Aurelia Butler

While the export-dependent economy grew 6.45% in 2021, the fastest rate since it expanded 10.25% in 2010, it is expected to grow much more slowly in 2022 and 2023, hit by COVID-19 turmoil in China, global inflation woes and the impact of the war in Ukraine.Tsai, in a statement from her office following a meeting of senior economic officials, said the government must make preparations in advance for the “more severe challenges” the global economy faces in 2023.The estimated T$380 billion in excess tax revenues for the central government in 2022 will be spent on areas including subsidies for electricity prices, labour and health insurance and other spending to cope with the impact of global inflation and international economic challenges, the president said.Government departments will also carry out a review of future industrial development strategies, “especially the adjustment of the role and layout of the semiconductor industry and the information and communications industry in the global supply chain”, Tsai said.This will help consolidate Taiwan’s key role in the global supply chain, and maintain the sustainable momentum of industrial development and economic security and stability, she added.Taiwan is a major producer of semiconductors, used in everything from cars and smartphones to fighter jets, and home to the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC). Taiwan’s central bank earlier in December cut its 2022 estimate for gross domestic product (GDP) growth to 2.91% from its previous forecast of 3.51% in September.For 2023, it projected GDP would grow 2.53%, compared with an earlier forecast of 2.9%. The economy grew 4.01% in the third quarter from a year earlier.($1 = 30.5770 Taiwan dollars) More

The ECB has raised interest rates by a total of 2.5 percentage points since July in a bid to arrest a historic surge in inflation and has promised even more policy tightening over its next several meetings as longer term price growth expectations have started moving above its 2% target. “We know wages are increasing, probably at a faster pace than expected,” Croatian newspaper Jutarnji list quoted Lagarde as saying on Saturday. “We must not allow inflationary expectations to become de-anchored or wages to have an inflationary effect.”Lagarde provided no new policy hint in the interview but said the bank must “take the necessary measures” to lower inflation to 2% from its current rate of near 10%.Croatia will join the euro zone on Jan. 1 as the currency bloc’s 20th member, entering an elite club at a time of unusual turmoil as the ECB tries to tame inflation after spending the past decade unleashing unprecedented stimulus to rekindle price growth when it was exceptionally low. “We need to be careful that the domestic causes that we are seeing, which are mainly related to fiscal measures and wage dynamics, do not lead to inflation becoming entrenched,” Lagarde said.Lagarde added that the bloc’s expected winter recession, induced by soaring energy costs, is likely to be short and shallow, provided there are no additional shocks. More

Better than expected tax collection, increased payments by state energy producers and weaker capital spending have helped the Balkan country to lower its fiscal shortfall this year from the 3.0% it registered in 2021. Bulgaria, rattled by political instability, has decided to extend its 2022 budget into the new year until a new government is formed and comes up its own fiscal plans for 2023. The interim government has warned that increased state pensions and other social spending in the second half of 2022 amid a looming economic slowdown meant the fiscal shortfall will balloon to over 6.6% of economic output in 2023.Weaker investment and delays in tapping European Union funds have lowered the fiscal deficit for 2022, but that spending would be transferred into 2023, increasing pressure on the budget next year, the finance ministry said in a statement. In the first 11 months of 2022, the country registered a fiscal shortfall of 398 million levs, or 0.2% of economic output for the year, the ministry said late on Friday. Bulgaria often loads its state spending toward the end of the year. The finance ministry forecast government revenues, supported by high inflation, to have increased to 64.7 billion levs at the end of December from 52.3 billion levs a year ago, mainly because of increased payments from energy producers. It forecast expenditures to have jumped to 62.9 billion levs from 54.6 billion levs a year ago, mainly due to compensation paid to businesses to shield them from surging energy costs and increases in some state salaries and pensions.Fiscal reserves, held under a currency regime that pegs the lev to the euro, were 12.8 billion levs by the end of November, data showed.($1 = 1.8268 leva) More

Panasonic will actively pursue growth in both the US and China as the Tesla supplier bolsters cash management to navigate the headwinds of the technology dispute between the world’s two largest economies.In an interview with the Financial Times, chief executive Yuki Kusumi said the Japanese conglomerate would also conduct a review to streamline its vast business portfolio, which spans car batteries, air conditioners and microwave ovens, after two years of trying to make its operations more nimble and cost-efficient.“It is true that the decoupling of the US and China is becoming a bigger challenge for us,” Kusumi said, adding that the company was studying ways to produce more car battery materials in the US that have previously been procured in China. “But both the US and China are major markets that will steadily grow,” he said. “For us, both markets are important and we will bring each of these businesses to a state where they will be less vulnerable to political influence.” The US is a particularly important market for Panasonic’s car battery business. The Japanese group runs a $5bn gigafactory in Nevada with electric vehicle maker Tesla. Panasonic plans to invest $4bn to build a plant in Kansas, a decision Kusumi said was aided by the recent passage of US president Joe Biden’s Inflation Reduction Act, which includes $369bn of incentives to fund clean energy efforts. Panasonic chief Yuki Kusumi said: ‘It is true that the decoupling of the US and China is becoming a bigger challenge for us’ © Eri Sugiura/FTThe Kansas factory is likely to be partly funded by the ¥400bn ($3bn) Panasonic has set aside to invest in growth areas such as EV batteries, supply chain software and air conditioners over three years until March 2025. Another ¥200bn has been earmarked to develop hydrogen fuel cells and other new technologies.But Panasonic has also made an aggressive wager on the expansion of its home appliances and housing equipment business in China, where local management is given autonomy over its operations, in marked contrast with other regions. Kusumi said the company might try to sell products made in China in Asian markets that do not fall under US export controls designed to obstruct Beijing’s access and ability to develop advanced semiconductors.“To be frank, we cannot be optimistic about the market conditions next year,” Kusumi said, adding that the tougher outlook would increase the need for each of Panasonic’s divisions to be more vigilant about inventory management and accelerate conversion of revenues into cash flow.In late October, Panasonic downgraded its annual operating profit forecast by 11 per cent to ¥320bn, blaming a slowdown in its automotive business and US supply chain specialist Blue Yonder, which it acquired for $7bn in 2021. The geopolitical challenges have emerged as Kusumi is trying to take Panasonic to its next phase of growth. Since taking over as chief executive in April 2021, he has shelved a heavy restructuring of non-core assets and pivoted the group to focus on green transition efforts.

He has also shifted the Japanese group to a holding company structure to instil financial discipline and facilitate faster decision-making. According to Kusumi, these efforts have revealed which divisions are more competitive and which are lagging despite reforms under his tenure. Some analysts have criticised Panasonic’s sprawling portfolio as lacking focus, warning that many of its businesses are vulnerable to macroeconomic cycles.“We’re going to shift to a new form of portfolio management that involves more than just carve-outs,” Kusumi said, adding that he would review the capital structure of some business units. More

The BOJ jolted markets this month by widening its 10-year yield cap range, a move officially aimed at straightening out bond market distortions but seen by some analysts as a prelude to the exit from its ultra-loose monetary easing.Upgrades to the BOJ’s inflation forecast would further fuel such speculation as Governor Haruhiko Kuroda has said the central bank could discuss the exit if achievement of its 2% inflation target in tandem with wage hikes comes into sight.Citing people familiar with discussions at the central bank, Nikkei said the proposed changes would show the core consumer price index rising around 3% in fiscal 2022, between 1.6% and 2% in fiscal 2023, and nearly 2% in fiscal 2024. The previous forecasts released in October were around 2.9%, 1.6% and 1.6%, respectively.Japan’s core consumer prices excluding fresh food items rose 3.7% in November, the highest since 1981, government data showed last week.But Kuroda has dismissed the chance of a near-term interest rate hike, saying recent price rises were driven by one-off increases in raw material costs rather than strong demand.The BOJ will release the latest quarterly growth and price outlook after its next policy meeting on Jan. 17-18.Analysts, searching for any clues on a monetary policy shift, are also waiting to see if annual wage negotiations early next year will bring substantial pay hikes, or if the end of Kuroda’s 10-year tenure in April leads to any revision to a 2013 policy accord between the BOJ and the government. More