Aurelia Butler

Tighter financial conditions and the energy price shock have begun to weigh on near-term growth, the IMF warned in its country report for Germany.It forecast growth in Germany’s gross domestic product (GDP) to stay near zero in 2023, before gradually strengthening to between 1% and 2% in the period of 2024 to 2026. Over the longer term, average GDP growth is expected to fall back below 1% as the population ages and with no significant accelerations in productivity or labour supply foreseen. Although headline inflation is falling steadily, core inflation is proving stickier, according to the report. “A top priority in the near term is thus to support disinflation with a moderate tightening of the fiscal instance in 2023,” it said.Over the medium term, Germany may need to create more fiscal room for investment in its future, the IMF said. It expects Germany’s deficit to narrow to around 0.5% of GDP by 2027 as energy relief measures are phased out. The debt brake, anchored in the German constitution, limits the budget deficit to 0.35% of GDP. The German parliament suspended the debt brake between 2020 and 2022 to allow for extra spending in response to the COVID-19 pandemic and the effects of the war in Ukraine.Germany created multiple extrabudgetary funds totalling about 9% of GDP during those years.Even without the debt brake in effect, this spending does count towards the general government deficit as measured under EU statistical standards.”Germany should consider adjusting the debt-brake rule to better align it with EU fiscal rules and lessen reliance on extrabudgetary funds,” the IMF said. The organization suggests increasing the annual deficit limit by 1 percentage point of GDP, to be more “realistic” regarding the country’s medium-term spending needs. The IMF warned that uncertainty is high and risks to the baseline forecasts are tilted downward. More

Russia exported more oil in April than in any month since its full-scale invasion of Ukraine last year, with almost 80 per cent of crude shipments flowing to China and India, according to the International Energy Agency.Russian oil exports edged up another 50,000 barrels a day in April to a post-invasion high of 8.3mn b/d, far exceeding the 7.7mn b/d and 7.5mn b/d that it averaged in 2022 and 2021 respectively.The rise in shipments reflects Moscow’s success in finding both new buyers for its oil since Europe blocked imports and new vessels after its access to western shipping was restricted.Since the west first threatened Russia with sanctions last year, Moscow has worked with a growing number of little-known trading companies and tanker-owners to develop new systems to move its oil. “Russia seems to have few problems finding willing buyers for its crude and oil products,” the IEA said in a monthly oil report on Tuesday.The EU is discussing its 11th sanctions package on Russia since its invasion of Ukraine last year. The bloc has sanctioned 1,473 Russian individuals and 207 entities and frozen €21.5bn of Russian assets.However, those measures have been designed to allow Russian oil to continue flowing to countries outside the EU. The result has been one of the biggest shifts in commodity flows, with Moscow rerouting millions of barrels a day of oil from Europe to Asia over the past 12 months.Despite shipping more oil than in April 2022, Russia’s monthly oil export revenues were 27 per cent lower than last year, according to IEA estimates, partly because of lower global energy prices. Russian oil has also been trading at a discount to global benchmarks because of a G7-led price cap on permitted Russian exports of oil and refined petroleum products imposed in December and February respectively.However, that discount has begun to narrow, the IEA said, as Russia has increased its access to non-western shipping able to operate outside of the price caps. Moscow’s oil export revenues in April were $15bn, up from $13.3bn in March, according to the IEA’s estimates.In total Russia shipped 5.2mn b/d of crude in April, the most since May 2022, including 2.1mn b/d to China and 2mn b/d to India. Total exports of refined petroleum products were 3mn b/d.

“New refining capacity is driving a continued shift east in forecast crude runs for the remainder of the year, mirroring regional demand strength,” the IEA said.Imports from Russia had helped meet rising oil demand in China, which hit an all-time high of 16mn b/d in March, the IEA added. “China’s demand recovery continues to surpass expectations,” it said.In response, the IEA increased its forecast for 2023 global oil demand growth to 2.2mn b/d, adding that China would account for nearly 60 per cent of the increase.The fall in global oil prices in April and early May, when Brent crude, the global benchmark, fell by nearly $16 a barrel in just two weeks, stood in “stark contrast” to the tighter market expected in the second half of the year, it said.

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Major central banks have been aggressively hiking interest rates to curb inflation which remains persistent. The ECB alone has raised rates by a combined 375 basis points since July and economists forecast two more 25 basis points at each of its next two meetings.Having raised rates by the most in the ECB’s 25-year history, Makhlouf, Ireland’s central bank governor, said the bank had an obligation to talk to the wider community and that like institutions everywhere, it had lost some trust.With inflation expected to run above the ECB’s target through at least 2025, consumers and investors have started to expect longer-term price growth above 2%, indicating a loss of confidence in the ECB’s ability to rein in prices. This could in turn push up wage demands, potentially setting up a hard-to-break wage-price spiral. “I think we have lost a degree of trust… (and that affects) what I feel we should be doing with our decision making, which is we should be explaining it to more people,” Makhlouf told a conference at the Irish central bank.The question was put to Makhlouf by Cleveland Federal Reserve President Loretta Mester, who asked whether he thought central banks around the world are trusted and “if we’ve lost some of the trust.””We probably need to do more in terms of thinking about the audience we’re talking to,” Makhlouf said. “We need to be explaining what we’re seeing and why we’re making the judgements we are, and we need to talk to people and communities in a language they understand and I think in the end that’s how you rebuild trust. I think we can do it as central banks.” More

WASHINGTON (Reuters) – The standoff over the federal debt limit is already having dire consequences for the U.S. economy, driving borrowing costs higher and adding to the country’s debt burden, U.S. Treasury Secretary Janet Yellen is expected to say in prepared remarks on Tuesday.Yellen will deliver the message to a group of community bankers in Washington, reminding them about the “eleventh-hour brinkmanship” over the debt ceiling in 2011 that led to the first-ever downgrade of the U.S. credit rating.”Time is running out. Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy,” Yellen said in remarks prepared for an event hosted by the Independent Community Bankers (NASDAQ:ESXB) of America.”The U.S. economy hangs in the balance. The livelihoods of millions of Americans do too. There is no time to waste. Congress should address the debt limit as soon as possible.”Yellen on Monday told Congress the Treasury expects to be able to pay the U.S. government’s bills only through June 1 without a debt limit increase, heaping pressure on Republicans in Congress and the White House to reach a deal in coming days.U.S. President Joe Biden is due to meet at 3 pm. EDT(1900 GMT) on Tuesday with Republican House of Representatives Speaker McCarthy and the three other top congressional leaders to hash out a plan to avoid the country’s first-ever default.Yellen said the 2011 crisis – when lawmakers raised the debt limit shortly before the government had to stop making payments – showed the serious repercussions of not acting sooner. Consumer confidence fell by over 20% as a result then, while the S&P 500 stock index dropped 17%, and mortgage and auto loan costs went up, she said.Allowing the U.S. to default would trigger an economic and financial catastrophe, jeopardizing the country’s reputation and undermining the bedrock of U.S. global economic leadership, she said.Investors had already become more reluctant to hold government debt that matures in early June, and the deadlock was increasing the overall debt burden, she said.Yellen gave an upbeat assessment of the health of U.S. community banks, noting that many reported higher net income in 2022 than before the pandemic, even as some regional banks were under increased pressure after the failure of two large regional banks – Silicon Valley Bank and Signature Bank (OTC:SBNY) in March.There had been some “aftershocks”, including the failure of First Republic Bank (OTC:FRCB), she said, but she did not see “any sign of a shift in the fundamental health of the banking system.”Still, Treasury remained vigilant and was continuing to closely monitor conditions, she said, adding that the government was ready to take further actions if needed, including if smaller institutions saw deposit runs that risked contagion. More