Aurelia Butler

The country of 22 million people has requested loans from the IMF as it struggles to pay for imports amid crushing debt and a sharp drop in foreign exchange reserves that has fueled soaring inflation.”We’ve had very good, fruitful, technical discussions on preparations for the negotiations with authorities over the past weekend and couple of days before,” said Anne-Marie Gulde-Wolf, acting director of the IMF’s Asia and Pacific Department, speaking at an online news conference.Sri Lankan Finance Minister Ali Sabry was in Washington last week to talk to the IMF, the World Bank, India and others about financing help for his country, which has suspended payments on portions of its $51 billion in external debt.”The requirement for fund lending will be progress toward debt sustainability,” Gulde-Wolf said, calling on Sri Lanka for measures to increase tax revenues to address critical spending needs.”Monetary policy has to be tightened to keep inflation in check,” she said. “We see a need for flexible exchange rates.”Gulde-Wolf did not reply to a question on the total value for any IMF package, nor the estimated timing of a conclusion to the negotiations with Sri Lanka. More

(Reuters) -The Asian region faces a “stagflationary” outlook, a senior International Monetary Fund (IMF) official warned on Tuesday, citing the Ukraine war, spike in commodity costs and a slowdown in China as creating significant uncertainty.While Asia’s trade and financial exposures to Russia and Ukraine are limited, the region’s economies will be affected by the crisis through higher commodity prices and slower growth in European trading partners, said Anne-Marie Gulde-Wolf, acting director of the IMF’s Asia and Pacific Department.Moreover, she noted that inflation in Asia is also starting to pick up at a time when China’s economic slowdown is adding to pressure on regional growth.”Therefore, the region faces a stagflationary outlook, with growth being lower than previously expected, and inflation being higher,” she told an online news conference in Washington.The headwinds to growth come at a time when policy space to respond is limited, Gulde-Wolf said, adding that Asian policymakers will face a difficult trade-off of responding to slowing growth and rising inflation.”Monetary tightening will be needed in most countries, with the speed of tightening depending on domestic inflation developments and external pressures,” she said.The U.S. Federal Reserve’s expected steady interest rate hikes also present a challenge to Asian policymakers given the region’s huge dollar-denominated debt, Gulde-Wolf said.In its latest forecast issued this month, the IMF said it expects Asia’s economy to expand 4.9% this year, down 0.5 percentage points from its previous projection made in January.Inflation in Asia is now expected to hit 3.4% in 2022, 1 percentage point higher than forecast in January, it said.A further escalation in the war in Ukraine, new COVID-19 waves, a faster-than-expected Fed rate hike trajectory and prolonged or more widespread lockdowns in China are among risks to Asia’s growth outlook, Gulde-Wolf said.”There is significant uncertainty around our baseline forecasts, with risks tilted to the downside.” she said. More

SEOUL (Reuters) -South Korea’s economic growth nearly halved in the first quarter from the preceding three months on coronavirus curbs and surging inflation, while a slowing Chinese economy clouded the outlook for the coming months.Gross domestic product grew a seasonally-adjusted 0.7% in the first quarter from the last quarter of 2021, preliminary data from the Bank of Korea (BOK) showed on Tuesday, slowing from 1.2% a quarter earlier, but just beating 0.6% growth seen in a Reuters survey.”Domestic consumption will rebound as domestic COVID-19 curbs were mostly lifted, but China’s slowdown would severely hit exports and the overall economy in the current quarter,” said Park Sang-hyun, economist at HI Investment & Securities.South Korean stocks and the won currency opened with modest gains after the data.The data comes as a senior International Monetary Fund (IMF) official warned on Tuesday Asia faces a “stagflationary” outlook with likely downgrades to growth projections and surging price pressures.Private consumption shrank 0.5%, the worst contraction in five quarters, as the government enforced social distancing restrictions to curb a surge in Omicron coronavirus cases.Capital investment fell 4%, the fastest decline in three years, while construction investment lost 2.4%.From a year earlier, the economy grew 3.1%, compared with economists’ forecast for 2.8% growth.The BOK is expected to revise down this year’s growth forecast from the current 3% estimate in its next review in May, as the country faces headwinds from the Ukraine war, U.S. monetary policy tightening and COVID-19 lockdowns in China.New BOK governor Rhee Chang-yong said last week economic growth is expected to weaken further from earlier projections and that monetary policy would need to address risks to growth and the threats from inflation.In a separate Reuters poll, South Korea’s economy was forecast to grow 2.8% this year and 2.6% in 2023 after expanding at an 11-year high of 4% in 2021. The BOK this month raised its benchmark rate to 1.50%, the highest since August 2019 in a surprise move as it ramped up the fight against inflation.The IMF recently lowered its 2022 growth projection for the country to 2.5% from 3.0% while upgrading its inflation projections to 4.0% from 3.1%. More

(Reuters) -Lael Brainard, one of President Joe Biden’s four nominees to the Federal Reserve, is poised to become the U.S. central bank’s next vice chair after she cleared a procedural hurdle in the U.S. Senate Monday evening with bipartisan support. The Senate is scheduled to hold a final confirmation vote Tuesday at 2:15 pm ET (1815 GMT) on Brainard, a current Fed governor.Eight Republicans joined Democrats in voting 54-40 Monday to end debate on Brainard’s nomination. A cloture vote on a second Fed nominee, Michigan State University’s Lisa Cook, could come on Tuesday.The Senate is also expected to schedule confirmation votes this week for Fed Chair Jerome Powell, renominated to his current position, and Davidson College dean of faculty Philip Jefferson, nominated to a vacant seat on the Board. Both are expected to win bipartisan support.At its policy meeting next week the Fed is widely anticipated to deliver a half percentage point interest rate hike and announce the start of a reduction in its giant balance sheet as it ramps up its fight against 40-year high inflation. Cook and Jefferson would likely join after that meeting, taking part in deliberations over what are expected to be interest-rate hikes at every subsequent Fed meeting this year and into at least the first part of next year.Cook would be the first Black woman to serve on what is currently an all-white Fed Board, and Jefferson would be the fourth Black man to serve in the central bank’s more than 100-year history. More

The UK’s post-Brexit trade deal with the EU has caused a “steep decline” in the number of trading relationships Britain has with the bloc as red tape at the border curbs the ability of smaller firms to export, new research has found.Although UK exports to the EU have now recovered to pre-pandemic levels, analysis of trading data shows the number of relationships between buyers and sellers tumbled by a third after the introduction of the EU-UK trade deal in January 2021.The findings from the LSE Centre for Economic Performance chime with warnings from business groups that smaller firms have struggled to absorb customs controls, VAT and regulatory red tape, with many quitting exporting altogether. The LSE team analysed changes in trade patterns for 1,200 individual product lines traded with the EU, in what they said was the most comprehensive study to date of the effects of Brexit on UK-EU trade.

The paper found the return to pre-Brexit levels of exports to the EU “masks a steep decline in the number of varieties [of goods] exported, driven by the exit of ‘small’ varieties that account for a low share of total exports.” Thomas Sampson, co-author and associate professor of economics at LSE, said the analysis had exposed the hidden impacts of increasing the red tape burden on smaller UK exporters.“The research found that after the trade agreement came into force, the number of buyer-seller relationships between the UK and the EU fell by nearly one-third, with the vast majority of those being shed in the first quarter,” Sampson said.The research also found that the sudden drop in the number of products being sold was most pronounced in trade between British businesses and their counterparts in smaller EU countries. Thomas Prayer, a co-author of the paper who is a doctoral student at the University of Cambridge, said the decline was “remarkable”. He added: “It appears the UK simply stopped selling a lot of products to smaller countries in the EU.”

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The findings are another worrying sign of the negative impact that the Trade and Cooperation Agreement between the UK and EU is having on UK exporters. Last month the Office for Budget Responsibility, the government spending watchdog, warned that UK trade had “missed out” on much of the recovery in global trade and was lagging all other G7 economies. The OBR, which estimates that total UK imports and exports will be 15 per cent lower over the medium term than if Britain had remained part of the EU, said Brexit “may have been a factor” in the relative underperformance.

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Sampson said the LSE findings raised worrying questions about the long-term impact of Brexit on future EU trade. “There’s quite a lot of evidence that future growth in trade comes from firms that are small today,” he added. “If you kill off those exporting relationships it may lead to lower future export growth.”William Bain, head of trade policy at the British Chambers of Commerce said the findings bore out complaints by businesses for more than a year that the TCA was making them less competitive. “Inevitably it is smaller firms which don’t have the money, time or logistical capacity to set up within the EU which are being hardest hit. That is also the message from this important new study,” he said, urging the government to work with the EU to reduce trade frictions.Martin McTague, chair of the Federation of Small Businesses, said exporters were facing “myriad challenges” including increased paperwork and urged the government to launch a new “SME Trade Support Fund” to help firms trade internationally. “Small business must be at the centre of free trade agreements,” he added.The Department for International Trade said the TCA allowed businesses in Britain to “trade freely” with the EU, and was working to support exporters via its Export Support Service. “We are ensuring that businesses of all sizes have the support they need to trade effectively with Europe and seize new opportunities as we strike trade deals around the world,” a spokesperson added. More