Economy

Despite a solid performance last year with a 5.2% growth rate, Cambodia’s economic landscape faces hurdles. Insufficient logistics and inconsistent energy supplies continue to pose significant challenges. Additionally, external economic shocks have led to a downturn in manufacturing and exports, resulting in a five percent reduction in manufacturing jobs.In response to these difficulties, the Cambodian government has stepped up with financial support for workers who have lost their jobs due to the manufacturing slowdown. The World Bank’s report stresses that private sector development is vital for sustained economic growth, pointing out that areas such as transportation infrastructure and power supply need substantial improvement.The report also highlights the need for structural reforms, including enhancing the business environment and improving workforce skills, as critical steps forward. It warns of potential volatility from high household debt levels within real estate sectors and the possibility of oil and food price shocks that could affect future economic stability.Maryam Salim, World Bank Country Manager, has emphasized the importance of private sector development for continued economic expansion. Similarly, Davide Furceri, IMF Mission Chief, acknowledges that despite various challenges, there has been steady progress in Cambodia’s economy.The focus now shifts towards implementing strategic reforms to bolster infrastructure and regional trade relations, which are expected to drive Cambodia’s economy closer to its pre-pandemic growth rates over the next two years.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

ANKARA (Reuters) -Turkey’s central bank raised its policy rate by a larger-than-expected 500 basis points to 40% on Thursday and said the pace of monetary tightening would slow as the rate approached its peak.”The Committee assessed that the current level of monetary tightness is significantly close to the level required to establish the disinflation course,” the bank said following its monetary policy committee meeting.In a Reuters poll, most economists predicted a 250 basis-point hike, while three forecast a 500-point hike. The bank has raised its one-week repo rate by 3,150 basis points since June.”The pace of monetary tightening will slow down and the tightening cycle will be completed in a short period of time. The monetary tightness will be maintained as long as needed to ensure sustained price stability,” the bank said.President Tayyip Erdogan chose former Wall Street banker Hafize Gaye Erkan as central bank chief after his May re-election and she has led a policy U-turn, vowing to raise rates as high as needed to cool inflation.The bank’s previous policy of cutting interest rates despite high inflation triggered a currency crisis in 2021, after which the government introduced a scheme to protect lira deposits from currency depreciation.”A final 250bp hike in December now looks likely,” said Liam Peach at Capital Economics. “The past month has brought further signs that Turkey’s economy is rebalancing in response to the policy U-turn in May.”EBRD President Odile Renaud-Basso told Reuters that Turkey’s policy rate “will need to remain at a high level for quite a long time to really rebuild confidence.”The lira firmed to as far as 28.51 against the dollar following the statement and stood at 28.7685 at 1200 GMT.U.S. FUND INFLOWS Central bank officials told Reuters that Turkey is seeing an inflow of funds to the lira from large corporate investors based on the west coast of the United States and that talks with foreign funds indicated such inflows would continue.The central bank also announced other measures, introducing an upper limit on rediscount credit interest rates for exports and forex-bringing services in a bid to support access to financing for exporting companies.Inflation stood at 61.36% in October and is expected to continue rising and peak in May 2024 at around 70-75%, according to the central bank which raised its year-end inflation forecasts for this year to 65% earlier this month.President Tayyip Erdogan in the past repeatedly criticised tight monetary policy, describing himself as an enemy of interest rates but has said in recent months that tight policy would help bring down inflation.Bankers told Reuters this week that banks’ deposit rates, already above 45%, are expected to rise further by year-end as the central bank takes additional steps to tighten liquidity and lenders spruce up their year-end balance sheets. More

Below reaction from analysts to the decision:LIAM PEACH, CAPITAL ECONOMICS, LONDON”(Turkey’s central bank) suggested that it is very close to the end of the tightening cycle. A final 250bp hike in December now looks likely. For the central bank to have any chance of achieving single digit inflation this decade, rates will need to stay at this level for some time.””The past month has brought further signs that Turkey’s economy is rebalancing in response to the policy U-turn in May. Credit growth has slowed, retail sales have weakened and the current account deficit has narrowed. Inflation pressures have cooled too and inflation expectations have started to fall.”BARTOSZ SAWICKI, CONOTOXIA FINTECH, WARSAW “In October the annual inflation rate inched lower and external price dynamics have turned a tad more favourable. At the same time, the macroeconomic backdrop remains extremely challenging. The risk of a sharp slowdown in activity points to less aggressive continuation of the tightening cycle. We see the one-week repo peaking around 45%. We expect slower hikes ahead as we get closer to this level and the policy stance became more restrictive.””The markets might remain uncertain if further hikes are on the table and fear the (central bank) might opt to pause the tightening until the local elections in March. In this context, the next couple of months will put the (central bank)’s independence and determination to stick to a more orthodox stance to the test.” More

JERUSALEM (Reuters) – Israel’s central bank is expected to leave short-term interest rates unchanged next week for a fourth straight meeting to maintain financial stability and avert an uptick in inflation due to the war with Hamas, which has raised supply concerns.All 14 economists polled by Reuters projected the Bank of Israel would hold its benchmark rate at 4.75% – its highest level since late 2006 – when it announces its decision on Monday at 4 p.m. (1400 GMT).The central bank raised the rate 10 times in a row from 0.1% in April 2022 before pausing in July and again in August and October.”As the war is going on, they will not lower rates because they will be afraid of the inflationary pressure that can be driven by the war,” said Ori Greenfeld, chief economist at the Psagot brokerage. “So they will keep it at 4.75% and will decide only after the war where are we going (with rates).”The subsequent policy meeting is set for Jan. 1, 2024 and economists believe that should inflation – now at 3.7% annually – show signs of abating, interest rates could start to decline at that time though much still depends on the impact of the war.While growth is set to slow due to a grim national mood and hundreds of thousands of Israelis called into military reserve duty, there is a severe shortage of foreign workers – Palestinians and Thais – in the construction and agriculture sector, and this could limit supply and lead to a spike in prices when demand returns, economists say.Israel launched its war in Gaza after gunmen from Hamas burst across the border fence, killing 1,200 people and seizing about 240 hostages, according to Israeli tallies. Since then, over 14,000 Gazans have been killed by Israeli bombardment, around 40% of them children, according to health authorities in the Hamas-ruled territory.A four-day temporary truce accord during which some Israeli hostages in Gaza would be freed was announced on Wednesday morning, but Israel said implementation of the deal would be delayed at least until Friday. When the war began, the already battered shekel had weakened another 6% in 2023 and raised central bank fears of higher inflation, spurring Governor Amir Yaron to suggest that the bank would likely hold off on rate cuts during the war to preserve market stability despite a hit to economic growth.He said measures taken by the central bank acted like monetary easing, such as working with lenders to allow those impacted by the conflict to defer or freeze loan repayments.So far in November, the shekel has reversed course – aided by a dive in the dollar – and has gained 8% versus the greenback to more than pre-war levels.As such, Morgan Stanley economist Georgi Deyanov gave a 40% chance of a rate cut of 25-50 basis points next week, but said he believed the central bank “will remain cautious in consideration of ongoing uncertainty about the future path of the conflict, despite the prospects of a temporary ceasefire”.Yaron, who is slated to give a news conference on Monday at 4:15 p.m. (1415 GMT), this week accepted a second five-year termthat removed an element of market uncertainty this year. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Virgin Money has missed profit expectations as it made a bigger than expected provision for bad loans to account for rising credit card arrears owing to the cost of living crisis.The challenger bank reported statutory profit before tax of £345mn in the year to September 30, down from £595mn in 2022 and below analyst forecasts of £430mn.The hit to profits was largely because of a jump in the amount the lender set aside for bad loans to account for rising arrears in its credit card business amid a gloomy economic outlook.Virgin Money reported a credit impairment charge of £309mn, higher than market expectations of £282mn. The jump, which is an almost sixfold increase on last year’s charge of £52mn, comes after the lender updated its model for credit losses to reflect a deterioration in the economy and higher levels of customer indebtedness.Virgin Money said it expected a “continued increase in arrears” in the next financial year, largely focused on its credit cards portfolio, which grew by 10 per cent this year as consumers turned to credit in the face of rising prices.Chief financial officer Clifford Abrahams said consumers who had been hit by higher mortgage rates were increasingly using credit cards to smooth their consumption on discretionary spending.“We see a lot of transactions on our travel credit cards and there is still a post-Covid effect of people spending more going out and travelling to go on holiday,” he said.The FTSE 250 lender said the relief it had offered customers struggling to pay their credit card bills, such as an extension in repayment terms, had also increased in line with arrears.The proportion of credit card balances reaching more than 90 days past due increased to 1.7 per cent, from 1.2 per cent the previous year, while the value of credit card balances having to be written off jumped to £116mn from £79mn over the same period.Virgin Money also took a £45mn impairment hit after it delayed the launch of a digital mortgage brokerage platform. “We are not quite sure if this bank is branch or digital led,” said Benjamin Toms, an analyst at RBC. “It feels like a lot of investment is still required to compete with large UK peers.”Virgin Money chief executive David Duffy said: “We spent a bunch of time working on [the platform] and at the end of the day when we were doing the testing for deployment we were not confident in the robustness of the data we were seeing.”The bank, which was created following a 2018 takeover by rival CYBG, said it would buy back up to £150mn of its own shares before May 2024 in Thursday’s update. It is planning to reward shareholders with a final ordinary dividend of 2p per ordinary share for the financial year.Shares fell by almost 4 per cent in morning trading on Thursday, and are down almost 20 per cent in the year to date, after the sector was hit by fear of contagion following the collapse of Silicon Valley Bank and trouble at other lenders including rival Metro Bank.Gary Greenwood, an analyst at Shore Capital, said the bank’s poor record of meeting expectations meant it might struggle in the near term without a change of leadership.“I don’t really care what other people think,” said Duffy. “I don’t have any conversations about that with anybody other than the board.” More

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The law has effectively created a new marketplace that helps smaller companies gain access to funding, with banks taking a cut.The 2022 climate law has accelerated investments in clean-energy projects across the United States. It has also delivered financial windfalls for big banks, lawyers, insurance companies and start-up financial firms by creating an expansive new market in green tax credits.The law, signed by President Biden, effectively created a financial trading marketplace that helps smaller companies gain access to funding, with Wall Street taking a cut. Analysts said it could soon facilitate as much as $80 billion a year in transactions that drive investments in technologies meant to reduce fossil fuel emissions and fight climate change.The law created a wide range of tax incentives to encourage companies to produce and install solar, wind and other low-emission energy technologies. But the Democrats who drafted it knew those incentives, including tax credits, wouldn’t help companies that were too small — or not profitable enough — to owe enough in taxes to benefit.So lawmakers have invented a workaround that has rarely been employed in federal tax policy: They have allowed the companies making clean-energy investments to sell their tax credits to companies that do have a big tax liability.That market is already supporting large and small transactions. Clean-energy companies are receiving cash to invest in their projects, but they’re getting less than the value of the tax credits for which they qualify, after various financial partners take a slice of the deal.Clean-energy and financial analysts and major players in the marketplace say big corporations with significant tax liability are currently paying between 75 and 95 cents on the dollar to reduce their federal tax bills. For example, a buyer in the middle of that range might spend $850,000 to purchase a credit that would knock $1 million off its federal taxes.The cost of those tax credits depends on several factors, including risk and size. Larger projects command a higher percentage. The seller of a tax credit will see its value diluted further by fees for lawyers, banks and other financial intermediaries that help broker the sale. Buyers are also increasingly insisting that sellers buy insurance in case the project does not work out and fails to deliver its promised tax benefits to the buyer.The prospect of a booming market and the chance to snag a piece of those transaction costs have raised excitement for the Inflation Reduction Act, or I.R.A., in finance circles. A new cottage industry of online start-up platforms that seeks to link buyers and sellers of the tax credits has quickly blossomed. An annual renewable energy tax credit conference hosted by Novogradac, a financial firm, drew a record number of attendees to a hotel ballroom in Washington this month, with multiple panels devoted to the intricacies of the new marketplace. The entrepreneurs behind the online buyer-seller exchanges include a former Biden Treasury official and some people in the tech industry with no clean-energy or tax credit experience.After President Biden signed the climate law last year, it effectively created a new financial marketplace.Doug Mills/The New York TimesTax professionals and clean-energy groups say the marketplace has widely expanded financing abilities for companies working on emissions-reducing technologies and added private-sector scrutiny to climate investments.But those transactions are also enriching players in an industry that Mr. Biden has at times criticized, while allowing big companies to reduce their tax bills in a way that runs counter to his promise to make corporate America pay more.“I wouldn’t call it irony. I would call it, sort of, this unexpected brilliance,” said Jessie Robbins, a principal of structured finance at the financial firm Generate Capital. “While it may be full of friction and transaction costs, it does bring sophisticated financial interests, investors” and corporations into the world of funding green energy, she said.Biden administration officials say many clean-tech companies will save money by selling their tax credits to raise capital, instead of borrowing at high interest rates. “The alternative for many of these companies was to take a loan, and taking that loan was going to be far more costly” than using the credit marketplace, Wally Adeyemo, the deputy Treasury secretary, said in an interview.Some backers of the climate law wanted an even more direct alternative for those companies: government checks equivalent to the tax benefits their projects would have qualified for if they had enough tax liability to make the credits usable. It was rejected by Senator Joe Manchin III of West Virginia, a moderate Democrat who was the swing vote on the law. A modest federal marketplace of certain tax credits, like those for affordable housing, existed before the climate law passed. But acquiring those credits was complicated and indirect, so annual transactions were less than $20 billion — and large banks dominated the space. The climate law expanded the market and attracted new players by making it much easier for a company with tax liability to buy another company’s tax credit.“There weren’t brokers in this space, you know, a year ago or 14 months ago before the I.R.A. came out,” said Amish Shah, a tax lawyer at Holland & Knight. “There are lots of brokers in this space now.” Mr. Shah said he expected his firm to be involved in $1 billion worth of tax credits this year.Mr. Biden’s signature climate law has spawned a growth industry on Wall Street and across corporate America.Gabby Jones for The New York Times“The discussion goes like this,” said Courtney Sandifer, a senior executive in the renewable energy tax credit monetization practice at the investment bank BDO. “‘Are you aware that you can buy tax credits at a discount, as a central feature of the I.R.A.? And how would that work for you? Like, is this something that you’d be interested in doing?’”Financial advisers say they have had interest from corporate buyers as varied as retailers, oil and gas companies, and others that see an opportunity to reduce their tax bills while making good on public promises to help the environment.Experts say large banks are still dominating the biggest transactions, where projects are larger and tax credits are more expensive to buy. For the rest of the market, entrepreneurs are working to create online exchanges, which effectively work as a Match.com for tax credits. Companies lay out the specification of their projects and tax credits, including whether they are likely to qualify for bonus tax breaks based on location, what wages they will pay and how much of their content is made in America. Buyers bid for credits.In order to sell tax benefits under the law, companies have to register their credits with the Treasury Department, which created a pilot registry website for those projects this month. The online platforms to connect buyers and sellers of the credits are not regulated by the government.Alfred Johnson, who previously worked as deputy chief of staff under Treasury Secretary Janet L. Yellen, co-founded Crux, one of the online exchanges, in January. The company has raised $8.85 million through two rounds of funding.Mr. Johnson said his business helped replace the “low-margin” administrative work that happens to facilitate deals. Lawyers and advisers will still be brought in for the more complicated parts of the deal.“It just requires more companies coming into the market and participating,” he said. “And if that doesn’t happen, the law will not work.”Seth Feuerstein created Atheva, a transferable credit exchange, last year. He has no clean-tech experience, but he has brought in green-energy experts to help get the exchange started.Atheva already has tens of millions of dollars in projects available for tax-credit buyers to peruse on the site, with hundreds of millions more in the pipeline, he said. On the site, buyers can browse credits by their estimated value and download documentation to help assess whether the projects will actually pay off. Mr. Feuerstein said that transparency helped to assure taxpayers that they were supporting valid clean-energy investments.“It’s a new market,” Mr. Feuerstein said. “And it’s growing every day.” More

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