Aurelia Butler

MANILA (Reuters) – The Asian Development Bank (ADB) on Thursday slashed its growth forecasts for developing Asia for this year and next, reflecting the economic fallout from Russia’s war in Ukraine and aggressive tightening by global central banks to tame inflation. Also contributing to its weaker growth forecasts was a sharper-than-expected deceleration in China prompted by its lingering COVID-19 lockdowns, the ADB said in a supplement to its Asian Development Outlook report. Downgrading its 2022 forecast for a third time, the ADB said it now expects the bloc’s combined economy, which includes China and India, to expand 4.6%, slower than its 5.2% projection in April.”Risks to developing Asia’s economic outlook remain elevated and mainly associated with external factors,” the ADB said, citing a substantial slowdown in global growth, the U.S. Federal Reserve’s aggressive tightening, and surge in commodity prices. For 2023, the region is forecast to grow 5.2%, down slightly from its earlier forecast of 5.3%, the ADB said.”From within the region, downside risks could arise from the potentially lingering effects on supply chains from (China’s) latest round of lockdowns and the country’s growth slowdown, which could hinder developing Asia’s growth momentum,” the multilateral lending organisation said.China’s economy will likely expand 4.0% this year, the ADB said, a drop of 1 percentage point from its April forecast, but will recover lost ground in 2023 with growth seen at 4.8%.The growth outlook for the sub-regions was mixed, with Southeast Asia, Central Asia and the Pacific expected to grow faster than initially projected, while South Asia was forecast to expand more slowly due to the economic crisis in Sri Lanka and high inflation in India. The ADB chopped its growth forecast for South Asia to 6.5% from 7.0% this year and to 7.1% from 7.4% in 2023.With soaring inflation gripping much of the world, the ADB upgraded its inflation forecasts for this year and next to 4.2% and 3.5 % from 3.7% and 3.1%, respectively.”Inflation pressures in the region, are however, less than elsewhere in the world,” the ADB said. GDP GROWTH 2020 2021 2022 2022 2022 2022 2023 2023 SEPT DEC APR JULY APR JULY Central Asia -2.0 5.6 4.2 4.4 3.6 3.8 4.0 4.1 East Asia 1.8 5.1 5.0 4.7 3.8 4.5 4.5 7.7 China 2.2 8.1 5.5 5.3 5.0 4.0 4.8 4.8 South Asia -5.2 7.0 7.0 7.0 6.5 7.4 7.1 8.1 India -6.6 7.5 7.5 7.5 7.2 8.0 7.8 8.7 SEast Asia -3.2 2.9 5.0 5.1 4.9 5.0 5.2 5.2 Indonesia -2.1 3.7 4.8 5.0 5.0 5.2 5.2 5.3 Malaysia -5.6 3.1 6.1 5.9 6.0 5.8 5.4 5.1 Myanmar 3.2 -18.4 n/a n/a -0.3 n/a 2.6 n/a Philippines -9.6 5.5 6.0 6.0 6.5 6.3 6.3 5.7 Singapore -4.1 7.6 4.1 4.1 4.3 3.9 3.2 3.2 Thailand -6.2 3.9 4.0 3.0 2.9 4.5 4.2 1.5 Vietnam 2.9 2.6 6.5 6.5 6.5 6.5 6.7 6.7 The Pacific -6.0 -0.6 4.8 4.7 3.9 4.7 5.4 5.4 Developing -0.8 6.9 5.4 5.3 5.2 4.6 5.3 5.2 Asia INFLATION 2020 2021 2022 2022 2022 2022 2023 2023 SEPT DEC APR JULY APR JULY Central Asia 7.7 8.9 6.7 7.3 8.8 11.3 7.1 8.1 East Asia 2.2 1.1 2.2 2.0 2.4 2.3 2.0 2.1 China 2.5 0.9 2.3 2.1 2.3 2.1 2.0 2.0 South Asia 6.5 5.1 5.3 6.5 7.8 5.5 6.6 5.8 India 6.2 4.8 4.8 5.8 6.7 5.0 5.8 5.5 SEast Asia 1.5 2.0 2.4 2.5 3.7 4.7 3.1 3.4 Indonesia 2.0 1.6 2.7 2.7 3.6 4.0 3.0 3.3 Malaysia -1.1 2.5 2.3 2.3 3.0 2.7 2.5 2.5 Myanmar 5.7 3.6 n/a n/a 8.0 n/a 8.5 n/a Philippines 2.4 3.9 3.5 3.7 4.2 4.9 3.5 4.3 Singapore -0.2 2.3 1.4 1.4 3.0 4.7 2.3 2.3 Thailand -0.8 1.2 1.0 1.4 3.3 6.3 2.2 2.7 Vietnam 3.2 1.8 3.5 3.8 3.8 3.8 4.0 4.0 The Pacific 2.9 3.1 4.1 4.1 5.9 5.9 4.7 4.7 Developing 3.2 2.5 2.7 2.7 3.7 4.2 3.1 3.5 Asia  More

WASHINGTON (Reuters) -A bipartisan group of U.S. senators introduced two bills on Wednesday to reform election laws, seeking to block a repeat of then-President Donald Trump’s failed attempt to overturn his 2020 election loss to Democratic President Joe Biden.The legislation, among other things, would make clear that the vice president has only a ceremonial role in certifying election results, after a mob of Trump supporters on Jan. 6, 2021, stormed the U.S. Capitol in a bid to force then-Vice President Mike Pence to overturn the election result.The action came amid growing evidence from the House of Representatives committee investigating the Jan. 6 melee that Trump sought to overturn his loss by spreading falsehoods about a rigged election. Introduced by the group led by Democratic Senator Joe Manchin and Republican Senator Susan Collins, the two bills address a range of issues, from the handling of election results and presidential transitions to mail-in ballots, election record security and threats against election workers.”We urge our colleagues in both parties to support these simple, commonsense reforms,” said a statement released by the group of seven Democrats and nine Republicans. Similar legislation is also being pursued by two Democrats, Senator Richard Durbin and Senate Rules Committee Chair Amy Klobuchar, along with independent Senator Angus King. Democrats in the House are also pursuing legislation.Lawmakers hope to enact a package of election law reforms this year, while the House and Senate are under Democratic control.”The January 6th commission has added urgency,” King said in a statement welcoming the bipartisan group’s legislation. “This will help build consensus around approaches that will reinforce the seams in the fabric of democracy we’ve seen stretched too thin.” One bill introduced on Wednesday would reform the 1887 Electoral Count Act by clarifying the appropriate state and federal roles in choosing the president and vice president, and provide clear guidelines on when federal resources can be allocated to eligible presidential candidates. A second piece of legislation would double federal penalties for those who threaten or intimidate election workers, poll watchers, voters or candidates. It would also seek to improve the handling of mail-in ballots by the U.S. Postal System and states, authorize the federal agency that administers elections and safeguard election records. More

SINGAPORE (Reuters) – Having bucked a global dash to tighten monetary policy for a year, Asian central banks find themselves scrambling to catch up in order to tackle rising inflation and defend weakening currencies.Market analysts suspect Indonesia, the last remaining dove in emerging Asia, may be the next to move by pushing interest rates higher on Thursday, as policymakers rush to convince investors they are tackling rising prices.Singapore and the Philippines surprised markets with unscheduled tightening announcements last week, underlining the growing urgency among policymakers to act.Asia has lagged as the rest of the world, including emerging markets, began lifting rates as early as last June, after the U.S. Federal Reserve kicked off an accelerated timeline for its policy tightening.While relatively subdued inflation allowed central banks in Asia to remain dovish in a bid to support the post-pandemic economic recovery, that led to weakening currencies and capital outflows, even as the war in Ukraine exacerbated price pressures globally.“Have central banks been too slow to act? Yes, I know, it’s a common question,” Ravi Menon, managing director of the Monetary Authority of Singapore, said at a conference on Tuesday.”And I don’t want to sound defensive on behalf of my colleagues elsewhere but very few people saw this coming. The markets didn’t see it.”The climb in inflation has been quite rapid. It was unusually fast … And many thought the bigger risks were on the downside on growth and so did not see this coming.”Currencies and bonds have borne the brunt. Among the worst hit, the Philippine peso is down more than 10% year-to-date, and just off a nearly 17-year low of 56.53 per dollar. Yields on the country’s government bonds have spiked about 200 basis points (bps) since the start of the year.The Thai baht has fallen more than 10% this year, and Thailand snapped a five-month streak of foreign investment into equities to lose $816 million in June.A large part of the selling has been a response to rising Treasury yields and the U.S. dollar – factors beyond domestic policymakers’ control, giving Asia an excuse to hold off on rate hikes.But central banks are suddenly finding they can no longer ignore rising food and oil prices. Thailand and Indonesia saw inflation hit multi-year highs this month.Even South Korea, which began raising rates as early as August 2021, saw prices hit a 24-year high in June, triggering a record half-point rate hike last week.”What I suspect they’re doing at this stage is really (to) still focus on fighting inflation for the next few months, because that’s where the concern is,” said Euben Paracuelles, chief ASEAN economist at Nomura.He added that rising global headwinds and the risk of recession in major economies complicated the policy challenge at a time when inflation was at the start of a sharp pickup in Southeast Asia.PEER PRESSUREIndia, which first saw its central bank raising rates by 40 bps in an off-cycle move in May, has logged six straight months of foreign investor equity outflows, contributing to a record drop in the rupee.The historically volatile Indonesian rupiah is actually only down around 5% versus the dollar for the year, although it saw its largest monthly fall of 2.2% in June.It has to some extent been helped by resource-rich Indonesia’s improved trade position and the fact foreigners now hold less than a fifth of its high-yielding bonds.Others, such as the Philippines and Thailand, are far more vulnerable owing to their current account deficits and, in the latter’s case, reliance on a tourism sector still struggling following the COVID pandemic.”Indonesia has been, for the most part, able to hold off on rate hikes. But I actually think they’ll hike … just because everybody has tightened already,” said Nicholas Mapa, senior economist at ING.Yet, only 11 out of 29 economists polled by Reuters expect Bank Indonesia to raise rates on Thursday.”The room to keep growth-supportive monetary policy is definitely coming to a close very imminently,” said UOB economist Enrico Tanuwidjaja, referring to central banks that have yet to raise rates.A senior director at the Bank of Thailand said last week that the central bank is highly likely to raise its key policy rate in August, adding that the bank is ready to intervene if the baht weakens too much.”At the end of the day, we are dealing with a much tighter global monetary policy landscape, so there’s definitely compulsion for central banks in general to raise rates,” said OCBC economist Wellian Wiranto. More

The UK government should “urgently” strike an agreement with the EU to co-operate on emergency energy supplies in case Russia triggers a severe shortage by cutting off gas exports to the continent, an influential House of Lords committee said on Thursday. The Lords economic affairs committee warned that there was no concrete accord between Britain and the bloc over managing an energy supply emergency, despite their interdependency in relation to the trade of gas and power via subsea cables and pipelines. “This is something we need to grip urgently,” committee chair Lord George Bridges told the Financial Times. “What was seen to be very unlikely but a few months ago is now seeming more likely, and therefore we have to have a plan.”Bridges’ comments came after the EU on Wednesday asked all member states to reduce gas demand by 15 per cent from August 1, warning of the severe risk of further cuts to Russian supplies.Gas interconnectors between Britain and the continent have in recent months been running at maximum capacity to help the bloc fill its gas storage facilities ahead of the winter, with high volumes of liquefied natural gas arriving at UK ports before being sent on to the mainland. However, Britain, which has limited gas storage capacity, traditionally relies on imports from the EU during the winter, when demand is greater.Unusually, Britain has since April also been a net exporter of electricity to the EU, as gas-fired power stations take advantage of increased LNG cargoes to generate electricity destined for member states including France, whose large network of nuclear reactors is experiencing difficulties. Britain normally relies on net imports from the mainland, especially if wind farms and solar are not generating significant amounts.The committee’s plea echoes comments by ENTSOG, which represents European gas groups. It said last month that political arrangements were needed across Europe “to know what we can expect from each other as neighbouring countries in the case of a severe crisis”. Individual countries each have emergency plans, but energy companies have warned that these were designed to address short-term outages at, say, a gasfield or pipeline rather than prolonged shortages.

The EU on Wednesday published its own emergency plan for conserving gas. The plan noted that, since the start of this year, the bloc had received 14bn cubic metres more gas via pipelines from four regions, including the UK, but did not mention a supply agreement with Britain.“The [European] Commission will remain vigilant to protect the single market,” it added.Under the UK’s gas emergency plan, interconnectors would be shut off by National Grid — which oversees the energy system — in the event of a severe shortage that threatened the system’s stability. An EU official insisted the European Commission was “in close contact with the UK government on these issues”, adding that the post-Brexit UK-EU Trade and Cooperation Agreement set out rules “for co-operation on risk preparedness and an obligation not to endanger mutual security of supply”.The UK government did not directly respond to the question of an energy co-operation agreement but insisted the country had “no issues with either gas or electricity supply” and was “fully prepared for any scenario”.The economic affairs committee also called on ministers to publish an energy demand reduction strategy, following an inquiry into security of supplies and how to reach net zero emissions. More

FRANKFURT (Reuters) – The European Central Bank will raise interest rates for the first time in 11 years on Thursday with a bigger-than-flagged move seen as increasingly likely as policymakers fear losing control of runaway consumer price growth.With inflation already approaching double digit territory, it is now at risk of getting entrenched above the ECB’s 2% target, requiring rate hikes even if that slows – or crashes – an economy already suffering from the impact of Russia’s war in Ukraine. But policymakers appear far from united on just how fast the ECB should move with some arguing that it is already a long way behind the curve, especially compared to global peers like the U.S. Federal Reserve, while others point to a looming recession the ECB risks exacerbating. The bank until recently was signalling just a 25 basis point increase to be followed by a bigger move in September but sources close to the discussion said a 50 basis point increase would also be on the table on Thursday as the inflation outlook is deteriorating quickly.Economists polled by Reuters predicted only a 25 basis point increase but most said the bank should actually hike by 50 basis points, lifting its record low minus 0.5% deposit rate to zero.Complicating the decision, the euro’s recent drop to a two decade low against the dollar also boosts inflation pressures, adding to the case for a bigger rate hike even if that ultimately hurts growth. A larger increase would, however, require the ECB to shield more indebted nations like Italy or Spain from soaring borrowing costs, so a deal on a new bond purchase scheme, already close to being reached according to sources, would also be needed.When rates rise, borrowing costs on the bloc’s periphery often increase disproportionately and the ECB has promised to fight this sort of fragmentation with a new instrument.While not all the details of this tool are expected to be announced, ECB chief Christine Lagarde is likely to make a firm commitment and must offer financial markets at least some specifics including on the requirements for triggering ECB aid. In June, when she made only a vague commitment, investors immediately challenged the ECB, pushing up Italian yields to their highest in a decade, forcing the ECB into a emergency policy meeting and a stronger pledge. The ECB announces its policy decision at 1215 GMT, 30 minutes later than previously, while Lagarde’s news conference is scheduled for 1245 GMT, 15 minutes later than in the past.INFLATION VS RECESSIONAlong with the rate hike, the ECB is also set to signal a string of subsequent increases. It already flagged a 50 basis point hike for September and that is likely to remain on the cards. It is also expected to pledge further moves, though it is less likely to make firm commitments.”Our central case is for a 50 basis point hike in September, but we think … the Governing Council will leave the door open for a larger move,” BNP Paribas (OTC:BNPQY) said in a note. “We still expect a … 50 basis point hike in October.”Markets now see almost 100 basis points worth of moves by September and a combined 170 basis points of hikes by the end of the year, or increases at all four meetings, with several 50 basis point moves along the way. [0#ECBWATCH] The dilemma for policymakers will be to balance growth and inflation considerations. Confidence has already taken a hit from the war and high raw materials prices are depleting purchasing power, pushing the block towards a possible recession, especially with looming gas shortages over the winter. Raising rates in a downturn is controversial, however, and could magnify the pain as businesses and households face higher financing costs.”One problem is that, for example, a gas shutdown would not only hit growth, but would also boost inflation and therefore the ECB may not immediately become more growth sensitive,” JP Morgan economist Greg Fuzesi said. The ECB’s ultimate mandate is controlling inflation, however, and rapid price growth for too long could perpetuate the problem as firms automatically adjust prices.Europe’s labour market is also increasingly tight suggesting that pressure from wages is also likely to keep price growth high. Some central banks, most particularly the Fed, have made clear they are willing to crash growth to control inflation because the risk of a new “inflation regime” setting in is too high. But if a recession is coming, the ECB needs to front load rate hikes so it gets done quicker. More

Tesla withstood disruptions to production in China and the high costs of scaling up new plants in Texas and Germany to report a 57 per cent jump in adjusted earnings per share in its latest quarter.The electric carmaker’s second-quarter results brought a degree of relief after the company had warned of production and supply strain stresses. Revenue, at $16.9bn, was up 42 per cent from the year before, though the figure fell slightly short of the $17.1bn Wall Street had been expecting.Tesla also revealed that it had largely unwound last year’s contentious $1.5bn bet on bitcoin, as it converted three-quarters of its stake into fiat currencies in the face of tumbling cryptocurrency prices. Chief executive Elon Musk’s enthusiasm for cryptocurrencies meant the carmaker was one of the first companies to park a portion of its cash in digital assets.Musk warned in an internal email last month that he had a “super bad feeling” about the economy. Asked on Wednesday whether demand was weakening, the Tesla boss said “some, maybe”, but added: “We have so much excess demand that it’s not an issue for us.” Chief financial officer Zach Kirkhorn said any fall-off in demand was “not material”. Instead, Musk said Tesla’s “problem is overwhelmingly that of production”. Supply chain pressures and the Covid 19-related shutdowns in Shanghai have left the company needing about 935,000 vehicle deliveries in the second half of the year to reach the 1.5mn total for which many analysts have hoped, or an increase of 70 per cent from the same period of 2021.Musk did not give a production forecast for the rest of the year except to say that the company was likely to achieve “record” output. He also said Tesla’s plans called for it to reach full production by the end of the year, at an annualised rate of 2mn vehicles. Tesla had disclosed that production shutdowns in Shanghai and parts shortages had wiped as much as a quarter off its vehicle deliveries in the three months ended June 30. Though the figure of 254,695 vehicles it did ship was still 27 per cent up on a year before, it represented the first sequential quarterly drop in more than two years.Spending on the new production facilities pushed Tesla’s closely watched gross profit margin from automotive activities down to 27.9 per cent, compared with the record 32.9 per cent margin it reported in the first quarter.Musk said Tesla’s crypto sales “should not be taken as some verdict on bitcoin” and that they were made to maximise the company’s cash position in the face of uncertainty over Covid-related shutdowns in China. Tesla was “certainly open to increasing bitcoin holdings in future” and had not sold any of its dogecoin, he added.

The price of bitcoin has roughly halved since the end of last year, when Tesla valued its stake at just under $2bn. It said the latest sales had raised $936mn and that it had taken an impairment charge of $106mn on top of a $101mn charge taken last year.Before the release of the results, Tesla’s share price had fallen 36 per cent since Musk first revealed he had built up a sizeable stake in Twitter. The Twitter stake stoked worries over whether his involvement in the social media company would lead to the sale of part of his Tesla holding. The tech-heavy Nasdaq Composite has fallen 13 per cent in the same period. Tesla shares initially jumped more than 4 per cent following the results on Wednesday, but trimmed their advance to 0.5 per cent.For the second quarter, Tesla reported adjusted earnings per share of $2.27, up from $1.45 the year before. Based on formal accounting principles, earnings per share climbed to $1.95, up from $1.02. More