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Hong Kong economy contracts 9% in latest quarter – 570 News

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Hong Kong’s economy shrank by 9% from a year earlier in the latest quarter, hurt by the coronavirus pandemic and facing more potential damage from the loss of U.S. trade privileges due to a security law imposed by Beijing.

The performance reported Wednesday for the three months ending in June was an improvement over the previous quarter’s 9.1% contraction, the biggest since the government began reporting such data in the 1970s.

Hong Kong, a centre for trade, finance and tourism, already was struggling before the coronavirus prompted the government to impose travel curbs and restrictions on business.

Tourist arrivals fell following protests that began in June 2019 over a proposed extradition law and expanded to include demands for greater democracy and other grievances.

The territory also faces further trouble after Washington withdrew its special trade status in response to Beijing’s imposition of a security law that will tighten control over the former British colony.

The Trump administration said Hong Kong would no longer be treated as an autonomous trading area. That could result in more scrutiny of goods bound to and from the United States, eroding Hong Kong’s competitive edge against mainland Chinese and other major Asian ports.

The Hong Kong government has launched stimulus programs including most recently a handout of 10,000 Hong Kong dollars ($1,290) to all adults.

Hopes for a quick economic rebound have been tempered by a recent surge in new virus infections.

The Associated Press

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Sweden's economy less hard-hit by coronavirus – BBC News

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Sweden, which avoided a lockdown during the height of the Covid-19 pandemic, saw its economy shrink 8.6% in the April-to-June period from the previous three months.

The flash estimate from the Swedish statistics office indicated that the country fared better than other EU nations which took stricter measures.

However, it was still the largest quarterly fall for at least 40 years.

The European Union saw a contraction of 11.9% for the same period.

Individual nations did even worse, with Spain seeing an 18.5% contraction, while the French and Italian economies shrank by 13.8% and 12.4% respectively.

“The downturn in GDP is the largest for a single quarter for the period of 1980 and forward,” Statistics Sweden said.

“It is, as expected, a dramatic downturn. But compared to other countries, it is considerably better, for instance if you compare to southern Europe,” said Nordea bank chief analyst Torbjorn Isaksson.

Sweden has largely relied on voluntary social distancing guidelines since the start of the pandemic, including working from home where possible and avoiding public transport.

Although businesses have largely continued to operate in Sweden, the country’s economy is highly dependent on exports, which were hit by lack of demand from abroad during the pandemic.

Despite the contraction, Sweden is not yet in recession, since the first quarter saw growth of 0.1%.

An economy is generally deemed to be in recession if it contracts for two consecutive quarters.

Various forecasts predict the Swedish economy will still shrink by about 5% this year.

That is less than other countries hit hard by Covid-19, such as Italy, Spain and the UK, but still similar to the rest of Scandinavia.

Sweden’s unemployment rate of 9% remains the highest in the Nordics, up from 7.1% in March.

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'$500 for everyone': Belarus leader's Soviet-style economy wears thin for some voters – TheChronicleHerald.ca

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By Andrei Makhovsky

MINSK (Reuters) – Under President Alexander Lukashenko, the average monthly wage in Belarus has risen in dollar terms to $500 from $50 in 1999. For voters, there’s just one problem: it hit $500 in 2010, and has been stuck there ever since.

As Lukashenko, a 65-year-old former collective farm manager with a fondness for a Soviet-style command economy, seeks re-election on Sunday after 26 years in power, his economic record is being found wanting by some voters.

“My daughter tells me all the time: I love my country, I want to live in my country,” said Dmitry, a 53-year-old Minsk resident protesting against Lukashenko last week.

“But with what is happening here, there are no prospects for young people. No future,” he said, saying his daughter lived in the Czech Republic and had no plans to return.

He declined to give his surname for fear of reprisals in a country where little dissent is allowed.

Once cast by Washington as “Europe’s last dictator”, Lukashenko controls the levers of power in the strategically important country between East and West through which Russia sends its oil. He is expected to be re-elected.

But he faces protests by opposition supporters rallying around his main opponent, a former English teacher whose husband was jailed and cannot run himself.

Lukashenko is also facing criticism over his human rights record and dismissal of COVID-19 as “a psychosis”.

His once popular promise of “$500 for everyone” was a reflection of rising prosperity in the 2000s, but has become the butt of internet memes.

“People are really sick of it, people want change, people want some kind of development,” said Vadim Iossub, a senior analyst at financial company Alpari Eurasia.

Fraying ties between Belarus and Russia have prompted Moscow to scale back subsidised energy supplies that previously propped up Lukashenko’s rule, creating a $700-million budget hole as the coronavirus pandemic tipped the economy into recession.

Hundreds of thousands of Belarusians have moved abroad in recent years. Lukashenko said on Tuesday the population had fallen by 8%.

UNWRITTEN AGREEMENT

Around 70% of the economy and two-thirds of the workforce have remained in state hands in the former Soviet republic.

While the government has cut red tape for private entrepreneurs, whom Lukashenko once derided as “leeches”, the economy is dominated by public companies receiving government loans and subsidies.

The model has been underpinned by cheap Russian gas and crude oil, processed in Belarusian refineries and exported.

Addressing the nation on Tuesday, Lukashenko promised to double wages within five years and resisted calls for rapid change, casting Belarus as an island of stability at a time of global turmoil.

Lukashenko said he expected the economy to grow by 3-4% in coming years. He said his statist model should deliver that if production and exports are ramped up and Belarus starts to manufacture $4 billion of goods it currently imports annually.

“For the entire term of my presidency, I have not found an answer to the question: why are state-owned enterprises such an eyesore to everyone?” he said.

Belarus grew by an average of less than 1% annually between 2010-2020. In 2012, the purchasing power of Belarusian wages was 73 percent of that in neighbouring Poland. By 2020, it had dropped to 60 percent, according to official data.

Valery Tsepkalo, an election opponent who fled abroad fearing arrest, told Reuters Lukashenko had broken an “unwritten agreement” with voters to deliver prosperity in exchange for political obedience.

“He deprived Belarus people of political freedoms and he also deprives Belarus people of economic growth. This is one of the reasons society started to protest,” he said.

(Additional reporting by Gabrielle Tétrault-Farber in Moscow; writing by Matthias Williams, Editing by Andrew Osborn and Timothy Heritage)

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Now for the hard part: Argentina must fix economy after debt deal – TheChronicleHerald.ca

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By Cassandra Garrison and Eliana Raszewski

BUENOS AIRES (Reuters) – It took months of tough talks for Argentina to reach agreement on restructuring $65 billion in debt. Now, economists and policymakers say, the real work begins: reviving Latin America’s No. 3 economy from its currency and fiscal crises.

Though both government and creditors celebrated Tuesday’s deal that should help Argentina avert a messy default, it still faces a 10%-plus contraction this year, an over-valued peso, spiking poverty and a deep fiscal hole.

“This was the easy step,” Stephen Liston, senior director at the Council of the Americas, said of the debt deal.

How the once-wealthy grains producer does from now is the acid test for Peronist President Alberto Fernandez and his star Economy Minister Martin Guzman, fresh from taming Wall Street.

“This is an important step,” Guzman said of the agreement. “But this does not solve all the problems of the Argentine economy.”

Argentina’s peso has been propped up by tight capital controls, which has seen the value of the currency in black market trades veer dangerously away from the official rate, with the gap currently around 76%.

The government says it plans to ease controls, but only when the economy has been righted, leaving an artificially strong peso that businesses say hinders trade.

‘PRECARIOUS SITUATION’

“It’s a very precarious situation there where you’ve got an over-valued currency, but weakening it will only worsen the debt situation,” said Nikhil Sanghani of Capital Economics in London.

Inflation, the thorn in the side of Argentine policymakers for years, shows little sign of abating. Consumer prices have slowed during the pandemic, but remain at an annualized level above 40% and will likely revive as the economy recovers.

The central bank, looking to mop up liquidity, is facing a “snowball” of short-term debt, temporarily reining in prices but increasingly straining the institution, said economist Eduardo Levy Yeyati of Buenos Aires’ Universidad Torcuato Di Tella.

Getting out from under this would likely mean the bank has to raise interest rates to encourage savings in pesos, he added, otherwise it would risk unleashing a new wave of inflation.

Under the weight of public spending to combat the impact of the pandemic, the primary fiscal deficit soared to $3.53 billion in June and the government is expected to end the year with a large fiscal hole.

Guzman has pledged to return to fiscal balance and keep the deficit under control, but faces a politically tricky balancing act between that and growth-boosting policies.

“The fiscal deficit has blown out again and we think that the primary deficit will be something like 8% of GDP this year,” said Sanghani, adding it could force the government to adopt politically unpalatable measures even as millions face increased poverty.

“If they have to impose some sort of austerity going forward, it will only keep the economy quite weak and that will hinder its ability to pay off even these restructured debts.”

IMF TALKS

The government plans to turn attention to negotiating a new program with its biggest creditor, the International Monetary Fund (IMF), which floated a $57 billion line in 2018.

Argentina may seek to extend its payment schedule in return for lowering inflation, fixing the exchange rate and reeling in public spending, said Claudio Loser, a former director at the IMF’s Western Hemisphere department.

“That would help Argentina a lot in the next decade, if it can be done,” Loser said.

But despite a softer approach from the IMF, any deal would likely come with some tough fiscal demands.

“It’s feasible that the Fernandez government is hesitant on some of these terms,” Sanghani said. “There are still some hurdles to getting a renewed IMF deal, so it’s not a forgone conclusion by any stretch of the imagination.”

(Reporting by Cassandra Garrison and Eliana Raszewski; Editing by Andrew Cawthorne)

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