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Singapore’s economy beats forecasts with 3.8% growth in 2022

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City-state’s growth slowed sharply in fourth quarter, clouding outlook for 2023.

Singapore’s economy has grown more than expected in 2022, according to government figures.

The Southeast Asian city-state’s economy grew 3.8 percent last year, preliminary figures from the Ministry of Trade and Industry showed on Tuesday. The government had forecast growth of 3.5 percent, down from 7.6 percent in 2021.

Growth, however, was weighed down by a 3.0 percent contraction in the key manufacturing sector in the final three months of the year.

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Growth in the fourth quarter came in at 2.2 percent, sharply down from 4.2 percent in July-September, according to the data.

Exports for computer chips and other products have been hit by softer global demand caused by surging inflation and sharp increases in interest rates.

The city-state’s economic performance is often seen as a useful barometer of the global environment because of its reliance on trade with the rest of the world.

IMF Managing Director Kristalina Georgieva on Sunday warned that 2023 will be a “tough year” for the global economy, with one-third of economies expected to be in recession.

Singaporean Prime Minister Lee Hsien Loong warned in his New Year’s message that growth this year is expected to ease to between 0.5 and 2.5 percent.

“The international outlook remains troubled. The Russia-Ukraine conflict continues, with no good outcome in sight,” he said.

Capital Economics said the economy is likely to struggle, which means the Monetary Authority of Singapore is unlikely to tighten monetary policy in 2023.

The central bank tightened its foreign exchange-based monetary policy four times last year to fight rampant inflationary pressures.

“Looking ahead, we think growth is likely to weaken further. Exports are likely to fall further if, as we expect, the global economy enters a recession in 2023,” Capital Economics said.

“Elevated interest rates, declining household savings and high inflation are likely to drag on domestic demand.”

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Economy

Freeland meets with provincial, territorial finance ministers in Toronto

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TORONTO — Deputy Prime Minister and Finance Minister Chrystia Freeland is hosting an in-person meeting Friday with the provincial and territorial finance ministers in Toronto to discuss issues including the current economic environment and the transition to a clean economy.

The meeting will focus on the economic situation both domestically and globally, according to a federal source with knowledge of the gathering, including discussions on how to provide incentives and supports to be competitive with the U.S.’s Inflation Reduction Act.

U.S. President Joe Biden’s Inflation Reduction Act includes electric-vehicle incentives that favour manufacturers in Canada and Mexico, as well as the U.S.

The incentives, which were already revised to include Canada and Mexico after originally focusing on the U.S., are now facing criticism from Europe about North American protectionism.

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The source, who spoke on the condition they not be named to discuss matters not yet made public said the ongoing challenges with health care in Canada will also come up at the meeting. More substantive discussions on that will be held next week when the prime minister meets with premiers on Feb. 7.

In her opening remarks, Freeland said it’s essential for Canada to have its rightful place in the transition to a clean economy, calling it one of the biggest challenges of the moment.

We are in a situation with a lot of economic uncertainty globally, said Freeland, adding that later in the day, the ministers will have a discussion with Bank of Canada governor Tiff Macklem.

“I think that conversation with the governor will be useful and important for all of us,” she said.

Despite the need to address health care challenges, Canadian jobs and the transition to a clean economy, Freeland said the government recognizes it also has to contend with real fiscal constraints.

Freeland will hold a closing news conference at 3:30 p.m. local time.

The meeting comes at a tense time for many Canadian consumers, with inflation still running hot and interest rates much higher than they were a year ago.

The Bank of Canada raised its key interest rate again last week, bringing it to 4.5 per cent, but signalled it’s taking a pause to let the impact of its aggressive hiking cycle sink in.

The economy is showing signs of slowing, but inflation was still high at 6.3 per cent in December, with food prices in particular remaining elevated year over year.

Interest rates have put a damper on the housing market, sending prices and sales downward for months on end even as the cost of renting went up in 2022.

Meanwhile, the labour market has remained strong, with the unemployment rate nearing record lows in December at five per cent.

— With files from Nojoud Al Mallees in Ottawa and James McCarten in Washington

This report by The Canadian Press was first published Feb. 3, 2023.

 

The Canadian Press

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Pakistan PM warns of IMF bailout conditions

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Pakistan’s Prime Minister Shehbaz Sharif has said that the government will have to agree to International Monetary Fund (IMF) bailout conditions that are “beyond imagination”.

Sharif’s comments on Friday came after an IMF delegation landed in Pakistan this week for last-ditch talks to revive vital financial aid which has stalled for months.

The government has held out against tax rises and subsidy-slashing demanded by the IMF, fearful of a backlash before elections due in October.

“I will not go into the details but will only say that our economic challenge is unimaginable. The conditions we will have to agree to with the IMF are beyond imagination. But we will have to agree with the conditions,” Sharif said in televised comments.

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The global lender has set strict conditions before resuming the bailout programme for Pakistan, such as asking the government to allow a market-determined exchange rate for the local currency, ease fuel subsidies, and control circular debt in the power sector.

Pakistan’s economy has been in dire straits, stricken by a balance of payments crisis as it attempted to service high levels of external debt, amid political chaos and a deteriorating security situation. On Wednesday, year-on-year inflation had risen to a 48-year high leaving Pakistanis struggling to afford basic food items.

Before the IMF visit, Islamabad began to bow to pressure with the prospect of national bankruptcy looming and no friendly countries willing to offer less painful bailouts.

The government loosened controls on the rupee to rein in a rampant black market in US dollars, a step that caused the currency to plunge to a record low. Artificially cheap petrol prices have also been raised.

Letters of credit are no longer being issued, except for essential food and medicines, causing a backlog of thousands of shipping containers at a Karachi port stuffed with stock the country can no longer afford.

Sajid Amin, a senior official at the Sustainable Development Policy Institute, a research institute in Islamabad, said Sharif’s statement revealed the depth of the challenges facing the economy.

“Without any doubt, the economic situation is tough. Pakistan is facing multiple crises, including balance of payment crisis, political instability – issues which have delayed decision making from government,” he told Al Jazeera. Amin further said that the delays in the last few IMF reviews have led to increased uncertainty and panic in the market.

“Two of the major IMF conditions, market-determined exchange rate and petrol price increase, are majorly met already. The talks are now more focused on how to meet Pakistan’s circular debt target in the power sector. The fund has not accepted the government’s plan and has asked for a revised plan to deal with the circular debt problem,” he added.

Uzair Younus, director of the Pakistan Initiative at the Atlantic Council’s South Asia Center said that the major hurdle in the IMF negotiations seemed to be the scale and pace of actions required to reduce the fiscal deficit and circular debt. He noted that the IMF’s terms did not seem unreasonable, especially considering the number of times Pakistan has reneged on promises.

“A key issue that remains is the increase in electricity prices and a credible plan to reduce the circular debt. Pakistan has paused these increases for several months, citing floods and other challenges. The IMF wants a rapid increase in rates to reduce the circular deficit, but the government wants to stagger these increases,” the Washington, DC-based analyst told Al Jazeera.

It was no surprise that the IMF was not eager to agree to a staggered approach, given that Pakistan did not have much credibility left when it comes to following through on its agreements, Younus added.

Amin said that given the precarious economic situation in the country, the government must do whatever it takes to get the IMF on board.

“The government must understand, and I think it does understand to some extent, that inflationary pressure and other costs are much higher than the costs of IMF conditions. I think this statement, therefore, may be preparing ground and making people ready for tough measures that the government is going to take to meet the IMF conditions.”

The tumbling economy mirrored the country’s political chaos, with former Prime Minister Imran Khan heaping pressure on the governing coalition in his bid for early elections while his popularity remains high.

Khan, who was removed last year in a no-confidence motion, negotiated a multibillion-dollar loan package from the IMF in 2019.

But he reneged on promises to cut subsidies and market interventions that had cushioned the cost-of-living crisis, causing the programme to stall.

It has been a common pattern in Pakistan, where most people live in rural poverty, with more than two dozen IMF deals brokered and then broken over the decades.

 

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Jobs growth surges in US despite slowdown fears

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Employers added 517,000 jobs last month, the Labor Department said.

That was far more than expected, pushing the unemployment rate down to 3.4% – the lowest rate since 1969.

Analysts are struggling to figure out what is happening in the world’s largest economy, which is being buffeted by a mix of higher borrowing costs and rising prices.

Many forecasters have warned that the odds of a recession this year are unusually high, pointing to data which has indicated a recent pullback in consumer spending, declines in manufacturing and a sharp slowdown in home sales.

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A recent survey by research company Morning Consult suggested nearly half of the public thinks the economy has already fallen into recession, or a period of decline.

Despite this, the labour market has remained strong – though the gains in January shocked even those economists who have argued against the gloomy predictions.

“This is a breathtaking number,” economist Justin Wolfers, a professor at the University of Michigan, wrote on Twitter following the report.

Dante DeAntonio, director at Moody’s Analytics, cautioned against reading too much into a single month of data.

His firm still expects employment growth to slow “dramatically” in the months ahead, and warned that the probability of a recession remained “uncomfortably high”.

But US President Joe Biden, whose approval ratings dropped last year as prices surged – with Republicans blaming his spending plans – said the report showed his critics were wrong in their grim interpretations of the economy.

“For the past two years we’ve heard a chorus of critics write off my economic plan,” he said. “Today’s data makes crystal clear what I’ve always known in my gut – these critics and cynics are wrong.”

The hiring in January was widespread, led by bars and restaurants, which are continuing to recover from job losses sparked by the pandemic.

The car manufacturing and tech industries were among the few parts of the economy to report job losses.

Those sectors are sensitive to borrowing costs, which shot up last year, as the US central bank took steps to stabilise consumer prices.

By raising interest rates, the Federal Reserve is aiming to cool demand, easing the pressures pushing up prices.

However, the increase in rates, coming at a time when price increases have started to ease, has raised fears that officials will tip the economy into a painful contraction, bringing economic activity to an abrupt slowdown that leads to firms to cutting jobs.

The head of the Federal Reserve, Jerome Powell, said this week he was hopeful the US central bank can avoid that scenario.

But he warned that the Fed was focused on curbing inflation and remained worried that the job market was too strong to allow price growth to stabilise around the bank’s 2% target.

Friday’s report showed wages rose 4.4% over the 12 months to January.

Pay increases did not keep pace with price inflation last year and have shown signs of cooling in recent months.

“It’s difficult to see how wage pressures can possibly soften sufficiently when jobs growth is as strong as this and it’s even more difficult to see the Fed stop raising rates and entertain ideas of rate cuts when there is such explosive economic news coming in,” said Seema Shah, chief global strategist at Principal Asset Management.

“The market is going to go through a rollercoaster ride as it tries to decide if this is good or bad news. For now, though, looks like the US economy is doing absolutely fine.”

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