Japan was hit by its biggest economic contraction on record in the second quarter as the coronavirus pandemic crushed consumption and exports, keeping policymakers under pressure for bolder action to prevent a deeper recession.
The third straight quarter of declines knocked the size of real gross domestic product (GDP) to decade-low levels, wiping out the benefits brought by Prime Minister Shinzo Abe’s “Abenomics” stimulus policies deployed in late 2012.
While the economy is emerging from the doldrums after lockdowns were lifted in late May, many analysts expect any rebound in the current quarter to be modest as a renewed rise in infections keep consumers’ purse-strings tight.
“The big decline can be explained by the decrease in consumption and exports,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“I expect growth to turn positive in the July-September quarter. But globally, the rebound is sluggish everywhere except for China.”
The world’s third-largest economy shrank an annualized 27.8 per cent in April-June, government data showed on Monday, marking the biggest decline since comparable data became available in 1980 and slightly bigger than a median market forecast for a 27.2 per cent drop.
While the contraction was smaller than a 32.9 per cent decrease in the United States, it was much bigger than a 17.8 per cent fall Japan suffered in the first quarter of 2009, when the collapse of Lehman Brothers jolted global financial markets.
The size of Japan’s real GDP shrank to 485 trillion yen, the lowest since April-June 2011, when Japan was still suffering from two decades of deflation and economic stagnation.
The main culprit behind the dismal reading was private consumption, which plunged a record 8.2 per cent as lock-down measures to prevent the spread of the virus kept consumers at home.
External demand — or exports minus imports — shaved a record 3.0 percentage points off GDP, as overseas shipments plunged 18.5 per cent, with auto exports hit particularly hard.
Falling global vehicle sales have hurt automakers like Mazda Motor Corp and Nissan Motor Co, among the biggest drivers of Japan’s economy, and their parts suppliers.
Capital expenditure declined 1.5 per cent in the second quarter, less than a median market forecast for a 4.2 per cent fall, as solid software investment made up for weak spending in other sectors.
Economy Minister Yasutoshi Nishimura conceded the GDP readings were “pretty severe,” but pointed to some bright spots such as a recent pickup in consumption.
“We hope to do our utmost to push Japan’s economy, which likely bottomed out in April and May, back to a recovery path driven by domestic demand,” he told a news conference.
Japan has deployed massive fiscal and monetary stimulus to cushion the blow from the pandemic, which hit an economy already reeling from last year’s sales tax hike and the U.S.-China trade war.
While the economy has re-opened after the government lifted state of emergency measures in late May, a worrying resurgence in infections cloud the outlook for business and household spending.
Hungary extends loan moratorium as economy struggles to recover from pandemic – The Guardian
By Krisztina Than
BUDAPEST (Reuters) – Hungary will extend a moratorium on loan repayments for some households and companies until the middle of 2021, as its finance minister warned the economy could struggle to grow next year unless a coronavirus vaccine is found.
Prime Minister Viktor Orban introduced the moratorium for all companies and private borrowers in March as one of his government’s key measures to help reduce the economic fallout from the pandemic. It was due to expire at the end of the year.
In a video posted on his official Facebook page on Saturday, Orban said the moratorium would be extended by six months for families with children, the retired, unemployed and those in public works programmes.
The extension until the middle of 2021 will also apply to companies that have seen revenues drop by at least 25%.
Orban also said loan contracts for all households and companies agreed before the pandemic could not be terminated for six months.
The moves come as the government prepares to announce more steps to try to revive growth, after the economy plunged more than expected in the second quarter and prospects for a recovery next year have worsened.
The weak economic outlook could represent the biggest threat to nationalist Orban’s decade-long rule as he prepares to face parliamentary elections in the first half of 2022.
Finance minister Mihaly Varga said in an interview published earlier on Saturday that if a coronavirus vaccine was not available by the middle of 2021 the economy might struggle to grow next year, based on a pessimistic scenario.
Under an optimistic scenario, the economy could grow by 4-5% if a vaccine was available in the second quarter, he told newspaper Magyar Nemzet.
A third scenario was for a protracted recovery with 3%-4% growth, also conditional on a vaccine being available, he added.
Hungary’s economy is expected to shrink by 5%-6% this year.
Varga said the government was working on new stimulus measures that could include targeted tax cuts for crisis-hit sectors.
After a spike in new cases in recent weeks, Hungary reported 809 new coronavirus infections on Saturday, bringing the total to 16,920, with 675 deaths.
(Reporting by Krisztina Than; Editing by David Clarke and Mark Potter)
Why falling immigration isn't that bad for the economy during COVID-19 – Yahoo Canada Finance
COVID-19 travel restrictions have put a big dent in immigration, widely seen as something the economy relies on, but the negative effects aren’t as bad as they might seem.
The latest government numbers show 13,645 fewer permanent residents came to Canada in July, down 63 per cent from the same month last year. April and June were similarly weak periods, making the likelihood of reaching the federal government’s target of 341,000 less likely.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.” data-reactid=”18″>For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada. ” data-reactid=”19″>“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada.
“So, even a complete shutdown of immigration would (roughly) shave 1 percentage point from growth (or a bit less). Not small by any means, but that compares with what could be a 6 per cent drop in GDP (OECD said -5.8 per cent for this year, we are looking at -5.5 per cent).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.” data-reactid=”21″>Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.
“Overall, given the realities of COVID and the now-soft demand for labour, the cool down in immigration by itself will not be particularly harmful — and certainly less so than it would have been say a year ago.” said Porter.
Long term effects without immigration
Pedro Antunes, the Conference Board of Canada’s chief economist, also thinks the effects are mitigated in the short-term but that doesn’t mean the economy will be totally unscathed.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.” data-reactid=”25″>“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.
However, he believes it’s more important to look at the long term repercussions of reduced immigration.
“Canada’s underlying capacity is dependent on private and public investment, adoption of technology and the number of workers (and the skills of those workers). We know from our prior research that without immigration, our labour force would be flat or declining (since exiting baby-boomers outnumber school leavers),” said Antunes.
“If immigration levels are reduced over a few years (we think 2020 and 2021 at least) the result is a long-lasting impact on our potential (or productive capacity).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.” data-reactid=”29″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for Apple and Android.” data-reactid=”30″>Download the Yahoo Finance app, available for Apple and Android.
EU looks to fast 5G, supercomputers to boost virus-hit economy – TheChronicleHerald.ca
By Foo Yun Chee
BRUSSELS (Reuters) – The European Commission on Friday urged the 27-country bloc to work together to speed up the rollout of fibre and 5G networks to boost the region’s virus-hit economy and secure its technology autonomy.
EU countries should develop a best practices toolbox by March 30 with the aim of cutting cost and red tape, provide timely access to 5G radio spectrum and allow for more cross-border coordination for radio spectrum for 5G services, the EU executive said.
The coronavirus outbreak showed how important internet services and 5G are, European digital chief Margrethe Vestager said.
“We have seen the current crisis highlight the importance of access to very high-speed internet for businesses, public services and citizens, but also to accelerate the pace towards 5G,” she said in a statement. “We must therefore work together towards fast network rollout without any further delays.”
The Commission also proposed a recommendation to boost research and activities to develop new supercomputing technologies.
“Keeping up in the international technological race is a priority, and Europe has both the know-how and the political will to play a leading role,” Internal Market Commissioner Thierry Breton said in a statement.
The Commission is investing 8 billion euros($9.46 billion)in the next generation of supercomputers.
(Reporting by Foo Yun Chee; Editing by Tomasz Janowski)
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