The rise of trade barriers against China and other countries over the past year could cost the global economy $1.4 trillion, on top of the severe damage being done by the war in Ukraine, the head of the International Monetary Fund said.
“What I am hoping to see is some reversals in policy blocks towards China and globally,” Kristalina Georgieva told Bloomberg Television’s Stephen Engle in an interview in Bangkok on Saturday. “The world is going to lose 1.5% of gross domestic product just because of division that may split us into two trading blocs. This is $1.4 trillion.”
For Asia, the potential loss could be twice as bad, or more than 3% of GDP, because the region is more integrated into the global value chain, Georgieva said on the sidelines of the Asia-Pacific Economic Cooperation’s economic leaders gathering this week.
While that would constitute significant damage to the global economy, the biggest factor hurting global growth remains the war in Ukraine, Georgieva said. “The single most damaging factor for the world economy is the war,” she said. “The sooner the war ends, the better.”
The IMF has also cautioned that inflation is hitting developing countries hardest, urging central bankers to keep up their fight to damp price growth and bring some relief, especially in food costs. Dollar appreciation in double-digits so far this year is continuing to cause headaches across emerging markets as investors flock to safe havens amid signs that much of the global economy could be headed toward recession.
Georgieva said that Asian countries must work together to overcome fragmentation in order to sustain growth, especially in the light of the multitude of other economic shocks from Covid-19, the war in Ukraine and the rising cost of living.
“If we add on top of it the fragmentation in the world’s economy, it will be throwing gasoline on a fire,” she said. “Nobody will benefit from it.”
Still, she said nations in Asia are much better equipped to face economic shocks thanks to significant reserves and cooperation within the region.
On the rising risk of sovereign debt in developing countries, Georgieva said the IMF is “not yet alarmed but alert.” About 25% of emerging markets trade in distressed territory, while 60% of low-income countries are at or near debt distress. She encouraged nations strained by the rising cost of servicing dollar-denominated debt and the global economic environment to act preemptively and seek help early from the fund.
Bangladesh was the latest economy to reach a staff-level agreement with the IMF amid dwindling foreign reserves, securing a $4.5 billion loan earlier this month that’s subject to IMF management and board approval in the coming weeks.
The IMF’s research department earlier this week cast its outlook in a starker tone compared to last month, saying in a blog post that the difficulties are “immense.” The fund last month cut its forecast for global growth next year to 2.7%, far below the 3.8% it was predicting in January. It sees a 25% probability that growth will be less than 2%.
IMF calculations show that about one-third of the world economy will have at least two consecutive quarters of contraction this year and next, and that the lost output through 2026 will be $4 trillion.
Georgieva pointed to the particular difficulties facing the European Union because of the war in Ukraine, which could put pressure on the region’s central banks to reverse efforts to tackle inflation too soon.
“In Europe, the situation is more difficult as the impact of war in Ukraine is significant,” she said. “Half of the EU at least may be in recession next year.”
Mint issues black-ringed toonie in memory of Queen Elizabeth II
The Royal Canadian Mint is issuing a new black-ringed toonie to honour Queen Elizabeth II.
The mint says the coin’s black outer ring is intended to evoke a “mourning armband” to honour the queen, who died in September after 70 years on the throne.
The mint says it will start to circulate nearly five million of the coins this month, and they will gradually appear as banks restock inventories.
Aside from the black ring, the mint says the coin retains the same design elements of the standard toonie.
Four different images of the queen have graced Canadian coins since 1953, when she was crowned.
The core of the commemorative toonie will feature the same portrait of the queen that has been in circulation since 2003, with a polar bear design on the other side.
“Queen Elizabeth II served as Canada’s head of state for seven decades and for millions of Canadians, she was the only monarch they had ever known,” Marie Lemay, president and CEO of the Royal Canadian Mint, wrote in a statement.
“Our special $2 circulation coin offers Canadians a way to remember her.”
The mint says it may produce more of the coins, depending on what it calls “marketplace needs”.
This report by The Canadian Press was first published Dec. 7, 2022.
The Canadian Press
Japan’s Economy Shrank Less Over Summer Than First Thought
(Bloomberg) — Japan’s economy took a smaller hit than first thought during a summer marked by a renewed Covid surge and a plunge in the yen, with a return to growth expected this quarter.
Gross domestic product shrank an annualized 0.8% in the three months to the end of September from the previous period, revised figures from the Cabinet Office showed Thursday. That was smaller than the 1.2% contraction first estimated and a 1% drop forecast by economists.
The revised figures showed that stronger exports reduced the heavy negative impact on trade from the yen drop, and that capital spending by firms held up.
A buildup of inventories also helped narrow the contraction of the economy, though that also suggests there wasn’t enough demand for the output of factories. The data also showed consumption was weaker than first thought during the summer Covid surge and inflation acceleration.
Overall, the figures didn’t improve enough to eliminate concerns among policymakers over the resilience of the economy. Japan heads toward the end of the year and into 2023 with clouds darkening over the global outlook, and the possibility of recessions in key overseas markets.
“The weaker consumption worries me,” said Harumi Taguchi, principal economist at S&P Global Market Intelligence. “Spending hasn’t picked up much in the current quarter, either, probably because of inflation and another rise in Covid infections.”
What Bloomberg Economics Says…
“Details under the hood of Japan’s narrower third-quarter GDP contraction aren’t encouraging. A buildup in inventory that contributed to the upward revision will limit catch-up production in 4Q.”
— Yuki Masujima, economist
For the full report, click here
Prime Minister Fumio Kishida has already put together an economic stimulus package to cushion the impact of strengthening inflation that should offer more support for growth early next year. Analysts also expect the economy to have returned to expansion this quarter.
The Bank of Japan, meanwhile, is expected to keep interest rates unchanged at ultra-low levels during the last months of Governor Haruhiko Kuroda’s tenure.
Still, analysts are concerned about how the economy will weather a global slowdown prompted by tighter central bank police elsewhere in the world. Cautious moves by China to relax its virus restrictions offer one of the few points of optimism over the coming months.
“External demand is also be on the wane, as we saw in industrial production,” Taguchi said. “The situation may change if China lifts its zero Covid policy, but for now Europe and the US are bracing for the impact of an economic slowdown in the wake of interest rate hikes.”
Economists expect private sector spending and services consumption to support the economy this quarter. Pent-up demand held over from the summer Covid wave has already fueled consumer outlays, though the recent resurgence of infections will likely start to limit those gains. The government is widely expected to keep the country free of virus-related restrictions to maintain economic activities.
Inflation is growing as another concern for consumption and the recovery path. Japan’s price increases hit their fastest clip in 40 years in October, and the pace likely sped up further in November based on last month’s Tokyo data, a leading indicator for nationwide trends.
Kishida’s support package offers further relief from soaring energy costs with electricity bills set to get hefty subsidies from early next year.
Business spending didn’t get revised up as expected but still showed resilience in corporate sentiment despite a yen slide that prompted government intervention in currency markets. The plunge in the yen over the summer may give companies second thoughts about their business plans.
Still, the yen’s recent pullback may reassure businesses going ahead and should also have a favorable impact on net trade this quarter.
“Personally, I don’t think the capital investment will decrease that much,” said Toru Suehiro, chief economist at Daiwa Securities. “I think that capital investment will continue throughout next year due to pent-up demands.”
Another positive development is that Japan fully reopened its borders to tourists in October. That offers the prospect of renewed inbound spending by visitors attracted by cheaper travel expenses thanks to their relatively stronger currencies.
(Adds economist comment, more details)
Key White House economic advisor says U.S. economy is slowing but resilient
The U.S. economy is showing “continued resilience” despite a predictable slowdown, a top White House economic advisor said Wednesday.
National Economic Council Director Brian Deese said low rates of credit card delinquency and mortgage concerns point to resiliency in household balance sheets, while the labor market and the savings rate also indicate steadier growth. What’s more, he pointed to slowing inflation as a positive sign for healthier economic growth.
“We need to see a transition to a more stable growth trajectory, but I think if you look at the key elements that you need as part of that, some easing on the inflation side … we’re starting to see some evidence in that direction,” Deese said Wednesday on CNBC’s “Squawk Box.”
The November labor market report released Friday showed job growth was better than expected, as nonfarm payrolls increased by 263,000. The unemployment rate was 3.7%.
The Federal Reserve has steadily raised interest rates in an effort to bring down the highest inflation in 40 years, contributing to concerns about a coming recession. The improving labor market, combined with a 0.6% increase in average hourly earnings last month, also has put pressure on the central bank to continue raising rates.
The Fed’s benchmark overnight borrowing rate reached a target range of 3.75%-4% after six consecutive hikes this year. Major U.S. stock indexes have struggled this week, in part due to concerns of a slowing economy and expectations of more rate increases ahead.
The Fed is expected to hike rates again at its meeting next week.
Despite the concerns felt by investors, economic resilience will position the U.S. to become a center of “investment, productivity and innovation” over the next few years, Deese said.
“We were out in (Phoenix) yesterday with a set of CEOs who all underscored this, that even as we’re looking at this transition and navigating through this historically unique transition, the United States looks better as a prospect to invest, and that’s going to be a driver,” Deese said. “That’s going be where we get our innovation and our productive capacity, beyond the next month or two.”
Quebec’s auditor finds Education Department ill-prepared for pivot to online learning
Bob Rae heads to Haiti in attempt at political consensus, amid possible intervention
Visa issues at COP15 biodiversity summit in Montreal could stem from UN delays
Silver investment demand jumped 12% in 2019
Iran anticipates renewed protests amid social media shutdown
Search for life on Mars accelerates as new bodies of water found below planet’s surface
News24 hours ago
Hard talks on hard targets: real work begins at Montreal biodiversity conference
Tech4 hours ago
Fortnite Chapter 4 Season 1: Every Battle Pass Skin Ranked
Health3 hours ago
Breakthrough Infections More Likely in Infliximab Treated IBD Patients Than Those Treated With Vedolizumab
Sports17 hours ago
No accusing Stars’ Robertson, Maple Leafs’ Marner of cheating
News24 hours ago
Chinese FM calls for joint efforts to make China-Japan relationship fit for new era
Investment23 hours ago
Forex Trading Tax Canada | How Are Trading Profits Taxed?
Politics5 hours ago
Kyiv mayor brushes off Zelenskiy’s criticism as ‘politics’
Media5 hours ago
US Sides Against Google in Consequential Social Media Case