Economy

The EBRD, which already deployed 3 billion euros to Ukraine for 2022-2023, said its board of directors had recommended that the bank’s governors approve the capital increase “to enable it to provide significant and sustained investment for Ukraine, now and in the future”.”Today’s decision is in line with the governors’ recognition that support for Ukraine should be the Bank’s highest priority, now and in the future, following Russia’s full-scale invasion of the country,” it said in a statement. The endorsement is the first step in the formal process to allow it to boost annual Ukraine funding to 3 billion euro. If approved, the first payments from the added funds would be available in 2025. The governors will make a final decision on the proposal by the end of the year, the statement said. Approval would increase EBRD’s authorised share capital from its current level of 30 billion euros and mark the third capital increase in its history, following two others in 1996 and 2010.The EBRD has been the largest institutional investor in Ukraine over the past 30 years, and increased its support markedly after Russia’s invasion last year. More

WASHINGTON (Reuters) – As families in the U.S. prepare to gather for their Thanksgiving dinners next week, food prices have largely flatlined for months, gasoline prices are about 10% lower than a year ago, and the average cost of much of what goes into a shopping cart has been roughly unchanged for a year.But the steady ebbing of inflation hasn’t translated into good news for either President Joe Biden or the Federal Reserve when it comes to public opinion. Attitudes towards both have kept slipping in light of one unchanging fact: Stuff remains pricier than it was before the coronavirus pandemic, and will likely stay that way.”Inflation falls … but prices don’t come down. They’re just going up at a slower rate,” Fed Governor Christopher Waller said last week when asked at a research conference about common public misconceptions. “What people have in their mind right now is … prices to go back to where they were in 2021. That’s not going to happen. These prices are probably there forever.”The White House and the Fed got some good news on Tuesday when the latest inflation data showed that prices overall did not increase between September and October, a rare reprieve from the steady climb that has cut about 15% from the U.S. dollar’s purchasing power since Biden took office in early 2021.There are reasons, too, to think inflation might continue to ease. Though housing cost increases are proving more persistent than expected, economists at the Fed and on Wall Street are confident a turn lower is coming in a sector that accounts for a big portion of the consumer price index. Moreover, recent inflation has been driven by services items, such as auto insurance and video streaming, that will likely prove to be one-off adjustments, with insurers, for example, raising premiums to account for earlier vehicle price hikes that have leveled off.Yet Biden’s disapproval rating has risen to 56%, according to a Reuters/Ipsos poll in early November, and has been above 50% since prices began to steadily rise as the economy emerged from the pandemic. Earlier surveys found about 60% of respondents disapproved of the Democratic president’s handling of inflation and 56% of his handling of the economy overall, though the results showed a heavy partisan slant. Even with a still-low unemployment rate, 46% of respondents disapproved of Biden’s stewardship of the job market while just 41% approved.The results have not been much better for the Fed. A September Gallup poll found a record 25% of respondents gave the central bank a “poor” performance rating. Only 36% said it was doing a good or excellent job, the worst such reading in a decade.’HARD TO CHANGE’The findings reinforce a fact that has dogged public officials for decades. When it comes to basic household economics, the public’s memory of bad news is slow to recede.For example, through the wild pandemic ride of shutdowns, government stimulus payments and rapid price hikes, inflation-adjusted incomes as of this past September are about 6% higher than they were in January 2020, on the eve of the COVID-19 outbreak. The drop in the dollar’s purchasing power, in other words, has been more than offset by fatter wallets. Yet surveys show continued skepticism about what’s ahead. Inflation expectations have fallen, according to a New York Fed survey but remain well above the central bank’s 2% target. The same survey showed a larger share of people, nearly 31%, expect their household financial situation to be worse a year from now than the 28% who expected it to be better off.General optimism was the rule before the pandemic, with responses of “somewhat” and “much” better off typically two to four times that of those who expected things to get worse.But the mood became persistently pessimistic as inflation accelerated – with the shock, for instance, of a 20% rise in food prices from March 2021 through 2022 more resonant than the fact that food costs have been nearly unchanged in 2023.”Once these attitudes are established, they are hard to change,” said Jeff Jones, a senior editor at Gallup. “We have seen other times when the economy was bad. The negative evaluations persist and need a pretty long period of consistently good economic news” to shift back.SHIFTING FOCUS While Biden faces a reelection in a little under 12 months, the Fed prides itself on being immune from the influence of elected officials and public sentiment. After roughly two years when the focus has been squarely on inflation, attention may start to shift if economic data continues in the current direction of slowing inflation and weaker job growth.Both Waller and Fed Governor Lisa Cook took note of the public mood last week in similar comments about the expectation for prices to fall, which they don’t frequently do.But if inflation readings continue to show a slowdown, the Fed could put more weight on sustaining the strength of the job market. Indeed, after the release of the CPI data on Tuesday, investors boosted bets on rate cuts beginning next spring.”Seeing as prices will never come back down … then the only way to win back the hearts and minds of the public is to make sure real incomes rise enough,” Derek Tang, an economist at Monetary Policy Analytics, wrote ahead of Tuesday’s data.”As long as inflation does not rise again … the (Fed) might opt to make sure the real side remains healthy enough to generate income growth to let spending power catch up.” More

The European Central Bank greatly reduced its bond-buying last year after a surge in inflation forced it to unwind a decade of stimulus policies. The Bank of England is also selling bonds.Fixed income markets have been dominated by the question of who will step in to buy government bonds as bond supply rises to meet government debts accrued during the COVID-19 crisis and energy shock following last year’s Russian invasion of Ukraine. “We have seen a rise of hedge fund activity, which may have replaced or surpassed ECB buying for whatever reason to go into the fixed income market,” Thomas Weinberg, head of trading and issuance at Germany’s debt management agency, said in panel debate at an Association for Financial Markets in Europe’s (AFME) conference in Brussels.Central banks across the world have increased interest rates since late 2021 to fight inflation and withdrawn from bond-buying programmes aimed at boosting inflation and economic growth.Weinberg said hedge funds accounted for roughly 40% of turnover in German securities. Other debt agency officials said regulation following the global financial crisis had prompted banks to be more cautious about investing in bonds, which also left hedge funds with greater scope to buy into fixed income markets.UK debt management office head Robert Stheeman said hedge funds had moved into the space left by banks in ensuring liquidity – in other words, the ease of buying and selling an asset.Mercedes Abascal Rojo, head of funding and debt management at the Spanish Treasury, urged the need for caution, however.”Higher participation can be healthy and excessive participation can be problematic and we have to aware off that,” she said.So far, market functioning has generally been smooth, the debt agency heads said.”Overall, we have seen a positive year with no disruption in absorbing higher supply,” Spain’s Abascal said, adding that Spain has seen higher demand for its bonds from non-resident investors. More

Stay informed with free updatesSimply sign up to the More

On Monday, during a high-level meeting, Vietnamese Prime Minister Pham Minh Chinh met with World Bank Regional Vice President Victoria Kwakwa and International Finance Corporation officials. They discussed the pivotal role these institutions have played in Vietnam’s development through their policy advice and financial assistance. Specifically, they focused on Official Development Assistance (ODA) projects, preferential loans, and identifying key projects that offer the best interest rates for government-leader-highlighted areas.Prime Minister Chinh called for expanded cooperation and public-private partnerships, emphasizing the need for the World Bank’s low-interest funds to be directed toward significant projects. These projects include those in transport, urban development, digital transformation, energy, and climate change response strategies in the Mekong Delta. He also pointed out emerging high-tech fields such as semiconductors, clean energy, and electric vehicles as areas of interest.The World Bank Regional Vice President affirmed the institution’s commitment to supporting Vietnam’s ambitious goal of reaching high-income status by 2045. She praised Vietnam for its strong commitment to sustainable development and its efforts to attract top-tier investors.The announcement follows a dialogue that occurred on Sunday at the APEC Finance Ministers’ Meeting in San Francisco where Ho Duc Phoc from Vietnam’s Ministry of Finance highlighted the need for increased loan support from the World Bank. These funds are earmarked for extensive projects across various sectors such as infrastructure development, renewable energy sources, smart agriculture technologies, greenhouse gas emission reduction initiatives, climate change mitigation in the Mekong Delta region, and advancing digital transformation.The Vietnamese economy is on an upward trajectory with growth projections of 4.7% in 2023, 5.4% in 2024, and 6% in 2025. The World Bank’s plan to provide loans specifically for renewable energy projects, climate change response initiatives in the Mekong Delta region, and digital transformation efforts is expected to play a crucial role in achieving these targets.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Stay informed with free updatesSimply sign up to the More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A street named Article 123 sits in the historic centre of Mexico City, honouring a venerated clause in the constitution that enshrined workers’ rights a century ago. Written during a bloody revolution, a central pillar of the text was the 8-hour shift, with one rest day, and a maximum of 48 hours a week.Lawmakers from the leftist ruling party Morena now want to lower the limit to 40 hours, following changes recently in Chile and Colombia to similar levels. Mexicans work some of the longest hours in the OECD. About 15mn people are at work for more than 48 hours a week, statistics from government agency INEGI show. It’s not unusual for office employees to be at their desks late and in factories most put in long shifts or Saturdays.“Us Mexicans work a lot,” Juan Contreras, a 48-year-old parking attendant who works 60 hours a week said. “It’s our culture from our parents, grandparents that worked in the fields . . . long days with very little pay.”The private sector is pushing back against the proposed reduction though, warning it would mean sharply higher costs, exacerbate growing labour shortages, and increase the proportion of workers in the informal sector.The debate is happening after several years of notable improvements for formal workers under leftist President Andrés Manuel López Obrador, something even many of his critics acknowledge. The minimum wage — set by a decentralised commission — has more than doubled, and a longstanding practice of outsourcing workers to avoid paying benefits was clamped down on. Union contracts, which often protected companies rather than workers, now have to be put to democratic votes. At the same time unemployment is less than 3 per cent and average daily wages in the formal sector have risen almost 20 per cent in the past five years in real terms. But business leaders says the proposal to cut regular working hours would mean companies have to find cover for 105mn extra hours a week, likely with 2.6mn workers at a cost of 360bn pesos ($20.4bn). “The big impact of the initiatives to reduce the work week across all sectors wouldn’t generate higher productivity, or more time off for workers . . . it would increase labour costs,” said Lorenzo Roel Hernández, chair of the labour commission at CCE, estimating labour costs would rise between 25-40 per cent for different companies.Investors are increasingly positive about Mexico as a place to shore up supply chains tested by the US-China trade war and broader geopolitical tensions. More than costs, there are concerns over the scarcity of labour in some parts of the country. The proposal on the table is a five-day work week, with a maximum 8-hour day with immediate effect. It requires a constitutional change, meaning Morena needs some opposition votes to reach the required two-thirds majority.“We’re not against reducing the work week . . . we need to gradually implement the reduction,” said Pedro Casas Alatriste, director of the American Chamber of Commerce of Mexico.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Existing labour reform efforts have focused on the formal economy. But more than half of Mexico’s workers are in the informal sector, which means they are more vulnerable to abusive conditions and their employers are likely to stay smaller and less productive than their formal competitors.“It’s very contradictory — the guys at the bottom of the wage distribution are not being helped by this, and they are potentially being hurt because it’ll even make it more difficult for them to eventually get a formal job,” Santiago Levy, senior fellow at Brookings Institution in Washington, said.In almost two decades since 2005, the proportion of informal workers has only fallen from 59 per cent to 55 per cent, according to INEGI. Few politicians have been willing to take difficult steps to reduce this further, such as by building a unified healthcare system or undertaking ambitious tax reform.López Obrador hasn’t made any public statement on the proposal to limit hours, and the discussion to limit hours could pass into next year, when Mexico holds elections.“We intend to pass it this year but being realistic it’s a little bit difficult,” said Napoleón Gómez, Senator for Morena and mining union leader. “The discussions are probably going to be long and heated.”[email protected] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.France’s unemployment rate has risen by more than expected in a blow to President Emmanuel Macron’s ambition to end the country’s chronically high jobless rate.The number of unemployed people in France increased 64,000 to 2.3mn in the three months to September, its highest level for two years, with job losses disproportionately affecting younger workers and women.The national statistics office data showed the country’s jobless rate rose from 7.2 per cent in the second quarter to 7.4 per cent in the third quarter. Economists polled by Reuters had forecast a smaller increase to 7.3 per cent.Macron had pledged to get France to full employment — equivalent to a jobless rate of 5 per cent — by the end of his second term in 2027. He has already made progress. Since he took office, the unemployment rate has fallen sharply from above 10 per cent in 2016 to 7.1 per cent in the first quarter of this year, its lowest level in decades. The government has reformed labour markets to make it easier to fire workers, trimmed unemployment benefits and promoted apprenticeships in a bid to reduce high rates of joblessness among younger and low-skilled workers. But after the French economy slowed and recent reforms lost momentum, the jobless rate started rising again over 2023. It also remains above the average of 6.5 per cent for the 20 eurozone countries in September.“The trend is not expected to improve in the coming quarters,” wrote Sylvain Bersinger at Asterès, an economic forecasting group. “The labour market, which had been very dynamic after the pandemic, deteriorated in the third quarter. All labour market indicators are in the red.”The government is acutely aware that achieving full employment may prove difficult. The European economy has slowed as rising interest rates, high inflation and weaker global trade have hit output at businesses and eroded consumer demand. French output rose only 0.1 per cent between the second and third quarters. A downturn in the wider eurozone economy, which shrank 0.1 per cent in the third quarter, has already produced signs of cracks in the region’s labour market. Unemployment in Germany rose in October by the most for more than a year. The eurozone’s jobless rate also inched up to 6.5 per cent in October, from a record low of 6.4 per cent in September.The downturn in the labour market is also affecting the groups that have traditionally been most exposed to unemployment in France. The jobless rate among younger French workers is on the rise, with the rate for those aged 15 to 24 climbing from 16.9 per cent in the second quarter to 17.6 per cent in the third quarter. The increase could reflect the government almost hitting its target of 1mn apprenticeships, more than double the number four years ago. The unemployment rate among women also rose from 7.1 per cent to 7.4 per cent.Goldman Sachs economists wrote in a note to clients this week that reaching the government’s “ambitious” 5 per cent full employment target was “likely to require further reforms”. Economists expect Macron’s government to consider incentives to employ older workers or cut jobless benefits for higher earners to regain momentum. But getting further reforms through parliament, where Macron’s centrist alliance no longer has a majority, may be challenging. There is also the risk of public backlash. Street protests were triggered by Macron’s flagship pension reform, pushed through last spring. That hard-fought policy change has also begun to add people to the unemployment rolls by gradually raising the retirement age from 62 to 64. Some economists estimate the change could eventually add about 0.3 percentage points a year to unemployment — a reflection of France’s poor record of keeping older people in the workforce.Patrick Artus, an economist at Natixis bank, said France’s economy was still creating jobs, although productivity — hourly output per worker — was worsening. “It’s not really the weakness of the labour market that is driving unemployment higher, it is the combination of pension reform, an uptick in corporate bankruptcies, and weak productivity gains,” he said.Even so, Artus said the government should focus more on improving the labour force participation rate, which stands at 68 per cent in France, about 10 percentage points lower than in Germany. “Macron’s goal to cut unemployment to 5 per cent is not ambitious enough, and it is not the right metric to aim at to ensure prosperity,” he said. More