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Thai Baht at Crossroads as Economy Seen Bottoming Out This Year

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Thai Baht at Crossroads as Economy Seen Bottoming Out This Year

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(Bloomberg) — Thailand’s baht could be at a turning point. It’s the second-worst performing currency in Asia this year, but expectations that the economy may bottom out over the next few months is spurring some bullish bets.

The baht lost ground as Thailand’s tourism-dependent economy was hit hard by travel restrictions to control the coronavirus spread. It’s down almost 4% against the dollar this year, just behind the Indonesian rupiah. Though, it’s showing signs of revival with gains of 0.5% in August.

Some analysts are turning bullish after Thailand’s Finance Minister Predee Daochai said last week the economy will likely bottom out in the second half of the year and rebound in 2021. Current account data this week could also be supportive as it’s forecast to post a surplus of $1 billion in July from a deficit of $247 million in the previous month.

“Over a thee-month horizon, we think it will outperform its Asian peers,” says Divya Devesh, head of Asean & South-Asia FX research at Standard Chartered Bank SG Ltd in Singapore. He sees the nation’s status as a major gold exporter and positive real yields attracting inflows.

The baht’s misfortune is a dramatic swing from last year, when it was the region’s best performer with an 8.6% gain. While the economic recovery prospects bode well for the currency, the Bank of Thailand has indicated in its latest meeting minutes that that it will act if needed to prevent a rapid appreciation.

The baht also remains vulnerable to outflows. Thailand’s Government Pension Fund, a 1 trillion baht ($32 billion) asset manager, plans to boost its overseas investments citing limited options in domestic equities.

Technically, the baht remains in consolidation mode as the dueling forces battle it out. The currency pair’s 100 day moving average continues to cap any rally against the dollar, while support under 31.00 is limiting any downside movement.

Below are the key Asian economic data and events due this week:

Monday, Aug. 31: Thailand July BoP current account balance and trade balance, Australia 2Q inventories and company operating profit, New Zealand business confidence, Japan industrial production, retail sales and consumer confidence, China manufacturing and non-manufacturing PMI, South Korea industrial production, India 2Q GDPTuesday, Sept. 1: RBA rate decision, Australia building approvals and 2Q BoP current account balance and net exports of GDP, New Zealand building permits, Japan jobless rate, manufacturing PMI and 2Q capital spending and company profits, China Caixin manufacturing PMI, South Korea trade balance and 2Q GDP, Indonesia CPI, Thailand business sentiment indexWednesday, Sept. 2: Australian 2Q GDP, New Zealand 2Q terms of trade, South Korea CPIThursday, Sept. 3: Australia trade balance, Japan services PMI, China services PMIFriday, Sept. 4: Australia retail sales, New Zealand 2Q volume of all buildings, South Korea BoP current account balance, Philippines CPI and unemployment rate

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4 million more Americans turn to Medicaid as coronavirus roils the economy – CNN

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The 5.7% jump between February and June came as millions of people lost their jobs — and, for many, their health insurance too — amid the public health emergency. Also, a coronavirus relief package Congress passed in mid-March barred states from cutting eligibility and disenrolling beneficiaries during the pandemic.
The surge marks a reversal of the slow decline in Medicaid enrollment since mid-2017 and accompanying increase in the number of uninsured adults and children.
More than 2.4 million adults enrolled in Medicaid, an increase of 7.2%. Also, 1.4 million kids signed up for Medicaid or the Children’s Health Insurance Program, a jump of 4.1%. (This data does not include Arizona and the District of Columbia, which did not report the breakouts for adult and child enrollment for one or more months covered in the report.)
Some 68 million people were enrolled in Medicaid and another 6.7 million children were in CHIP in June, according to the Centers for Medicare and Medicaid Services data.
The increase, however, was less than some experts had predicted amid the economic collapse last spring. That’s in part because some workers were temporarily furloughed and able to keep their work-based health coverage, said Edwin Park, a research professor at the Georgetown Center for Children and Families. Also, Medicaid enrollment typically lags job loss during a recession.
But more of those layoffs are becoming permanent, so Medicaid enrollment is expected to increase, Park said.
The Congressional Budget Office now expects an additional 9 million people to be enrolled in Medicaid and CHIP in 2021, according to updated estimates released Tuesday. About half that figure stems from the pandemic-fueled economic downturn and half from the requirement that states allow people to remain in the program longer.
Meanwhile, nearly half a million Americans turned to the federal Obamacare exchanges earlier this year after losing health insurance coverage, according to federal data released in June.
Sign-ups spiked in April to more than double the number in prior Aprils, while more people also enrolled in May than in prior years.
Overall, enrollment jumped 46% in the first five months of 2020 compared with the same period the year before.
States that run their own health insurance exchanges also saw increases in sign-ups during special enrollment periods they enacted this year.

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Canada's economy to take a hit from the second wave, economist says — and some sectors may never recover – Toronto Star

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The Canadian economy faces a long, slow recovery from COVID-19, and some industries are never bouncing back to where they were, according to a new forecast from a business think tank.

The prediction, from the Conference Board of Canada, says things won’t get back to anywhere close to normal until there’s a vaccine to battle COVID-19, likely sometime next June.

“Until we’re seeing COVID fully behind us, it’s going to be a rough ride. We won’t see a complete recovery until there’s a vaccine and this has been brought under control. The biggest risk is if a vaccine ultimately isn’t found,” said Conference Board chief economist Pedro Antunes in an interview.

The Conference Board’s argument was bolstered by a report from Statistics Canada on Wednesday showing the size of the Canadian economy is still six per cent smaller than in February, and that just a quarter of industries have hit their pre-pandemic size.

Statistics Canada showed Canadian Gross Domestic Product grew by three per cent in July, after having grown by 6.5 per cent in June. The StatsCan report also said data is expected to show that the economy grew by just one per cent in August.

While the economy started to bounce back in May and June as COVID-related restrictions eased up, the start of the second wave spells more trouble, said Antunes.

“Before, we were trying to flatten the curve of new COVID cases. Now, it’s a case of COVID flattening the recovery,” Antunes said.

Consumer spending picked up as restrictions started to loosen, Antunes said, partly because of pent-up demand, and partly because of government support programs including the Canada Emergency Response Benefit and the Canadian Emergency Wage Subsidy.

“It was consumers to the rescue with a lot of borrowed government money,” said Antunes, who predicted the CEWS will eventually be extended until next June.

Some sectors will struggle more than others as the second wave continues, Antunes said, singling out the hospitality, travel and cultural industries.

Other industries are seeing disruptions which are likely permanent, he added. Among the most heavily-affected sectors in the long term, Antunes predicted, will be bricks and mortar retailers, and commercial real estate, particularly office buildings. Simply put, companies are realizing that having employees doing their jobs from home works just fine.

“I think telecommuting will become permanent in a lot of cases. And that also means there will be a lot of office space on the market,” said Antunes.

For retailers, a gradual move to e-commerce turned into a tidal wave because of COVID-19, and many customers won’t be going back once COVID ends.

“I think a lot of those changes are permanent. We had more of an increase in e-commerce in a few months than we did in six years,” said Antunes.

That assessment is backed up by retail analyst Lisa Hutcheson.

“The longer people shop online, the less likely they are to go back,” said Hutcheson, managing director of retail consultancy J.C. Williams Group.

The speedy rise in e-commerce, which Hutcheson said was equivalent to a decade’s worth of increases, has already knocked some companies out of business entirely.

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“The retailers who weren’t making these changes are likely the ones who’ve gone out of business,” said Hutcheson.

In a recent survey, J.C. Williams Group found that 39 per cent of Canadians say they’ll stick with their current shopping habits even once an effective treatment for COVID-19 is found, Hutcheson said.

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Economic rebound slows as Statistics Canada says economy grew 3.0 per cent in July – Toronto Star

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OTTAWA – The pace of Canada’s economic rebound from the COVID-19 pandemic slowed in July, and maybe even more in August, Statistics Canada says, suggesting the country is in what experts described as a long, choppy path to recovery.

Statistics Canada says real gross domestic product grew by three per cent in July, matching the agency’s preliminary estimate and economists’ expectations, but below the 6.5 per cent recorded in June, and May’s 4.8 per cent bump.

Gains have been linked to the loosening of restrictions that forced non-essential businesses to close in March and April, but they haven’t been enough to haul the economy back to pre-pandemic levels.

Overall, Statistics Canada said the economy in July was about six per cent below its pre-pandemic level in February, even if some sectors like retail and real estate have recouped their losses and then some.

Looking at August, the statistics agency said growth likely continued albeit at a slower pace as it provided a preliminary estimate of a one per cent climb in GDP for the month.

“That’s suggesting the steam in the recovery is going away and so, this for me is suggesting that we might be moving from a quick rebound phase of the recovery to a more challenging phase,” said TD senior economist Sri Thanabalasingam.

The August figure will be finalized late next month.

The path of the recovery over the coming months will be tied to the path the pandemic takes, which could lead to rollbacks of reopening measures.

Rising case counts have prompted such calls as the country heads into what several public health officials say is a second wave of the novel coronavirus pandemic.

The increase in COVID-19 infections, coupled with the August figure suggests the sharp rebound in the third quarter won’t carry over to the final three months of the year, said CIBC chief economist Avery Shenfeld.

“Easing up on COVID-19 restraints fed into solid Canadian GDP gains in July and August, but the concerns now are whether we will pay for some of that greater openness,” Shenfeld wrote in a note.

The Conference Board of Canada said health measures and testing should prevent another full shutdown of economic activity earlier this year, but warned of localized lockdowns as one hurdle.

The pandemic is going to flatten the recovery curve for the next year at least, said Pedro Antunes, the organization’s chief economist.

“We’re going to be creating fewer jobs on a monthly basis going forward, we’re going to see the increases in economic activity or GDP being much more subdued in terms of their increases overall,” he said.

The Conference Board’s outlook expected the unemployment rate won’t fall back to its pre-pandemic levels until 2025.

Thanabalasingam said it could be early 2022 before before the economy gets back to where it was prior to COVID-19.

July’s GDP report from Statistics Canada noted that all 20 industrial sectors it tracks posted increases in July, with agriculture, utilities, finance, insurance and real estate sectors recouping losses suffered since the start the pandemic.

Manufacturing grew 5.9 per cent in July, following a 15.1 per cent expansion in June as more operations ramped up production, but still remained about six per cent below where it was pre-pandemic.

The hard-hit accommodations and food services sector posted a third consecutive month of double-digit increases, jumping 20.1 per cent in July.

Thanabalasingam said despite the bump, the amount of activity in the industry was about two-thirds of where it was in February, as more people went shopping and case numbers dropped.

“There’s still a very, very long way to go, even though they’re posting these strong growth rates,” he said.

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“My worry is that as caseloads continue to rise and some of these provinces think about rolling back some of those reopening measures . . . then is this as good as it could get for these sectors?”

The health care and social assistance sector rose by 3.7 per cent in July, as more doctors, dentists and diagnostic laboratories reopened in line with the rollback of restrictions.

This report by The Canadian Press was first published Sept. 30, 2020.

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