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China's Economy Is Reeling From Successive Punches: Eco Week – Financial Post

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(Bloomberg) — China is counting the cost of a multiple whammy of hits to its economy, from a crackdown on the property market and an energy crunch to stringent virus controls and soaring commodity prices.   

The cumulative impact will show in gross domestic product for the third quarter due on Monday, with growth forecast to slow to 5% from 7.9% in the previous three months. Further illustrating that picture will be monthly industrial and investment data the same day, revealing the severity of electricity shortages last month.

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China’s slowdown will ripple across Asia and the rest of the world, knocking commodity markets like steel and iron ore that are reliant on the country’s construction activity. 

With Beijing tightening its grip on the property market as part of a broader effort to tackle financial risks, real-estate sales and prices are already falling. 

Meanwhile, a power shortage last month curbed factory production, pushing the purchasing managers index down enough to signal a manufacturing contraction for the first time since the pandemic started — even if frontloaded export orders for Christmas could have offset some of that. 

Beijing will likely still meet its modest full-year growth target of more than 6%, meaning authorities may be in no rush to pump in stimulus. The People’s Bank of China refrained from injecting liquidity into the financial system on Friday, while asking lenders to keep credit to the real estate sector “stable and orderly.”

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Premier Li Keqiang sounded a confident note in a speech on Oct. 14, saying China has “risen up to the challenges” including severe flooding and a complex international environment.

“Growth leveled off a little bit” in the third quarter, he said. “But for the whole year, we have the confidence and the ability to meet our overall development targets.” 

What Bloomberg Economics Says:

“China’s GDP data are likely to confirm a sharp deceleration in growth in the third quarter, as a confluence of shocks — delta variant outbreaks, an acute energy shortage and regulatory tightening — batter the economy.”

–Chang Shu and David Qu. For full analysis, click here

Elsewhere, Turkey may cut interest rates while Russia raises them, a new reading of U.K. inflation may keep focus on the Bank of England’s possible response, and the Federal Reserve will release its Beige Book. 

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Click here for what happened last week and below is our wrap of what’s coming up in the global economy.

Asia

Aside from Chinese economic data, Japan is likely to be a focus as its general election campaign kicks off Monday with a policy debate among party leaders seeking to stop what looks like an inevitable victory for new Prime Minister Fumio Kishida. 

Japanese exports figures out Wednesday should offer the latest gauge of how the global trade recovery is holding up amid supply chain bottlenecks. Inflation figures on Friday are likely to show the first price growth in Japan in 18 months, and a much stronger upward trend fueled by energy prices. 

Also on Friday, Reserve Bank of Australia Governor Philip Lowe speaks on a panel about central bank mandates amid talk of a possible review of the RBA’s. Indonesia’s central bank is likely to keep interest rates on hold when it meets on Tuesday.

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For more, read Bloomberg Economics’ full Week Ahead for Asia

U.S. 

In the U.S., traders await the latest data on industrial production, manufacturing and housing to judge the state of the economy. 

For Fed watchers, the central bank’s Beige Book is due out on Wednesday and will provide a snapshot of businesses across the country.

For more, read Bloomberg Economics’ full Week Ahead for the U.S.

Europe, Middle East, Africa

U.K. inflation on Wednesday is likely to have kept to the fastest pace in almost nine years in September, with a reading of 3.2% anticipated. Investors having piled on bets in recent weeks for imminent Bank of England tightening, so these data will be one of the most-watched reports in the region.   

Elsewhere, the coming days present a final window for European Central Bank policy makers to speak out on the future of stimulus before a pre-decision quiet period. Executive Board members Fabio Panetta and Philip Lane, along with Governing Council member Olli Rehn, are among officials scheduled to share their views. 

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In the Nordic countries, Riksbank Governor Stefan Ingves and Deputy Governor Martin Floden will speak in Sweden’s Parliament on Wednesday, while Norway’s sovereign wealth fund — the world’s biggest — will release third-quarter results the next day. 

Interest-rate decisions will dominate the economic news from around the rest of the wider region, with seven due this week. 

The highlights include Turkey, whose central bank will hold its first meeting on Thursday since President Recep Tayyip Erdogan sacked three policy makers who were wary of cutting rates, driving the lira to record lows. That sets the stage for the bank to maintain its easing cycle after a surprise cut at its last decision, despite runaway inflation.

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Meanwhile on Friday, economists predict Russia’s central bank will raise its interest rate by a quarter-point amid no letup in inflation, though expectations are rising that policy makers could go even further, with a half-point move. 

For more, read Bloomberg Economics’ full Week Ahead for EMEA

Here’s a quick summary of the other monetary decisions due in the region: 

Hungary’s central bank is poised to raise interest rates for a fifth month but resist pressure to accelerate tightening. That’s on Tuesday.The Mauritius central bank will likely leave its benchmark rate at an all-time low of 1.85% on Wednesday to support growth in the tourism-dependent nation.Also Wednesday, Namibia is expected to keep its key interest rate unchanged to aid the recovery.Ukraine’s central bank, the same day, will reveal how it plans to address persistent inflation against the backdrop of plans to keep borrowing costs unchanged this year.Botswana’s central bank may stay on hold on Thursday, reckoning that inflation now above its target band of 6% start will start moving back within range

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Latin America

On Tuesday, look for data to show that Colombia’s strong June-July activity, which saw the economy return to its pre-pandemic level, continued in August. The IMF forecasts 2021 output of 7.6%, which would be the fastest since at least 1991.

Argentine President Alberto Fernandez’s government has ramped up spending before next month’s midterms. Look for the September budget results out Wednesday to push the year-to-date deficit well above 500 billion pesos.  

On Thursday, Mexican retail sales figures for August will likely show some bounce given a record high level of remittances in the month and sustained rises in same-store sales. In Argentina, an easing pandemic and rising mobility may sustain the June-July bump in Argentina GDP-proxy data into August.

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Mexico posts mid-month inflation data on Friday, the second-to-last set of readings before Banxico’s November rate decision. Persistently elevated inflation has seen a divided central bank hike at its last three meetings to the current 4.75%. Patience may be wearing thin, though, with the board talking of “a more aggressive adjustment” to deal with the risk scenario ahead.

Closing out the week, Brazil on Friday reports September current account and foreign direct investment figures.

For more, read Bloomberg Economics’ full Week Ahead for Latin America

©2021 Bloomberg L.P.

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Taliban Prime Minister Seeks Global Help to Shore Up Economy – Bloomberg

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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.

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Afghan Economy Nears Collapse as Pressure Builds to Ease U.S. Sanctions – The New York Times

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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.

Victor J. Blue for The New York Times
Victor J. Blue for The New York Times

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.

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“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.

Kiana Hayeri for The New York Times
Jim Huylebroek for The New York Times

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.

Kiana Hayeri for The New York Times
Kiana Hayeri for The New York Times

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.

“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.

Kiana Hayeri for The New York Times
Kiana Hayeri for The New York Times

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.”

Jim Huylebroek for The New York Times

Kiana Hayeri contributed reporting from Mazar-I-Sharif, and Yaqoob Akbary from Kandahar.

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Charting Global Economy: Latin America at Top of Inflation Wave – BNN

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(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

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:

U.S.

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.

Europe

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. 

Asia

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. 

Emerging Markets

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.

World

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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