Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Employment rose to a record high across developed economies in the second quarter despite the growing pressures of high inflation and rising interest rates, according to data published on Thursday.The share of the working-age population in employment in the OECD’s 38 member countries rose above 70 per cent for the first time in records going back to 2005, the Paris-based organisation said. This reflected record highs in more than two-thirds of countries, as well as in the EU and eurozone overall.Workforce participation also rose to its highest level in records stretching back to 2008, among both men and women, with 73.7 per cent of the working-age population either in work or seeking work. Even Italy — which has the lowest share of women in work in the EU — registered its best performance yet on both measures, as did France, Germany and Japan.Economists give several explanations for the persistent strength of jobs markets even as the economic backdrop has weakened: ageing populations and changing lifestyles that have led to labour shortages; a pandemic-fuelled wave of public sector hiring; and concerted efforts in countries such as France to tackle longstanding problems with youth unemployment through subsidised training programmes.Unemployment has begun to tick up in some countries, including the US and UK, since the middle of the year. Joblessness among young men — often an early indicator of a broader labour market downturn — has also risen slightly. But the overall rate remained at a record low in August across the OECD, EU and euro area, the OECD said.“Resilience remains the name of the game in the labour market, in the face of slowing labour market activity,” Melanie Debono, of the consultancy Pantheon Macroeconomics, said in a note published last week after the latest data from the eurozone painted a similar picture.  The strength of the jobs market has raised hopes that central banks will be able to quash high inflation without the painful waves of job losses that have accompanied past periods of rapid tightening in monetary policy. But it has also allowed workers to press for higher wage growth — especially in countries such as the UK where workforce participation still remains well below previous peaks. Central banks fear this could fuel high inflation and force them to keep interest rates high for longer.Although lay-offs are now becoming more widespread, and wage growth slowing, “the overall impression is that of a return to normal after an over-exuberant post-pandemic recovery, rather than a material slowdown”, said Tamara Basic Vasiljev, at the consultancy Oxford Economics. “This might make higher-for-longer interest rates necessary.” More

COLOMBO/MARRAKECH (Reuters) – Sri Lanka said on Thursday it reached an agreement with the Export-Import Bank of China covering about $4.2 billion of outstanding debt, while talks with other official creditors stall.Sri Lanka, mired in its worst financial crisis in decades, has been trying reach restructuring deals with creditors since last autumn, having being forced to default on its foreign debt in May 2022 after its foreign exchange dwindled to record lows.The EXIM deal will help Sri Lanka in getting past the first review of an International Monetary Fund (MF) program, and securing a second IMF tranche of about $334 million, its finance ministry said in a statement. It gave no further details.China is the island nation’s largest bilateral creditor.A debt rework between Sri Lanka and countries including Japan, India and France was also expected this week, but news of the EXIM deal took them by surprise. The three nations request comparability of debt treatment with China.They were “on the verge of finding an agreement,” French Finance Minister Bruno Le Maire told journalists in Marrakech. A senior Japanese official had said on Wednesday that creditors were struggling to reach consensus and finding an agreement during this week’s IMF and World Bank meetings could be difficult.Members of the creditor committee need to see details of the China deal before finalizing their proposal, said a source with direct knowledge of the talks, who asked not to be named.Sri Lanka started negotiating with creditors including China, Japan and India last September, parallel to moving forward on a $2.9 billion IMF bailout.The EXIM agreement “constitutes a key milestone in Sri Lanka’s ongoing efforts to foster its economic recovery,” the ministry statement said. Sri Lanka and China EXIM will in coming weeks “actively work on formalizing and implementing the agreed parameters of the debt treatment,” it added. More

Georgieva drew attention to the potential economic consequences of the conflict involving Palestinian militant group Hamas, which has led to thousands dead in Gaza. The World Economic Outlook report had already predicted weak global growth, and this conflict further threatens that prediction.Despite the initial surge in global oil prices due to the conflict, prices have since stabilized. However, there remain fears of other nations intervening and causing disruption to supply flows. Pierre-Olivier Gourinchas, IMF’s chief economist, warned of potential deceleration in global growth and inflation hikes due to oil price fluctuations.The International Energy Agency (IEA), however, reassured that the risk of oil supply disruptions due to the war is limited. In addition to addressing this crisis, world economy leaders at the meeting are also grappling with other challenges such as poverty reduction and climate change. They are devising strategies to help heavily indebted poor nations navigate through what Georgieva termed as a “not-the-sunniest horizon for the world economy.”Despite these challenges, the IMF maintains a modest growth forecast of 3% for this year, with a slight reduction to 2.9% in 2024.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

MARRAKECH, Morocco (Reuters) – Japan made a “very impressive pledge” to an International Monetary Fund account that provides subsidies to enable zero-interest rate loans to the poorest countries, IMF Managing Director Kristalina Georgieva said on Thursday.The pledge made Japan the single largest donor – accounting for 20% – of the account that covers the interest payments on loans under the fund’s Poverty Reduction and Growth Trust (PRGT), Georgieva told reporters at the annual meetings of the IMF and World Bank.Georgieva said a number of new pledges for the subsidy account were received on Wednesday, and further funds were expected when the IMF’s steering committee meets on Saturday.The IMF has been urging member countries to fill a $1.2 billion gap in the $3 billion subsidy account endorsed by the membership in 2021.Georgieva said 40 countries had stepped up to contribute, and one-third were emerging market economies.The IMF is expected to release details on the fundraising effort on Saturday.The PRGT is the fund’s main vehicle for providing low- or zero-interest loans to low-income countries (LICs) that support economic programmes and help leverage additional financing from donors, development institutions, and the private sector.Since the beginning of the COVID-19 pandemic, the IMF said it has supported more than 50 low-income countries with some $29 billion in interest-free loans via the PRGT, reducing instability in a wide range of the world’s poorest nations, from Haiti to the Democratic Republic of Congo and Nepal.The IMF projects demand for PRGT lending will reach nearly $40 billion through next year, more than four times the historical average. It says each $1 of subsidy resources allows the PRGT to provide about $5 in zero-interest loans. More

JOHANNESBURG (Reuters) – South Africa’s economic growth is expected to pick up slightly next year due to better energy supply, a Reuters poll found, while slowing inflation might give consumers some respite although the bigger risk is it remains elevated.Gross domestic product (GDP) is expected to expand 1.2% next year, better than a 1.1% expectation in a September poll and compared to a median estimate of 0.7% for this year. In 2025 it is forecast to grow 1.7%.”We expect growth to stage a mild improvement into next year on the back on an improvement in the supply of energy. This should have positive ramifications for confidence in the household and business sectors,” said Sanisha Packirisamy, economist at Momentum Investments.”Moreover, real wages are expected to improve as inflation continues to shift towards the midpoint of the target band on a more sustainable basis, providing a lift in purchasing power for households.”Inflation in South Africa is expected to brake to 4.8% next year, slightly slower than predicted in last month’s poll, and compared with 5.8% estimated for this year. In 2025 inflation is forecast to slow to 4.5% – in the middle of the South African Reserve Bank’s 3%-6% comfort range.Still, all 10 economists who responded to an additional question said risks to the inflation outlook were skewed more to it being higher over the coming year, with some wary of currency weakness and government-set prices.Economists expect the South African Reserve Bank to wait until either January or March before cutting its repo rate by 25 basis points to 8.00%.Rates are then expected to be cut by the same amount in May, the only policy meeting in the second quarter, and then again either in July or September to 7.50% before a brief pause into 2025. The repo rate is forecast to end 2025 at 7.00%.The SARB’s negative real rates turned positive at the end of last year and look to remain so for the rest of the horizon.Still, the head of South Africa’s central bank said on Wednesday the government needed to rebuild its fiscal buffers to help bring down inflation, and he expected domestic interest rates to stay higher for longer.In the world’s biggest economy, the United States, the latest Federal Reserve minutes showed policymakers wrestling with risks they agreed were no longer just about inflation.(For other stories from the Reuters global economic poll:) More

MARRAKECH, Morocco (Reuters) -International Monetary Fund managing director Kristalina Georgieva said on Thursday the “heartbreaking” Israel-Hamas conflict threatened to darken an already murky global economic outlook.”We are closely monitoring how the situation evolves, how it is affecting, especially oil markets,” Georgieva said. There had been some fluctuations in oil prices and reactions in markets but it was too early to predict the economic impact, she added. “Very clearly, this is a new cloud on not the safest horizon for the world economy, a new cloud darkening this horizon,” she told a news conference at the annual meetings of the IMF and World Bank in Marrakech, Morocco.Georgieva joined a growing chorus of financial leaders expressing concern about the sudden eruption of violence in the long-running Israeli-Palestinian conflict which has already claimed more than 2,500 lives.Israel has vowed to annihilate the Hamas movement that rules the Gaza Strip in retribution for the deadliest attack on Jewish civilians since the Holocaust, when hundreds of gunmen poured across the barrier fence and rampaged through Israeli towns on Saturday.Israel said on Thursday there would be no humanitarian break to its siege of the Gaza Strip until all hostages taken by Hamas were freed, after the Red Cross pleaded for fuel to be allowed in to prevent overwhelmed hospitals from “turning into morgues”.”It’s heartbreaking to see innocent civilians dying,” an emotional Georgieva told reporters. “Who pays the price? It is the innocent who pay the price.”Georgieva said severe shocks were becoming “the new normal” in a global economy characterized by weak growth, economic fragmentation and deepening divergences, with interest rates expected to stay higher for longer to tame persistent inflation.She appealed to countries to avoid escalating the situation and focus on areas of cooperation. “We do need to build our agility in terms of anticipating shocks and being quick to respond,” she said.French Finance Minister Bruno Le Maire told reporters any regional expansion of the conflict would lead to “problematic economic consequences” for energy prices and global growth. More