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Ukraine's economy shrank by 30% in first three quarters of 2022 – SaltWire NS

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(Reuters) – Ukraine’s economy shrank by an estimated 30% in the first three quarters of 2022 compared with the same period in 2021, largely due to Russia’s invasion, the economy ministry said on Saturday.

Bad weather in September that slowed the pace of harvesting also played a role, as did interruptions in supply from the Zaporizhzhia nuclear power plant, the ministry said in a statement. Ukraine and Russia accuse each other of shelling the facility.

Exports in September jumped by 23% from August to their highest level since the war started in February, helped by an internationally brokered deal allowing the shipment of grain from Black Sea ports.

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“The situation at the front improved in September, but the enemy continued shelling Ukrainian territory, which put pressure on business sentiment and logistics,” the ministry said.

“Further destruction of production facilities, infrastructure and residential buildings,” as well as uncertainty over how long the war would last, were hindering development and postponing the recovery, it said.

In July, Ukraine’s central bank said the economy could shrink by a third in 2022 and was expected to grow between 5% and 6% in 2023 and 2024.

(Reporting by David Ljunggren; Editing by Leslie Adler)

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India may become the third largest economy by 2030, overtaking Japan and Germany – CNBC

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Beautiful and colorful aerial view of Mumbai skyline during twilight seen from Currey Road, on February 16, 2022 in Mumbai, India.
Pratik Chorge | Hindustan Times | Getty Images

India is set to overtake Japan and Germany to become the world’s third-largest economy, according to S&P Global and Morgan Stanley.

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S&P’s forecast is based on the projection that India’s annual nominal gross domestic product growth will average 6.3% through 2030. Similarly, Morgan Stanley estimates that India’s GDP is likely to more than double from current levels by 2031.

“India has the conditions in place for an economic boom fueled by offshoring, investment in manufacturing, the energy transition, and the country’s advanced digital infrastructure,” Morgan Stanley analysts led by Ridham Desai and Girish Acchipalia wrote in the report.

“These drivers will make [India] the world’s third-largest economy and stock market before the end of the decade.”

India posted a year-on-year growth of 6.3% for the July to September quarter, fractionally higher than a Reuters poll forecast of 6.2%. Prior to this, India recorded an expansion of 13.5% for the April to June compared to a year ago, buoyed by robust domestic demand in the country’s service sector.

The country posted a record 20.1% year-on-year growth in the three months to June 2021, according to Refinitiv data.

“These drivers will make [India] the world’s third-largest economy and stock market before the end of the decade.”
Morgan Stanley

S&P’s projection hinges on the continuation of India’s trade and financial liberalization, labor market reform, as well as investment in India’s infrastructure and human capital.

“This is a reasonable expectation from India, which has a lot to ‘catch up’ in terms of economic growth and per capita income,” Dhiraj Nim, an economist from Australia and New Zealand Banking Group Research, told CNBC.

Some of the reforms cited have already been set in motion, said Nim, highlighting the government’s commitment to set aside more capital expenditure in the country’s annual expenditure books. 

Becoming a more export-driven hub

There’s a clear focus by India’s government to become a hub for foreign investors as well as a manufacturing powerhouse, and their main vehicle for doing so is through the Production Linked Incentive Scheme to boost manufacturing and exports, according to S&P analysts.

The so-called PLIS, which was introduced in 2020, offers incentives to both domestic and foreign investors in the form of tax rebates and license clearances, among other stimulus.

“It is very likely that the government is banking on PLIS as a tool to make the Indian economy more export-driven and more inter-linked in global supply chains,” S&P analysts wrote.

Workers processing metal parts at a cookstove manufacturing plant of GHG Reduction Technologies Pvt in Nashik, Maharashtra, India, on Sunday, Nov. 13, 2022.
Dhiraj Singh | Bloomberg | Getty Images

By the same token, Morgan Stanley estimates that Indian manufacturing’s share of GDP will “rise from 15.6% of GDP currently to 21% by 2031” — which implies that manufacturing revenue could increase three times from the current $447 billion to around $1,490 billion, according to the bank.

“Multinationals are more optimistic than ever about investing in India … and the government is encouraging investment by both building infrastructure and supplying land for factories,” Morgan Stanley said.

“India’s advantages [include] abundant low-cost labor, the low cost of manufacturing, openness to investment, business-friendly policies and a young demographic with a strong penchant for consumption,” said Sumedha Dasgupta, a senior analyst from the Economist Intelligence Unit.

These factors make make India an attractive choice for setting up manufacturing hubs until the end of the decade, she said.

Risk factors

Salient sticking points that could challenge Morgan Stanley’s forecast include a prolonged global recession, since India is a highly trade-dependent economy with nearly 20% of its output exported.

Other risk factors cited by the U.S. investment bank include supply of skilled labor, adverse geopolitical events and policy errors which may arise from voting in a “weaker government.”

A global slowdown may dampen India’s export businesses outlook, India’s finance ministry said last Thursday.

Even though India’s GDP on aggregate is already above pre-Covid levels, forward looking growth is going to be “much weaker” compared to previous quarters, said Sonal Varma, chief economist at Nomura.

“Real GDP is now 8% above pre-Covid levels in growth rate terms … but in terms of the forward looking view, there are headwinds from the global side financial conditions,” Varma told CNBC’s Squawk Box on Thursday, warning that there will be a cyclical slowdown ahead.

Similarly, Nim also said that more priority could be given to human capital investment via education and health.

“This is especially important for a post-pandemic economy where greater disruptions to the informal sector have meant widened economic and wealth inequalities,” he said, adding that falling labor force participation rate, especially among women, was concerning.

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Brazil's economy grows less than expected in third quarter, but still reaches record level – Reuters

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BRASILIA, Dec 1 (Reuters) – Brazil’s economic growth slowed more than expected in the third quarter as higher interest rates affected household spending, underscoring challenges facing President-elect Luiz Inacio Lula da Silva next year.

Gross domestic product rose 0.4% in the three months to September, government statistics agency IBGE said on Thursday, below the 0.7% growth forecast by economists polled by Reuters.

Brazil’s central bank have raised borrowing costs to a nearly six-year high to battle double-digit inflation this year, which has begun to weigh on domestic demand.

Economists warn that if Lula unleashes a surge of new government spending, the central bank may not cut rates as expected.

“The balance of risks for 2023 are to the downside, due mostly to politics and the deterioration of the fiscal picture, which could keep interest rates high for even longer,” wrote economist Andres Abadia of Pantheon Macroeconomics in a note.

Household consumption rose just 1%, down from 2.1% in the second quarter, while fixed investments gained 2.8% and a burst of election-year spending lifted government expenditures 1.3%.

On the production side, farm output fell 0.9% in the quarter due to a delayed sugar cane harvest, while industrial output advanced 0.8% and the dominant services sector rose 1.1%.

This was the fifth consecutive quarter of expansion, putting activity in Latin America’s largest economy 4.5% above its pre-pandemic level in the fourth quarter of 2019.

“The clear message from today’s figures is that the economy is losing momentum,” said William Jackson, chief emerging markets economist at Capital Economics, predicting an even weaker fourth quarter due to a worsening global outlook and high interest rates.

“We’re sticking to our view that while the economy will grow by 3% this year, it will expand by little more than 1% in 2023,” he wrote in a note to clients.

The government of outgoing President Jair Bolsonaro forecasts GDP to rise by 2.7% this year and 2.1% in 2023.

President-elect Lula, who will be sworn in on Jan. 1, is pushing to exclude a major welfare programme from Brazil’s constitutional spending cap, opening space for more public expenditures to meet his campaign promises.

As Lula has still not proposed alternative fiscal rules to keep a lid on public debt, his push for more spending has created doubts about monetary policy and pushed up Brazil’s yield curve, implying higher financing costs for the government’s hefty interest bill.

The central bank paused its tightening cycle in September after 12 consecutive hikes that raised the benchmark interest rate to 13.75% from a record-low 2% in March 2021.

Central bank chief Roberto Campos Neto has said that fiscal uncertainty could force policymakers to take a more restrictive approach.

Brazil’s GDP expanded by 3.6% from the third quarter of 2021, IBGE reported on Thursday, slightly below the 3.7% rise forecast by economists polled by Reuters.

IBGE also revised down second-quarter growth to 1% from the prior quarter, compared to 1.2% reported previously, while revising upward first-quarter growth to 1.3% from 1.1% previously.

Reporting by Marcela Ayres; Editing by Steven Grattan, Brad Haynes and Arun Koyyur

Our Standards: The Thomson Reuters Trust Principles.

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Russian economy shrinks 1.7% in Jan-Sept, but capital investment up – Reuters

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  • This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine

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MOSCOW, Nov 30 (Reuters) – The Russian economy shrank 1.7% year on year from January to September, but capital investment, one of the main economic growth drivers, rose 5.9% in the same period, data from the Rosstat federal statistics service showed on Wednesday.

The export-dependent economy has withstood the impact of sweeping Western sanctions better than initially expected, although the government still has to contend with falling real wages, slumping retail sales and rising inflation.

The economy ministry expects Russia’s gross domestic product (GDP) to fall 2.9% this year, a far cry from early assumptions that the economy could contract as much as 12% because of the sanctions imposed in response to what Moscow calls its “special military operation” in Ukraine.

Capital investment rose 5.9% year-on-year between January and September to reach 16.418 trillion roubles ($271.65 billion), Rosstat said.

Official unemployment remained at 3.9% in October, just above August’s record low of 3.8%, Rosstat data showed on Wednesday, but real wages, which are adjusted for inflation, fell 1.4% year on year in September.

Data also showed that retail sales, the gauge of consumer demand, declined 9.7% in October in year-on-year terms after a 9.8% fall in the previous month.

All that comes as consumer prices climbed for the 10th week running, perhaps giving the central bank pause for thought. The Bank of Russia is widely expected to keep its key rate unchanged at 7.5% when its board meets on Dec. 16.

($1 = 60.4390 roubles)

Reporting by Alexander Marrow and Darya Korsunskaya; Editing by Mark Trevelyan

Our Standards: The Thomson Reuters Trust Principles.

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