Aurelia Butler

Investing.com – Brazil is facing a very challenging outlook in 2022. Even with the downward trend in inflation, the macroeconomic scenario will consist of high interest rates and a devalued real, in addition to concerns about the country’s fiscal situation. The presidential elections at the end of the year should act as an aggravating factor, bringing more volatility to the market.“For 2022, the expectation for domestic consumption is not good. We expect stability or a small drop, but not growth,” comments Rafaela Vitória, chief economist at Banco Inter. “We expect a growth of 0.5%, but this aggregate data reflects little, because we will have sectors in decline and sectors growing.”Vitória explains that agriculture and some industries, such as extractive industries, are better positioned for next year. On the other hand, the service and retail sectors should be affected by inflation and lower salaries leading to a decrease in families’ purchasing power.The consumer durable goods industry may also see weaker performance, since it is lapping a higher base with recent strong quarters. “The overall temperature may point to a recession, because the sectors with strong prospects employ fewer people,” explains Vitória.”It is difficult to have a good year. The fact that Brazil is structurally weak makes it much more vulnerable to shocks of all kinds,” says economic consultant Zeina Latif, who foresees a mild recession for 2022. The country’s productivity is low, with a relatively poorly skilled labor force, and national industries are technologically outdated, which, according to the specialist, can be seen in the increase in imports even with the rising exchange rate and weakening real.”We have a very weak, almost stagnant economy. We had a quick turnaround after 2020, [when the pandemic crisis started], but this brought problems, especially in fiscal matters,” comments Latif.Latif explains that the recent injection of capital into the economy was essential to minimize the economic impacts brought by the pandemic, but the national industry was not prepared to meet the country’s repressed demand. “In general, Brazil spent too much and without a clear focus. So part of our inflation, which started already last year, was the result of over-stimulating the economy,” she explains.Furthermore, the increase in public spending without compensatory measures has generated mistrust about the government’s fiscal commitment, which in turn puts pressure on the exchange rate and intensifies inflation and the interest rate. Among the analysts consulted by Investing.com Brazil, the forecast for 2022 is that the dollar will be in the range of R$ 5.40 to R$ 5.50, with the Selic (Brazilian interest rate) between 10.5% and 12% and an IPCA (inflation mark or CPI) close to 5% year over year, on average.Latif explains that in the last year there has been an “institutional weakening of the (constitutional) spending limit,” with off-budget spending and the recent discussions about the PEC of Precatórios, which changes the country’s fiscal anchor. This all will have an effect on the presidential elections: “Now the market debate is about how committed the competitive candidates are to the cap rule and the fiscal responsibility law.” For Latif, long-term or structural projects will only get underway after the election result is clarified.”There is a favorable situation for a center-left candidate to win, because the level of activity in Brazil is very weak and the average consumer’s income and purchasing power has dropped a lot, either because the labor market is bad or because inflation is high. In a situation like this it is very difficult to raise a liberal, free-market flag,” explains André Perfeito, chief economist at Necton Investimentos.Although the names of the presidential candidates are not yet decided, Perfeito points out that among the possibilities presented so far, the main center-left representative that could win the elections next year is former president Luiz Inácio Lula da Silva, of the Workers’ Party (PT). With a possible victory for the PT, the specialist believes that the Central Bank would not feel pressured to reduce the Selic, which at Necton is forecasted to reach 11.5% in 2022.Perfeito explains that although interest rates have reached 2% in recent years, this reduction had no significant impact on the economy; on the contrary, it brought, “a series of dysfunctionalities in the financial system. Besides, the bond and stock markets were very disconnected.”The moratorium interest rate was well below the perceived risk. When the interest rate goes higher, this will indicate that asset prices are low and this may generate a positive mood in the market in 2022, despite the scenario indicating that Lula da Silva will win the elections,” comments Necton’s chief economist.Besides the internal challenges, the international economic climate will also be of little help to Brazil. “World trade should be stagnant and facing an inflation challenge in 2022,” Latif says. “With the Fed raising interest rates and world trade growing more modestly, it is a more difficult environment for emerging countries,” explains the economic consultant.For the economist and professor at USP, José Francisco de Lima Gonçalves, the expectation is that the United States monetary policy will tighten global financial conditions over the next year, which together with doubts about Chinese demand, should impact commodities. The scenario gets even more complicated with the bottlenecks in the economy and the questions about the Omicron coronavirus variant.”There is not much demand coming from abroad for Brazilian exports, so there will be large production in agriculture, but without pricing power. Besides, less favorable financial conditions abroad pose difficulties for investments here, which increases speculative or fixed income positions,” explains Gonçalves.Read also: Expectations for the Turkish Economy in 2022: Is There a Plan for Inflation?See our full outlook series here. More

Poland’s economy weathered the COVID-19 pandemic better than many regional peers and has bounced back strongly. The finance ministry said the deficit would continue to decline in coming years.”We have a stable situation in the public finances. State budget revenues are growing,” Deputy Finance Minister Piotr Patkowski said in a statement.The finance ministry also said that in 2021 it would spend 26 billion zlotys, or 1% of GDP, on servicing debt, a figure that is 3.3 billion zloty lower than the previous year. More

Investing.com — Putin and Biden are set to discuss Ukraine, while ECB’s members debate inflationary pressures. Stock markets are set to end the year on the rise, like the U.K. housing market, and crude waits for OPEC to discuss output levels. Here’s what you need to know in financial markets on Thursday, 30th December.1. Putin and Biden to hold talksU.S. President Joe Biden and Russian President Vladimir Putin are set to speak later Thursday amid growing tensions over the situation in eastern Ukraine.Russia’s intentions towards Ukraine have concerned the West ever since its seizure of Ukraine’s Crimea peninsula in 2014. The situation has become more acute in recent weeks, with the U.S. accusing Moscow of plotting to invade the Eastern European country, pointing out the massing of tens of thousands of troops near the Ukraine border in the past two months.Russia officially denies planning to attack Ukraine, and says it has the right to move its troops on its own soil as it likes. That said, Moscow has expressed concern about NATO expanding eastwards, and has been seeking guarantees that Ukraine or other neighboring countries will not be allowed to join the Western military alliance or house NATO’s advanced weaponry.The call will take place at 3:30 p.m. ET (2030 GMT), the White House said. 2. Stocks to edge higher; Jobless claims in focusU.S. stocks are set to open marginally higher Thursday, aided by more positive Omicron vaccine news ahead of the release of the latest U.S. labor market data.By 5:20 AM ET, Dow Jones futures were up 20 points, or 0.1%, S&P 500 futures were 5 points higher, or 0.1%, while Nasdaq 100 futures edged up 40 points, or 0.2%.The major averages are set to close the year on a positive note, with all three indices in the green for December, boosted by hopes that new coronavirus-related curbs and restrictions may not be needed into 2022 as the Omicron variant is seen as less dangerous than other variants, even if the number of cases keeps rising.Helping the tone Thursday was the news that a booster dose of Johnson & Johnson (NYSE:JNJ)’s single-dose Covid-19 vaccine was 84% effective at preventing hospitalization in South African healthcare workers who became infected with the Omicron variant, according to a study published earlier Thursday.Also in the spotlight Thursday will be Micron (NASDAQ:MU) after the memory chip makers warned that strict Covid-19 curbs in the Chinese city of Xian could disrupt its chip manufacturing base in the area.The main economic release is the weekly initial jobless claims number, at 8:30 AM ET (1330 GMT), which is expected to be largely unchanged from the previous week’s 205,000, a level that is generally consistent with pre-pandemic levels.3. ECB’s inflation hawks and dovesThe Federal Reserve may have finally decided that inflation was running too hot for it to ignore, but the debate over rising prices within the European Central Bank is still ongoing.The ECB earlier this month raised its inflation projections to above its 2% target for this year and in 2022 while forecasting inflation would then fall below that figure in the following two years.However, ECB governing council member Klaas Knot said in an interview Thursday that inflation in the euro zone could very well exceed these current projections for the coming years, saying that the central bank’s outlook could prove to be too rosy.”I have a different view, I think the chance we remain stuck above 2% is just as big. Not far above 2%, but still,” Knot told Dutch daily Trouw.This view was countered by ECB Governing Council member Ignazio Visco, who stated on Thursday that the forecasts that inflation in the Eurozone will be below 2% in 2023 and 2024 are exposed to downside not just upside risks.This internal debate between hawks and doves within the ECB is likely to last some time, and could get heated.4. U.K. housing market soarsThere has been very little to write home about as far as the U.K. economy is concerned, with the exception of the buoyant housing market.Britain’s economy experienced its biggest annual decline in 300 years in 2020 amid the fallout from the coronavirus pandemic, and the rebound has been gradual with Brexit remaining a drag on growth.That said, British house prices rose by a stronger-than-expected 1.0% in December from November, capping the biggest full-year rise in prices since 2006, according to data from mortgage lender Nationwide Thursday.House prices this month were 10.4% higher than in December 2020, helped by a now-lapsed tax break for buyers and by ongoing demand for bigger properties as more people work from home.5. Crude enjoys a banner yearOil prices weakened Thursday, handing back some of the previous session’s gains after U.S. inventories data showed continued demand from the world’s largest consumer despite rising numbers of Covid cases.By 5:20 AM ET, U.S. crude futures were down 0.9% at $75.91 a barrel and Brent futures fell 0.9% at $78.54 a barrel.U.S. crude oil inventories fell by 3.6 million barrels in the week to Dec. 24, according to data from the Energy Information Administration, released Wednesday, roughly in line with what the American Petroleum Institute reported on Tuesday. Gasoline and distillate inventories also fell, indicating demand remains strong despite record Covid-19 cases in the United States.Crude is on course to post gains of between 50% and 60% in 2021 as demand has climbed back to near pre-pandemic levels while top producers have adopted a very cautious stance in returning output to the market.The Organization of Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, is due to meet next week to assess production policy heading into 2022. 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There has been an unexpectedly strong global economic recovery this year. A year ago, the OECD forecast global economic growth at 4.2 per cent in 2021, after a decline of 4.2 per cent in 2020. It now knows the shrinkage in 2020 was only 3.4 per cent. Yet even after a smaller than expected recession in 2020, this year’s growth is forecast at 5.6 per cent. The robust recovery is welcome. But it is also uneven in many ways.The most remarkable performance relative to expectations a year ago has been by the high-income countries. The US economy is now forecast to grow by 5.6 per cent and the eurozone by 5.2 per cent in 2021. A year ago, US growth was forecast at a mere 3.2 per cent this year and the eurozone’s at 3.6 per cent. In all, says the latest Economic Outlook, “output in most OECD countries is now close to or above pre-pandemic levels.” All the same, “The strength of the rebound has not yet permitted a full healing of the global economy from the effects of the pandemic.”The striking feature of this recovery has been its unevenness on multiple dimensions — relative performance of richer and poorer countries, spread of vaccination, extent and characteristics of policy support, behaviour of labour markets, patterns of sectoral demand, extent of disruptions to supply chains and shortages of vital resources. Despite the recovery, the OECD states that global output was still 3.5 per cent below pre-pandemic forecast in mid-2021. Crucially, the lost output has been unevenly distributed, with relatively bigger losses in middle-income emerging economies than in high-income ones and the biggest losses in low-income countries, with terrible effects on the world’s poorest.The vastly greater room for fiscal and monetary support in rich countries and the divergence in vaccinations explain these differences. At the beginning of December, the number of doses administered per hundred people ranged from 183 in China and 176 in the UK to 140 in the US, 93 in India, 44 in China and just 5 in Nigeria. This gap has to be closed if the world economy is to be reopened and Covid controlled.Not only have high-income countries been able to spend more freely, they have also done so in divergent ways. In countries that spent heavily on job retention programmes, such as Germany and France, labour force participation is roughly where it was before the pandemic. In countries where support was concentrated on the unemployed, notably in the US, unemployment is low and vacancies high, while participation has fallen, as many workers appear to have left the labour force.The pandemic has also had noteworthy sectoral impacts, with relatively strong demand for manufactures and relatively weak demand for face-to-face services. This has had strongly differential effects on the demand for workers. It has also created bottlenecks in supply chains, notably in the production of motor vehicles. Gas shortages have also emerged, leading to big jumps in electricity prices.The combination of shortages with strong pressure on labour markets is also generating unexpectedly high inflation. Jay Powell, recently reappointed chair of the US Federal Reserve, has retired the word “transitory” from his vocabulary. Monetary policy is likely to be tightened faster than expected just a month or so ago.Despite the good news, then, 2021 will bequeath big challenges, not least containing inflation, while sustaining demand. The arrival of the Omicron variant also reminds us that Covid remains a threat and global delivery of vaccines an obligation and a necessity. Much has been achieved in 2021. But much remains to be done in 2022. More

“Mergers and acquisitions of projects between real estate companies are the most effective market-oriented means for real estate companies to resolve risks,” Zou told reporters. Chinese real estate firms have been under severe liquidity stress this year after regulators stepped up their deleveraging campaign against the bloated sector, triggering defaults at some heavily indebted companies. More

The ECB this month raised its inflation projections to above its 2% target for this year and in 2022 and forecast inflation would be below that figure in the following two years.However, during the bank’s December policy meeting several policymakers questioned the ECB’s projections, arguing that the bank is underestimating the risk of price growth holding above the 2% target.”The (inflation) forecasts below 2% in 2023-24 are of course subject to both downside and upside risks,” Visco, who is also the governor of the Bank of Italy, told the Italian daily La Stampa. Visco said that the final impact on the euro zone economy of the coronavirus variant Omicron, which has raced out of control in Europe, was unknown at the moment. Regarding the European Union Stability Pact, Visco said sustainability of fiscal budgets was crucial both in the bloc as a whole and in each member state, adding it would be helpful to have a euro zone or EU economy minister. More