professionals from the country, humanitarians say.
And the scope of the exemptions is limited in other ways. Many foreign banks that aid organizations rely on to transfer funds into Afghanistan have cut ties to Afghan banks for fear of running afoul of sanctions. And the liquidity crisis severely restrains the amount that organizations can withdraw to pay vendors or aid workers.
“The current economic restrictions and sanctions policy, if maintained and not adjusted, are on track to hurt the Afghan people — through deprivation and famine — more than the Taliban’s brutalities and poor governance,” said John Sifton, the Asia advocacy director at Human Rights Watch.
Already in hospitals across the country are signs of a hunger crisis that could overwhelm the fragile health care system.
In a malnutrition ward of a hospital in southern Afghanistan, Shukria, 40, sat with her 1-year-old grandson, Mahtab, his mouth craned open but body too weak to let out a cry.
For weeks, the boy’s father had come home empty-handed from his mechanic shop as business dried up, and the family resorted to bread and tea for every meal. Soon his mother stopped producing milk to breastfeed, so she and Shukria supplemented his diet with milk from their family’s goat. But when they ran out of cash to buy food, they sold the animal.
“I’ve been asking this hospital to give me work,” Shukria said. “Otherwise after a week, a month, he will just end up sick and back here.”
Kiana Hayeri contributed reporting from Mazar-I-Sharif, and Yaqoob Akbary from Kandahar.
Charting Global Economy: Latin America at Top of Inflation Wave – BNN
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While prices are rising all over the world, the increases are especially striking in Latin America, which has the highest inflation forecast for both this year and next.
U.S. and U.K. inflation metrics recorded multi-decade highs, while big price jumps in New Zealand led the central bank to raise interest rates for the second time in as many months. India’s economy is showing signs of strengthening, while an increase in Covid-19 infections is denting business sentiment in Germany.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Personal spending rose in October from a month earlier by the most since March, while a closely watched inflation measure posted the largest annual increase in three decades. The figures come as some Federal Reserve officials are advocating for a faster tapering of the central bank’s asset-purchase program than initially planned.
The supply crunch that’s helped drive inflation to multi-decade highs shows some signs of easing in the U.S. -– but it’s still getting worse in Europe.
Applications for U.S. state unemployment benefits plunged last week to a level not seen since 1969, which if sustained would mark the next milestone in the labor market’s uneven recovery. However, the larger-than-expected drop was largely explained by how the government adjusts the raw data for seasonal swings.
German business confidence took another hit in November, with a new wave of Covid-19 infections looming over the economy and rising inflationary pressures threatening to weigh on manufacturing. Expectations for the next half year also worsened.
U.K. companies reported the strongest inflation in more than two decades during November, adding to pressure on the Bank of England to lift interest rates as early as this month. IHS Markit Ltd. said 63% of purchasing managers reported increased cost burdens, driving the fastest growth in an index tracking inflation since the report started in 1998.
Singapore expects gross domestic product to expand 3% to 5% next year, a slower pace than this year as its rebound from the worst of the pandemic steadies. The first official forecast for 2022 compares with about 7% this year, the Ministry of Trade and Industry said Wednesday, reflecting the impact from easing pandemic restrictions and a stabilizing global economy.
China pulled back on its already halting progress toward meeting its U.S. trade deal targets, slowing purchases of all types of goods covered by the agreement despite calls from the Biden administration for Beijing to adhere to its commitments.
Price surges are busting through policy makers’ targets in all of Latin America’s major economies, with annual inflation prints this month of 6% in Chile, 10.7% in Brazil and a whopping 52% in Argentina. Consumer prices in Mexico rose 7.05% in the first half of November from a year prior, the highest in 20 years.
India’s economy showed steady signs of strengthening in October as services, manufacturing and exports kept it on course to post the world’s fastest growth.
New Zealand’s central bank raised interest rates for the second time in two months and signaled it will need to tighten policy more quickly than previously expected to contain inflation.
©2021 Bloomberg L.P.
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