Economy

The International Monetary Fund said the world economy was poised for a rebound as inflation eases.WASHINGTON — The International Monetary Fund said on Monday that it expected the global economy to slow this year as central banks continued to raise interest rates to tame inflation, but it also suggested that output would be more resilient than previously anticipated and that a global recession would probably be avoided.The I.M.F. upgraded its economic growth projections for 2023 and 2024 in its closely watched World Economic Outlook report, pointing to resilient consumers and the reopening of China’s economy as among the reasons for a more optimistic outlook.The fund warned, however, that the fight against inflation was not over and urged central banks to avoid the temptation to change course.“The fight against inflation is starting to pay off, but central banks must continue their efforts,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said in an essay that accompanied the report.Global output is projected to slow to 2.9 percent in 2023, from 3.4 percent last year, before rebounding to 3.1 percent in 2024. Inflation is expected to decline to 6.6 percent this year from 8.8 percent in 2022 and then to fall to 4.3 percent next year.After a succession of downgrades in recent years as the pandemic worsened and Russia’s war in Ukraine intensified, the I.M.F.’s latest forecasts were rosier than those the fund released in October.Since then, China abruptly reversed its “zero Covid” policy of lockdowns to contain the pandemic and embarked on a rapid reopening. The I.M.F. also said that the energy crisis in Europe had been less severe than initially feared and that the weakening of the U.S. dollar was providing relief to emerging markets.The I.M.F. predicted previously that a third of the world economy could be in recession this year. However, Mr. Gourinchas said in a news briefing ahead of the release of the report that far fewer countries were now facing recessions in 2023 and that the I.M.F. was not forecasting a global recession.Lukoil oil field in the Baltic Sea. A coordinated plan by the United States and Europe to cap the price of Russian oil exports at $60 a barrel is not expected to substantially curtail its energy revenues.Vitaly Nevar/Reuters“We are seeing a much lower risk of recession, either globally, or even if we think about the number of countries that might be in recession,” Mr. Gourinchas said.Despite the more hopeful outlook, global growth remains weak by historical standards and the war in Ukraine continues to weigh on activity and sow uncertainty. The report also cautions that the global economy still faces considerable risks, warning that “severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate and tighter global financing costs could worsen debt distress.”Growth in rich countries is expected to be particularly sluggish this year, with nine out of 10 advanced economies likely to have slower growth than they had in 2022.The I.M.F. projects growth in the United States to slow to 1.4 percent this year from 2 percent in 2022. It expects the jobless rate to rise from 3.5 percent to 5.2 percent next year, but that it is still possible that a recession can be avoided in the world’s largest economy.“There is a narrow path that allows the U.S. economy to escape a recession altogether, or if it has a recession, the recession would be relatively shallow,” Mr. Gourinchas said.The slowdown in Europe will be more pronounced, the I.M.F. said, as the boost from the reopening of its economies fades this year and consumer confidence frays in the face of double-digit inflation. In the euro area, growth is projected to slow to 0.7 percent from 3.5 percent.China is projected to pick up the slack with output accelerating to 5.2 percent in 2023 from 3 percent in 2022.Combined, China and India are expected to account for about half of global growth this year. I.M.F. officials said at a press briefing on Monday night that China’s economic trajectory would be a major driver for the world economy, noting that after a period of flux, China appears to have stabilized and is able to fully produce.However, Mr. Gourinchas noted that there were still signs of weakness in China’s property market and that its growth could moderate in 2024. The report described the sector as a “major source of vulnerability” that could lead to widespread defaults by developers and instability in the Chinese financial sector.A surprising contributor to global growth is Russia, suggesting that efforts by Western nations to cripple its economy appear to be faltering. The I.M.F. predicts Russian output to expand 0.3 percent this year and 2.1 percent next year, defying earlier forecasts of a steep contraction in 2023 amid a raft of Western sanctions.A coordinated plan by the United States and Europe to cap the price of Russian oil exports at $60 a barrel is not expected to substantially curtail the country’s energy revenues.“At the current oil price cap level of the Group of 7, Russian crude oil export volumes are not expected to be significantly affected, with Russian trade continuing to be redirected from sanctioning to non-sanctioning countries,” the I.M.F. said in the report.Among the I.M.F.’s most pressing concerns is the growing trend toward “fragmentation.” The war in Ukraine and the global response have divided nations into blocs and reinforced pockets of geopolitical tension, threatening to hamper economic progress.“Fragmentation could intensify — with more restrictions on cross-border movements of capital, workers and international payments — and could hamper multilateral cooperation on providing global public goods,” the I.M.F. said. “The costs of such fragmentation are especially high in the short term, as replacing disrupted cross-border flows takes time.” More

Britain is the only leading economy likely to slide into recession this year, the IMF said on Tuesday, predicting that UK household spending would falter under the weight of high energy prices, rising mortgage costs and increased taxes. The fund upgraded its forecasts for most leading economies and said the global outlook had brightened. But it identified the UK as an exception and said the British economy would shrink by 0.5 per cent between the final quarter of 2022 and the final quarter of this year.Even Russia’s economy is now likely to outpace the UK’s, growing 1 per cent this year, according to the IMF forecasts.Pierre-Olivier Gourinchas, chief IMF economist, said the UK could expect a “sharp correction” in 2023, adding that the country faced “a quite challenging environment”.The IMF prediction that UK 2023 output will contract by 0.5 per cent represents a downgrade of its October forecast of 0.2 per cent growth for this year. By contrast, the fund upgraded its global economic forecast over the same period by 0.5 percentage points. Gourinchas said eurozone economies had been “surprisingly resilient”, while the US had a “narrow path” to avoid recession, with inflation falling and only modest increases in unemployment. The IMF also thinks Beijing’s decision to ditch its zero Covid policy will help China reach 5.9 per cent growth by the end of this year, more than double the 2022 rate of 2.9 per cent.UK chancellor Jeremy Hunt said the IMF forecast showed that the UK was “not immune to the pressures hitting nearly all advanced economies”. He added that Britain outperformed many forecasts last year and was on track to outgrow Germany and Japan in coming years if it met its goal of halving inflation.But Gourinchas said UK consumers and companies found themselves unusually exposed to high energy prices. He said borrowers would also be hit by higher mortgage rates this year as the Bank of England continued to raise interest rates to counter inflation that, while apparently past its peak, was still 10.5 per cent in December. The Bank of England is expected to increase interest rates by 0.5 percentage points to 4 per cent on Thursday.Gourinchas also noted difficulties owing to Britain’s labour market. Other European countries have experienced an increase in people seeking work following the height of the pandemic — helping keep a lid on price increases and boosting growth.

This has not been true to the same extent of the UK, which has been affected by greater reluctance to return to the labour force as well as post-Brexit labour shortages. The BoE is set to revise its own forecasts on Thursday, and is likely to produce estimates close to the IMF’s. That would be an improvement from the bleak outlook the central bank delivered in early November at a time wholesale gas prices were far higher than today. In November, the BoE forecast that gross domestic product would fall 1.9 per cent between the fourth quarter of 2022 and the equivalent period of this year. More

The unions’ protest movement is a test of Macron’s ability to push through change in his second term. WHAT’S IN THE PLAN?* Retirement age pushed back by two years to 64. The change will be gradual, increased by three months per year from September, until 2030.* From 2027, workers will have to make social security contributions over 43 years rather than 42 years in order to draw a full pension. The additional year was already foreseen in a 2014 reform but Macron is accelerating the pace of transition.* Guaranteed minimum pension income of not less than 85% of the net minimum wage, or roughly 1,200 euros per month at current levels, for new retirees. After year one of retirement, the pensions of those receiving a minimum income will be indexed to inflation. The government expects to recalibrate upwards the incomes of those already receiving the lowest pensions.* Public workers in jobs deemed physically or mentally arduous will maintain the right to early retirement, though their retirement age will be increased by the same number of years as the wider labour force. Police officers, sewer cleaners, prison guards and air traffic controllers are among those currently able to retire at 52.* The end to a grouping of a dozen so-called ‘special regimes’ with different retirement ages and benefits that currently cover, among others, rail workers, electricity and gas workers and central bank staff.This change will only apply to new entrants to the labour market. Existing workers in these sectors keep hold of their perks. However, the ‘special regimes’ covering seafarers and Paris Opera (NASDAQ:OPRA) House performers survive.* A ‘Seniors Index’ modelled on France’s gender equality index and which would measure the progress made by companies vis-a-vis the training and recruitment of seniors. WHAT IMPACT?* Boost the employment rate among 60-64 year-olds. In France, the employment rate in this age category is just 33% compared with 61% in Germany and 69% in Sweden.* The pensions of the poorest 30% will increase by 2.5%-5%, according to the government.* Gross savings of 17.7 billion euros per year by 2030.* Balanced pension budget by 2030. Existing forecasts without any reform show a pension budget deficit of 13.5 billion euros in 2030. More

TOKYO (Reuters) -Japanese factories cut output slightly in December, capping the worst quarter for manufacturers since the onset of the COVID-19 pandemic, hit by stalling global demand and rising costs.Although retail sales, a barometer of service-sector activity and consumer spending, rose more than expected, the faltering factory activity is ill-timed as companies face calls to hike wages to sustain Japan’s post-pandemic recovery.”Japan is nearing a recession if you look only at manufacturers, but solid non-manufacturers are underpinning the overall economy,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.Industrial output fell 0.1% in December from the previous month, government data showed on Tuesday. The drop was less than the median market forecast for a 1.2% decrease and followed upwardly-revised 0.2% growth in November.Outputs of items related to capital expenditure such as general machinery and metal products, which dropped 6.0% and 3.0%, respectively, dragged down the overall December index. Output of auto products was up 0.6%, posting first growth in two months.Compared with the previous quarter, factory output fell 3.1% in October-December, the first drop in two quarters. The fall was biggest since April-June 2020’s 16.8% decline, when the impact of the pandemic first fully hit the world’s third-largest economy.Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expect output to remain flat in January and increase 4.1% in February, the data also showed, although the official poll tends to report an optimistic outlook.Separate data showed on Tuesday Japanese retail sales rose 3.8% in December from a year earlier, beating a median market forecast for a 3.0% gain and its tenth straight month of expansion.Japan is set to downgrade its disease classification of COVID-19 to a lower level equivalent to the seasonal flu in May, Prime Minister Fumio Kishida said on Friday, raising hopes for further economic normalisation coupled with a tourism reopening.The jobless rate stayed unchanged at 2.5% in December, another official data showed. Jobs-to-applicants ratio, a gauge of job availability, was also flat from the previous month that posted the highest reading since March 2020.With a tightening labour market, 41-year-high consumer inflation and policymakers’ pleas, more than half of big Japanese companies are planning to raise wages this year, a Reuters survey showed this month.Yet the small companies that provide most of Japan’s jobs are struggling to increase pay, testing the Bank of Japan’s rosy picture of sustainable economic growth in tandem with wage hikes.”Rising raw material costs are increasingly tormenting small companies, who are willing to raise workers’ wages but must be realistic about their bottom line amid a cost squeeze,” said Shinkin’s Tsunoda.”Pay hikes won’t prevail outside of big firms, so the monetary policy should stay easy.”Japan’s economy, after a surprise contraction in July-September, is expected to have expanded by an 3.0% annualised growth in October-December thanks to solid consumption, according to the latest Reuters poll. More

UK households face an extra £788 on their annual shopping bills as grocery costs continued to mount in January, indicative data by market researcher Kantar has found.Grocery price inflation hit 16.7 per cent in the four weeks to January 22, the fastest pace since Kantar began tracking the figure in 2008. The January rate was 2.3 percentage points above December’s reading. Prices for milk, eggs and dog food grew at the fastest pace. “Late last year, we saw the rate of grocery price inflation dip slightly, but that small sign of relief for consumers has been shortlived,” said Fraser McKevitt, Kantar’s head of retail and consumer insight, with the rate “flying past the previous high we recorded in October”. Annualised food price inflation was 16.8 per cent in December, according to the most recent figures from the Office for National Statistics.Grocers competed for customers by boosting their own-label ranges, which rose 9.3 per cent in January, outpacing branded alternatives, which were up by 1 per cent.High food prices also prompted buyers to turn to discount chains, according to Kantar. Aldi, which demands 9.2 per cent of the market, was the fastest growing grocer for the fourth consecutive month, with sales 26.9 per cent higher from the previous year. Its rival Lidl generated 24.1 per cent more sales.Many committed to new year’s resolutions of avoiding alcohol, pushing no- and low-alcohol beer volumes up 3 per cent.UK inflation, at 10.5 per cent last month, has receded from a 41-year peak in October, leaving the Bank of England set to keeping its options open on whether interest rates will peak at 4.25 per cent or 4.5 per cent. The central bank is expected to raise rates by 0.5 percentage points to 4 per cent, a tenth consecutive increase, when it meets on Thursday. More

(Reuters) -The Biden administration has stopped approving licenses for U.S. companies to export most items to China’s Huawei, according to three people familiar with the matter.Huawei has faced U.S. export restrictions around items for 5G and other technologies for several years, but officials in the U.S. Department of Commerce have granted licenses for some American firms to sell certain goods and technologies to the company. Qualcomm (NASDAQ:QCOM) Inc in 2020 received permission to sell 4G smartphone chips to Huawei.A Commerce Department spokesperson said officials “continually assess our policies and regulations” but do not comment on talks with specific companies. Qualcomm declined to comment. Bloomberg and the Financial Times earlier reported the move.One person familiar with the matter said U.S. officials are creating a new formal policy of denial for shipping items to Huawei that would include items below the 5G level, including 4G items, Wifi 6 and 7, artificial intelligence, and high-performance computing and cloud items.Another person said the move was expected to reflect the Biden administration’s tightening of policy on Huawei over the past year. Licenses for 4G chips that could not be used for 5g, which might have been approved earlier, were being denied, the person said. Toward the end of the Trump administration and early in the Biden administration, officials had still granted licenses for items specific to 4G applications.American officials placed Huawei on a trade blacklist in 2019 restricting most U.S. suppliers from shipping goods and technology to the company unless they were granted licenses. Officials continued to tighten the controls to cut off Huawei’s ability to buy or design the semiconductor chips that power most of its products.But U.S. officials granted licenses that allowed Huawei to receive some products. For example, suppliers to Huawei got licenses worth $61 billion to sell to the telecoms equipment giant from April through November 2021.In December, Huawei said its overall revenue was about $91.53 billion, down only slightly from 2021 when U.S. sanctions caused its sales to fall by nearly a third. More

WASHINGTON (Reuters) -The U.S. government likely awarded about $5.4 billion in COVID-19 aid to people with questionable Social Security numbers, a federal watchdog said in a report released on Monday.The watchdog, the Pandemic Response Accountability Committee (PRAC), said it “identified 69,323 questionable Social Security Numbers (SSNs) used to obtain $5.4 billion from the Small Business Administration’s (SBA) COVID-19 Economic Injury Disaster Loan (COVID-19 EIDL) program and Paycheck Protection Program (PPP).”The loans were disbursed between April 2020 and October 2022, the watchdog said in its report, which comes ahead of a scheduled Wednesday hearing by the Republican-led House of Representatives Oversight Committee on fraud in pandemic spending.About 57,500 Paycheck Protection Program forgivable loans worth $3.6 billion were disbursed by August 2020, the report added. The United States is probing many fraud cases pegged to U.S. government assistance programs, such as the Paycheck Protection Program, unemployment insurance and Medicare. In May 2021, Attorney General Merrick Garland launched a COVID-19 Fraud Enforcement Task Force.Last year, the U.S. Justice Department tapped federal prosecutor Kevin Chambers to lead its efforts to investigate fraudsters who used the pandemic as an excuse to bilk government assistance programs.The report demonstrates “the significant fraud and identity theft that occurred under the prior administration due to the lack of basic anti-fraud controls, as well as how consequential were the Biden administration’s quick actions to reinstate strong anti-abuse measures in these emergency small business programs,” Gene Sperling, a senior adviser to President Joe Biden said in an emailed statement. The watchdog report mentioned that in 2021 the U.S. Small Business Administration made improvements to its assistance program controls. Biden took office in January that year.In September, the inspector general for the U.S. Labor Department said fraudsters likely stole $45.6 billion from the United States’ unemployment insurance program during the coronavirus outbreak by applying tactics like using Social Security numbers of deceased individuals. Also in September, federal prosecutors charged dozens of defendants, who were accused of stealing $250 million from a government aid program that was supposed to feed children in need during the pandemic. More

SINGAPORE, (Reuters) – Like many rich Chinese, graduate student Zayn Zhang thinks Singapore could be ideal to park his family’s wealth.He’s hoping that studying at a university in the Asian financial hub will lead to permanent residency and while the 26-year-old hits the books, his wife is out looking for a S$5-7 million ($4-5 million) penthouse.”Singapore is great. It is stable and offers a lot of investment opportunities,” Zhang told Reuters at a business and philanthropy forum here late last year. His family might establish a Singapore family office to manage its wealth in the future, he added.Hosting discussions on topics like family wealth and sustainable investing, the forum at Singapore’s Shangri-La hotel was attended by hundreds of wealthy people, many bedecked in designer gear from Hermes belt buckles to monogrammed Gucci shawls and the latest Dior bags. Several Chinese attendees said they had recently relocated to Singapore or were thinking of doing so.With its tax-friendly regime and seen as politically stable, Singapore has long been a haven for ultra-rich foreigners. But it has seen a fresh influx of wealth since 2021 after it became one of the first Asian cities to significantly ease pandemic restrictions and as many Chinese became disillusioned with their country’s draconian COVID policies.That disenchantment propelled Zhang, who gained Hong Kong residency in 2021, to look at Singapore.”We just lost patience over time,” he said, describing the lengthy quarantines he had to endure when travelling between Hong Kong and mainland China. Political turmoil in Hong Kong has also been disheartening, he added.FAMILY OFFICE BOOM Singapore’s number of family offices – which handle investments, taxation, wealth transfer and other financial matters for the super rich – surged to about 700 in 2021 from 400.Well-known Singapore family offices include those set up by James Dyson of vacuum cleaner fame, hedge fund manager Ray Dalio and Zhang Yong, founder of China’s Haidilao hotpot restaurant chain.Though fresher statistics are not available, those involved in the industry said interest in family offices picked up in 2022 and is expected to continue unabated this year. China’s abandonment of zero-COVID policies is not expected to change the trend, given concern among the country’s rich about President Xi Jinping’s common prosperity drive that aims to reduce inequality, they added.Chung Ting Fai, a lawyer who helps set up family offices, said in late 2022, he had one enquiry a week from people who want to move at least $20 million into Singapore. That’s up from about an enquiry a month in 2021, while in January this year, he received two enquiries a week.Many are parents looking to obtain permanent residency for their children, he said, noting enquiries also came from Japanese and Malaysian potential clients in addition to Chinese.Part of Singapore’s attraction for the rich is its government-administered global investor programme under which people who invest at least S$2.5 million in a business, a fund or a family office can apply for permanent residency.Grace Tang, executive director at Phillip Private Equity which operates one of two global investor programme funds in Singapore, said her new year has been filled with meetings with potential investors, most of them Chinese.While some are setting up family offices, others are setting up business headquarters in Singapore or investing in funds domiciled in Singapore, she said.WEALTH MANAGEMENT HUBSingapore’s assets under management grew 16% to S$5.4 trillion in 2021 – the latest year for which data is available. More than three-quarters of that originated outside Singapore, with just under a third coming from other Asia-Pacific countries. GRAPHIC: Singapore’s assets under management jump – https://www.reuters.com/graphics/SINGAPORE-ECONOMY/WEALTH/byvrlrxblve/chart.png The influx of wealth is part of a wider trend of people returning to Singapore after an exodus of ex-patriates during the pandemic. Last year, the city had 30,000 more permanent residents and 97,000 more foreigners on a work or other long-term visa, boosting its population to 5.64 million.Singapore’s new additions sent rents surging 21% in the first nine months of last year. Home prices have also jumped over the past two years with mainland Chinese buyers continuing to be the top foreign buyers of expensive private properties.Another telling sign of how private wealth is flowing in is skyrocketing golf club memberships. The cost of membership to Singapore’s prestigious Sentosa Golf Club has hit S$880,000 for foreigners, more than double 2019 levels, according to club membership brokerage Singolf Services.Desmond Teo, Asia Pacific family enterprise leader at consulting firm EY said the inflows of money support Singapore’s financial services sector and startups, creating a “rich ecosystem” that makes the country more attractive to new stakeholders. “When you hit a certain critical mass, the critical mass itself is an attraction,” he said. ($1 = 1.3110 Singapore dollars) More