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Economy

What next for Afghanistan's economy? – BBC News

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Taliban fighters in Kabul

EPA

Afghanistan’s economy is “shaped by fragility and aid dependence”.

That is the troubling overview set out by the World Bank several months before the Taliban takeover.

Economic prospects look even more precarious now, as future financial assistance is under a cloud of uncertainty.

Afghanistan does have substantial mineral resources, but the political situation has impeded their exploitation.

The aid dependency is striking. In 2019, World Bank figures show development aid was equivalent to 22% of gross national income (which is not the same as GDP, but close to it).

That is a high figure, but it is down a long way from the 49% the World Bank reported 10 years earlier.

Now those aid flows are under a cloud of profound uncertainty. German Foreign Minister Heike Maas told the broadcaster ZDF last week: “We will not give another cent if the Taliban takes over the country and introduces Sharia law.”

Other aid donors are sure to be watching developments closely.

Corruption woes

The fragility the World Bank refers to is illustrated by the very high levels of spending on security before the Taliban takeover: 29% of GDP, compared with an average of 3% for low-income countries.

Security and severe problems with corruption are behind another persistent problem in Afghanistan: very weak foreign business investment.

According to United Nations data, there were no announcements in the last two years of new “greenfield” investments, which involve a foreign business setting up an operation from scratch. Since 2014, there have been a total of four.

To take two other countries from the South Asia region, both with somewhat smaller populations, Nepal has managed 10 times as many and Sri Lanka 50 times more over the same period.

The World Bank describes Afghanistan’s private sector as narrow. Employment is concentrated in low-productivity agriculture: 60% of households get some income from farming.

The country also has a large illicit economy. There is illegal mining and, of course, opium production and related activities such as smuggling. The drugs trade has been an important source of revenue for the Taliban.

Mineral wealth

All that said, the Afghan economy has grown since the US invasion in 2001.

The figures for Afghanistan are not reliable, but what they show, according to the World Bank, is average annual growth of more than 9% in the 10 years from 2003.

After that, it slowed (which may well reflect the lower levels of aid) to an average rate of 2.5% between 2015 and 2020.

Opium poppies in an Afghan field

EPA

The country does have significant natural resources, which would, in the context of better security and less corruption, be attractive to international business.

There are several types of mineral available in substantial quantities, including copper, cobalt, coal and iron ore. There is also oil and gas and precious stones.

One with particularly striking potential is lithium, a metal that is used in batteries for mobile devices and electric cars. The latter application is going to be especially important as the motor industry makes the transition to zero-carbon forms of transport.

Back in 2010, a top US general told the New York Times that Afghanistan’s mineral potential was “stunning” – with “a lot of ifs, of course”.

The paper also reported that an internal US Defence Department memo had said the country could become “the Saudi Arabia of lithium”.

Yet this undoubted potential is nowhere near being exploited – and the Afghan people have seen very little, if any, benefit from it.

Foreign powers

There have been many reports that China is keen to be involved. It seems to have better relations with the Taliban than Western powers do, so may have an advantage if the new regime does hold on to power.

However, Chinese firms did win contracts to develop operations in copper and oil. But little happened.

It is to be expected that China would be interested. The opportunities appear to be very substantial and the two countries do share a short border.

But any Chinese agency – official or a business – would want to be confident of succeeding. They will be reluctant to commit unless they feel the security and corruption problems will be well enough contained to enable them to extract worthwhile quantities of these industrial commodities.

A key question for any hard-nosed potential investors – from China or anywhere else – will be whether the Taliban is likely to be any more able than the previous Afghan government to create the kind of environment they need.

In the immediate future, there is also a great deal of uncertainty about financial stability. Crowds of people have been trying to withdraw their money from the banks.

The Pakistan-based Afghan Islamic Press reported a Taliban spokesman as offering assurances to bank owners, money changers, traders and shopkeepers that their lives and property would be protected.

That there are even questions about the physical safety of financial operators is shocking. They do need to be confident if Afghanistan’s financial system is to function. But it also needs customers to feel their money is safe. That won’t happen quickly.

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What is a recession? Your economy questions, answered. – The Washington Post

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The U.S. economy is back in the headlines, with more economists and financial experts warning of an impending downturn at some point in the next year. But what is a recession — and what happens during one?

The answers can be complicated and vague.

“Recessions are notoriously hard to predict in advance,” said Tara Sinclair, an economics professor at George Washington University. “It’s pretty easy to say a recession is coming at some point in the future. … It’s much harder to quantify exactly when, how long and how deep.”

For nearly two years, the U.S. economy has notched blockbuster gains, with millions of new jobs and wage hikes adding to the streak of good news. Families and businesses were flush with cash, which they used to buy houses, cars, electronics and other big-ticket items. That extra spending — combined with lingering supply chain shortages and delays from the pandemic — helped drive up prices and contributed to the highest inflation in 40 years.

Now policymakers are trying to tackle some of those skyrocketing prices with higher interest rates. They’re hoping that by making it more expensive for families and businesses to borrow — for investments, homes and cars, for example — that demand for those things will go down. The question is whether they will be able to slow things down just enough, without sending the country into a recession.

Here, we answer some common questions on economic downturns and how they affect Americans.

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Ontario premier Ford vows to rebuild economy, unveils new Cabinet – Reuters.com

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OTTAWA, June 24 (Reuters) – Doug Ford took the oath of office for a second term as the premier of Canada’s most populous province on Friday with a promise to build highways and homes, and rebuild Ontario’s economy.

Ford’s right-leaning Progressive Conservatives returned to power with a sweeping victory in a provincial election on June 2, winning 83 seats in the 124-seat legislature.

He unveiled a larger 30-member Cabinet, moving former solicitor general Sylvia Jones to role of minister of health and deputy premier, while keeping Peter Bethlenfalvy in post as the debt-laden province’s finance minister.

Ford said he had an “ambitious plan” for his second stint, as his government faced challenges posed by inflation rates hitting a nearly 40-year high in Canada.

“That plan starts with rebuilding Ontario’s economy,” Ford said at his swearing-in ceremony.

He reiterated pledges made in the lead-up to the election, including new spending on highways, transit and the auto sector.

“We’re investing to connect every part of our auto supply chain … the cars of the future will be built right here, Ontario, from start to finish,” Ford said.

Ontario, home to just under 40% of Canada’s 38.2 million people, is Canada’s manufacturing heartland. It is also one of the world’s largest sub-sovereign borrowers, with publicly held debt in excess of C$400 billion ($309.6 billion).

Ford also pledged to address soaring home prices in the province by building more affordable housing.

Canada’s national housing agency projects Ontario to be one of the worst affected by a housing shortage over the next decade. Provincial capital Toronto is already one of the most expensive cities to live in globally.

“Too many families are frozen out of the housing market … we need to build more attainable homes,” Ford said.

($1 = 1.2921 Canadian dollars)

(This story was refiled to fix typo in headline)

Reporting by Ismail Shakil in Ottawa

Our Standards: The Thomson Reuters Trust Principles.

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Economy

Northern Shootout's return provides a big boost to Orillia's economy – CTV News Barrie

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The return of an annual slo-pitch softball event marks the unofficial start of summer in Orillia.

The Northern Shootout is back for its 13 edition after a pandemic-driven hiatus.

The tournament consists of 78 men’s, women’s and co-ed teams from Ontario and Quebec and promises a big boost to the economy in the city.

“Especially after two years of pandemic restrictions,” said Mike Ladouceur, City of Orillia. “This helps our tourism recover, puts heads in beds, hotels are filled, restaurants filled, this is really the big event that begins our summer of events.”

Organizer Mike Borrelli said the tournament has grown to become one of the biggest in Canada.

“We’re pretty much at capacity for participants. We can’t accommodate anymore,” he added. “We’re using the other diamonds, we got all the diamonds in Orillia, and we’re using the Rama diamond, so if we had more diamonds, we could accommodate more teams.”

The owners of Adovo Pizza in Orillia say the increase in tourism has done wonders for their business this year.

This being the first big event of the season, they’re excited to welcome so many people into the city.

“Everyone has just been waiting to get out,” said Adam Zimmerman, co-owner. “Especially for sporting events and vendors, have a cold beer. There’s nothing wrong with it.”

The tournament culminates with an annual home run derby, which organizers said typically draws 1,200 fans to watch.

Sixteen participants will compete to walk away with a championship belt.

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