Economy

TOKYO (Reuters) – Core consumer prices in Japan’s capital, a leading indicator of nationwide figures, rose 3.4% in October from a year earlier, data showed on Friday, marking the fastest annual pace since 1989 in a sign of broadening inflationary pressure.The rise in the Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, exceeded a median market forecast for a 3.1% gain and followed a 2.8% gain in September.Inflation in the Tokyo area thus exceeded the central bank’s 2% target for five straight months.The data came as the Bank of Japan meets for a two-day policy meeting that ends later on Friday, when it is expected to revise up its inflation forecasts but keep monetary policy ultra-loose to underpin a fragile economic recovery.BOJ Governor Haruhiko Kuroda has repeatedly said the bank must maintain ultra-low interest rates on the view the recent cost-push inflation will likely prove temporary. More

Assuming security risks decline and demand picks up, gross domestic product will grow by around 4% to 5% per year in 2023 and 2024, the bank said in a quarterly inflation report.”This year’s economic downturn has been driven by lower domestic demand, disrupted logistics, and large losses of labor force and production potential caused by the war,” it said, predicting the unemployment rate would hit 30% this year.”Fiscal policy is unprecedentedly accommodative and will remain so until the end of 2024. This will support the economy during the war and, coupled with the easing of security risks, contribute to economic recovery.”Inflation – currently at almost 25% – should ease to 21% next year and drop to below 10% in 2024, the bank said.International financing will remain the primary source of covering the budget deficit, which will narrow gradually to 12% of GDP in 2024, down from 25% of GDP in 2022, it said.The key risk to the forecast is that the war may last longer than anticipated. Under an alternative scenario, which assumes security risks will last till mid-2024, GDP growth will be just 2% to 3% a year in 2023 and 2024. More

Minister Choo Kyung-ho made the remark at a scheduled meeting of economy-related ministers, while providing no figure and adding inflation would still remain at a relatively high level for some time.”Consumer prices in October will likely turn out to be lower than a level we had worried about as oil products prices continued their decreasing trend,” Choo said.South Korea’s annual rate of inflation fell in each of the past two months to 5.7% in August and 5.6% in September after hitting an almost 24-year high of 6.3% in July.Choo had said inflation would have passed the peak by October at the latest. South Korea is due to release October consumer price index data on Wednesday. More

The writer is chief economist at Enodo EconomicsPeople talk about “reading the tea leaves” on China, but the results of the 20th party congress in Beijing this month were clear to anyone: Xi Jinping made a clean sweep, putting his men in the top party positions. He now has a clear field to pursue his preferred policies, and those policies are unlikely to be investor-friendly.Markets have taken the outcome of the Congress badly. Investors must now reposition for a China where Xi Jinping’s credo reigns supreme. They must also brace for the expected backlash from the US, in the form of more sanctions and increased scrutiny of supply chains and investment ties that were once encouraged, a mere decade ago. In other words, the great decoupling, which I first identified as a major investment theme three years ago, is now in full swing.What does this mean? First of all, countries and multinationals will need to pick sides more. Companies that have put too many eggs in the China basket will be forced into a painful and costly reorientation. If they have too much manufacturing in China, they will need to reallocate; if they are too dependent on the Chinese consumer, they’ll need to brace for very slow growth for the foreseeable future.Ideology and national security trump all other considerations for Xi, including growth. He will double down on “common prosperity”, achieving economic self-sufficiency and pressing to bring Taiwan definitively under mainland control. For foreign investors in China, this means new investments will be “steered” (more or less politely) to the priorities set by the Chinese state. Foreigners should not be surprised to find that operations at their joint ventures are “steered” too, with less of an eye for profitability and more of an eye for policy co-operation and doing the party’s bidding. Meanwhile, US politicians and policymakers increasingly view any contact with China as suspicious. A Republican victory in the midterms would likely fast-track more measures against the country.The fragmenting and doubling up of supply chains, as multinationals create parallel US-oriented and China-oriented production plans, will lower productivity globally. And it will continue to fuel inflation as the bifurcation of global supply chains sweeps from sector to sector over a lengthy period of time. Remember when China was said to “export deflation” post its 2001 entry into the World Trade Organization — now the reverse process is under way.Global banking and capital markets will be the next to decouple. US restrictions of capital flows into China are on the horizon as Washington prepares to prevent America from funding the economic development of its main strategic adversary. Beijing is also working hard on creating its own sphere of economic and financial influence. It is intent on decoupling from the dollar-based global financial order as it views any such dependence as a strategic vulnerability.China can do very little in the short-term to advance financial self-reliance. But the financial sanctions imposed by the west on Russia in response to its invasion of Ukraine have added urgency to Beijing’s efforts to promote the international use of its own currency and cross-border payment system.One financial measure China pounced on is initiating the break-up of HSBC. Mainland insurer Ping An, the bank’s chief shareholder, may claim that the east-west split of the venerable Hong Kong bank would unlock more profitability, but make no mistake that the geopolitical considerations for a divorce are much more compelling.Most of all, investors positioning themselves for the great decoupling must ensure their portfolios are insured against the risk of a conflict over Taiwan which now looms large.“Bullish China” was a decades-long play that made many investors in Chinese companies listed abroad very rich. Now portfolio investors in countries which are likely to fall in the US sphere of influence would be wise to avoid Chinese onshore markets despite Beijing finally opening them to foreigners more or less fully.But the great decoupling is set to create new opportunities for Western equity investors as countries and firms that can attract the capital and investment that is leaving China will benefit. Investors should look into companies that are less exposed to China than their peers from either a revenue or supply chain point of view. What lies ahead is nothing short of a fundamental rewiring of how the world works — but as ever, there will be winners as well as losers. More

The e-commerce giant, which also turned a profit in its latest quarter, indicated sales in the holiday period might rise at their lowest level since 2001.For much of this year, Amazon’s growth slowed and losses mounted as it faced high costs and changes in people’s shopping habits with the ebbing of the coronavirus pandemic.On Thursday, the e-commerce giant signaled that its business was rebounding. But it also cautioned that growth would be weak, possibly falling to its lowest level since 2001.Amazon, which is headquartered in Seattle, posted $127.1 billion in sales for the third quarter, up 15 percent from a year earlier, showing that high inflation has not pummeled consumer spending. It also returned to profitability, making $2.9 billion after two quarters of losses.At the same time, Amazon projected that sales might slow to as low as 2 percent in the current quarter, which includes the vital holiday shopping season. Those estimates, which fell far short of Wall Street’s expectations, include a forecast that the strong U.S. dollar will continue to depress international sales.The results come amid a rocky patch for tech giants. Microsoft, Meta and others have indicated in their earnings this week that tough days may be ahead. On Thursday, a day after Meta revealed that its profits and sales fell in the most recent quarter, the company’s stock plunged more than 24 percent, to its lowest level in at least five years. Shares of Microsoft and Alphabet, the parent of Google, also have declined this week.More on Big TechBig Tech’s Slowdown: Amid stubborn inflation and rising interest rates, Google, Meta, Microsoft and other Silicon Valley giants are signaling that tough days may be ahead.App Store Battle: Spotify wants to get into the audiobooks business, but Apple has rejected its new app three times. The standoff is the latest in a series of confrontations between the companies.Inside Meta’s Struggles: After a rocky year, employees at Meta are expressing skepticism, confusion and frustration over Mark Zuckerberg’s vision for the metaverse.A Deal for Twitter?: In a surprise move, Elon Musk has offered to acquire Twitter at his original price of $44 billion, which could bring to an end the acrimonious legal fight between the billionaire and the company.“We are seeing signs all around that people’s budgets are tight, inflation is still high, energy costs are an additional layer,” Brian Olsavsky, Amazon’s finance chief, said on a call with reporters. “We are preparing for what could be a slower growth period.”He added that demand was particularly weakening in Europe, where inflation and rising fuel costs from the war in Ukraine have affected consumers.Amazon’s stock dropped more than 19 percent in after-hours trading.Prices are rising, but the volume of items selling is falling, said Guru Hariharan, whose company, CommerceIQ, advises large consumer brands that sell products on Amazon. “That is a very concerning trend,” he said.After two years of breakneck expansion, Amazon has spent much of this year putting on the brakes. Andy Jassy, who took over as chief executive last year, has moved to swiftly cut costs after the company overbuilt in anticipation of an extended pandemic-fueled boom in e-commerce. Amazon has curtailed plans to open warehouses and worked to improve the efficiency of its fulfillment operations, and it imposed a hiring freeze for corporate and technology roles for its retail division.In the third quarter, Amazon benefited from its annual two-day Prime Day sale in July. In the previous year, Prime Day had been held earlier than July. The company called this year’s event its “biggest ever,” and it generated about $6.8 billion in revenue — about $5 billion more than a typical two days — according to estimates from the investment bank Cowen.Growth in Amazon’s cloud computing division was the slowest on record, increasing 27 percent to $20.5 billion. Amazon Web Services accounted for 16 percent of the company’s total sales but was the only division that produced an operating profit. Mr. Olsavsky said growth slowed in the late summer, as Amazon saw a “lot of customers cutting their bills, which we are glad to help with.”Its international operations, dragged down by the strong dollar, generated $2.5 billion in operating losses.The company employed 1.5 million people by the end of the third quarter, almost 100,000 fewer than at the start of the year.Mr. Olsavsky said Amazon generated more than $1 billion in productivity savings, about half a billion less than executives had hoped. The cost to ship products grew slower than the number of units it sold. But the depressed sales growth makes it harder to operate at optimal efficiency, Mr. Olsavsky said, because the company can best utilize its fulfillment and delivery infrastructure when it has more orders.Amazon’s lucrative advertising business, which Morgan Stanley estimates is worth about $185 billion, grew 25 percent to $9.5 billion, though there was a slowdown over the quarter as advertisers pulled back. The company’s subscription business, primarily Prime membership, grew 9 percent to $8.9 billion.Mr. Olsavsky said overall operating profit was reduced by high costs to market two major video offerings for Prime members — Thursday night football games with the National Football League, and its new “Lord of the Rings” series.In addition to the volatile economic environment, the value of Amazon’s investment in Rivian Automotive, an electric truck maker that has struggled to meet production goals, has added fluctuations to Amazon’s profits this year. That valuation rose $1.1 billion, contributing to Amazon’s profits in the latest quarter. More

Workers at one of the biggest factories producing Apple iPhones are pleading for food and medical supplies as China’s zero-Covid policy causes havoc in the world’s most important manufacturing hub. Beijing’s censors have removed viral videos circulating on Chinese social media showing workers at the Zhengzhou facility in central China asking for supplies. Two workers told the Financial Times that the factory failed to deliver food regularly to staff under quarantine. The disruptions highlight investor concerns about supply chain risk at Apple, with more than 95 per cent of iPhones produced in China, though production remains stable for now. The company on Thursday reported that total revenues in the September quarter rose 8 per cent to $90.1bn, against forecasts of $88.9bn and compared with $83.4bn a year ago, according to Refinitiv.Foxconn said in a statement that only “a small number of employees” had been affected and production on the Zhengzhou campus remained “relatively stable”. Apple did not respond to a request for comment.The Zhengzhou Covid outbreak comes in a week when $550bn has been wiped off the value of the biggest US tech companies, with headlong growth stalling because of the slowing global economy and mounting cost pressures.More Covid news: Hong Kong will allow bars and restaurants to stay open later from November 3 as it makes a cautious reopening push. (Straits Times) Five more stories in the news1. Russia rejects claims it intends to use nuclear weapons Vladimir Putin has denied that Russia is fuelling nuclear tensions and countered western warnings that Moscow might be planning to detonate a “dirty bomb” in Ukraine in a false flag operation, saying he saw “no point” in a nuclear strike.Related read: President Joe Biden avoided a radical shift in the US new nuclear weapons policy that was opposed by allies in Europe and Asia. 2. US to withdraw permanent F-15 fighter force from Okinawa The US air force plans to replace its entire fleet of F-15 fighter jets based in Okinawa, Japan, with a “rotational” force. The decision has triggered alarm in some parts of the Japanese government and the Pentagon because the air force does not intend to replace them with a permanent presence in the near term, sending a dangerous signal to China, officials say. 3. China-based AIIB ramps up global development lending The Asian Infrastructure Investment Bank is sharply increasing its global lending despite the continuing suspension of its operations in Russia. AAIB president Jin Liqun told the FT that the bank planned to boost financing to “more than $10bn” in each of the three years to the end of 2025 from a total of $36bn since its founding in 2016.4. Twitter ‘cannot become a free-for-all hellscape’, says Musk A day before his $44bn deal to buy Twitter was set to close, Elon Musk has said he does not want Twitter to become a “free-for-all hellscape”, in a sudden attempt to appease advertisers after the billionaire previously suggested that he wanted the social media platform to rely less on money from marketers. 5. Australia rides out Chinese sanctions as exports boom China’s introduction of trade sanctions on some Australian products in 2020 has resulted in unexpected benefits, with the latest economic statistics showing exports booming for the resource-rich country as it has been forced to shift its focus to other markets.How well did you keep up with the news this week? Take our quiz.The days aheadBOJ interest rate decision The Bank of Japan is expected to maintain its ultra low interest rate when it announces its decision today. Prime Minister Fumio Kishida is also expected to unveil a $200bn spending plan today to ease the pain of high inflation. (Reuters) Taiwan GDP figures Preliminary third-quarter growth statistics released today are expected to show that Taiwan’s economy grew 3.2 per cent compared with a year earlier, according to a Reuters poll of economists. However, growth has likely been heavily curbed by decreased demand for Taiwanese goods. (Reuters) Earnings Third-quarter results will come from Airbus Group, Eni, Equinor, ExxonMobil, Glencore, NatWest, Swiss Re, Volkswagen and more on Friday.Brazil presidential election The run-off contest between Jair Bolsonaro and Luiz Inácio Lula da Silva will be held on Sunday. In this FT Film, Brazil bureau chief Bryan Harris travels the nation to look at the enormous economic and social challenges facing the next president.What else we’re reading and listening toGerman exporters rethink €100bn ‘love affair’ with China Germany’s Mittelstand companies are increasingly realising that they cannot rely on Chinese profits as they once did, according to Jörg Wuttke, president of the influential trade lobby EU Chamber of Commerce in China. The breakdown threatens to unravel what has become one of the world’s most mutually beneficial trading relationships.Xi consolidates his rule as economic problems mount On this episode of the Rachman Review podcast, Gideon talks to economist Linda Yueh of Oxford university to discuss what the growing centralisation in China tells us about how Xi Jinping will handle the private sector, the property crisis and international tensions over Taiwan.The problem with social media is that it is not a real place If we want to stop the internet becoming either a desperately bland or perfectly horrible place, we need to start treating it as somewhere we would be happy spending time in real life. That includes imposing moral and social consequences for behaving like an idiot, writes Jemima Kelly. The US Supreme Court’s business agenda The high court will soon hear cases on issues including the reach of state regulation and the question of where companies can be sued. Despite a solid 6-3 conservative majority, there is no guarantee that the justices will prove friendly to business interests, legal experts say. Here are some of the cases US businesses will be watching most closely.From ‘moron premium’ to ‘dullness dividend’ New UK prime minister Rishi Sunak yesterday postponed his government’s highly anticipated financial statement. The delayed “Halloween Budget” will now be presented on November 17, improving the likely outlook for the country’s public finances.ArtThe golden age of AI-generated art is here — and it’s going to get weird. Artificial intelligence image-generation technology is advancing swiftly. The software’s ability to create almost any image from a few words will change human creativity, writes Tom Faber in this week’s FT Weekend cover story. Click here to receive the FT Weekend newsletter every Saturday. More

Demand for semiconductors was off the charts last year. But a sharp slowdown coupled with new U.S. restrictions against China have created obstacles.A few months ago, makers of computer chips seemed on top of the world.Customers could not get enough of the small slices of silicon, which act as the brains of computers and are needed in just about every device with an on-off switch. Demand was so strong — and U.S. dependence on a foreign manufacturer so worrying — that Democrats and Republicans agreed in July on a $52 billion subsidy package that included grants to build new chip factories in America.U.S. chip makers such as Intel, Micron Technology, Texas Instruments and GlobalFoundries pledged huge expansions in domestic manufacturing, betting on a growing need for their products and the prospects of federal subsidies.But lately, supplies of some semiconductors are piling up, which could spell good news for consumers but not for industry executives. Their bold investment plans are running into a sudden and unexpected slowdown in consumer demand for electronic gadgets, new U.S. restrictions on sales to customers in China, rising inflation and the unusual prospect of a simultaneous shortage of some chips and glut of others.That has left chip makers, which had been looking ahead to immense demand and opportunity, suddenly grappling with immense challenges. Many of the companies now face complex questions about whether and when to boost production, amid uncertainty about how long the current sales slowdown may last.“Six months ago, I would have said we were in this hypergrowth phase,” Rene Haas, chief executive of Arm, the British company whose chip technology powers billions of smartphones, said of the broader industry. Now, he said, “we’re in a pause.”For many consumers, products that were scarce because of a chips shortage may start becoming more available, though not immediately. Automakers, which have struggled to make enough cars with the lack of chips and other components, said they were getting more but still face some problems. Prices of smartphones and computers could also fall as chip supplies grow and prices plummet for two types of memory chips they use.But for now, not everyone is able to get all the chips they need, and prices remain high for many kinds of semiconductors. “We are still way above prepandemic pricing,” said Frank Cavallaro, chief executive of A2 Global Electronics and Solutions, a chip distributor.Fears of a slump, which have clobbered semiconductor stocks this year, are evident in recent earnings announcements from chip makers. South Korea’s SK Hynix on Wednesday reported a 20 percent drop in revenue and said its business of memory chips “is facing an unprecedented deterioration in market conditions.” Intel provided more evidence of a downturn in its third-quarter results on Thursday, including a 20 percent drop in revenue and a $664 million charge to cover cost-cutting measures expected to include job cuts.The Biden administration delivered its own blow this month with sweeping restrictions aimed at hobbling China from using U.S. technology related to chips. The measures restrict sales of some advanced chips to Chinese customers and prevent U.S. companies from helping China develop some kinds of chips.That hurts semiconductor companies like Nvidia, which makes graphics chips used to run A.I. applications in China and elsewhere. The Silicon Valley company, already suffering from a sharp sales decline for video game applications, recently estimated that the U.S. restrictions would probably reduce revenues in its current quarter by about $400 million.The sanctions may bite even harder at companies that sell chip-making equipment, which relied heavily in recent years on sales to Chinese factories.Lam Research, which produces tools that etch silicon wafers to make chips, estimated that the China limitations would reduce its 2023 revenue by $2 billion to $2.5 billion. “We lost some very profitable customers in the China region, and that’s going to persist,” Doug Bettinger, Lam’s chief financial officer, said during an earnings call last week.Applied Materials, the biggest maker of chip manufacturing tools, also said sales would suffer because of the restrictions. On Wednesday, another maker of chip manufacturing tools, KLA, said its revenue next year was likely to shrink by $600 million to $900 million as it reduces equipment sales and services to some customers in China.Worries about foreign competition are nothing new in semiconductors, an industry known for boom-and-bust cycles. But it has rarely faced a player as potent as the Taiwan Semiconductor Manufacturing Company, whose factories on the island churn out chips designed by companies including Apple, Amazon, Nvidia and Qualcomm.China claims Taiwan as its own territory, creating a potential risk to chip supplies. That helped drive the recent bipartisan support for the U.S. chip legislation, which was heavily pushed by President Biden.President Biden trekked to Albany, Ohio, last month for the ground breaking of a $20 billion Intel manufacturing campus. Pete Marovich for The New York TimesHe trekked to Ohio last month for the ground breaking of a $20 billion Intel manufacturing campus. On Thursday, President Biden visited a site near Syracuse, N.Y., where Micron has vowed to spend as much as $100 billion over 20 years on a large complex to build memory chips, a project he called “one of the most significant investments in American history.”Those plants will be needed at some point, industry executives said. But they are now grappling with the sudden and sharp decline in chip demand. The problem is particularly acute in processors and memory chips, which perform calculations and store data in personal computers, tablets, smartphones and other devices.Those products were hot commodities as consumers worked from home during the coronavirus pandemic. But that boom has now cooled, with PC sales dropping 15 percent in the third quarter, according to estimates by International Data Corporation. The research firm also predicted that smartphone sales would fall 6.5 percent this year. Demand has been tempered by inflation as well as a lengthy Covid lockdown in China, analysts said.At the same time, inventories of chips piled up. Computer makers spooked by the shortage bought more components than they ended up needing, said Dan Hutcheson, a market researcher at the firm TechInsights. When customer demand dried up, they started slashing orders.“You see multiple issues converging,” said Syed Alam, who leads Accenture’s global high tech consulting practice, including semiconductors.Handel Jones, chief executive at International Business Strategies, predicts that total sales for the chip industry will still grow 9.5 percent this year. But he expects revenue to decline 3.4 percent to $584.5 billion next year. Last year, he had predicted steady yearly growth for the chip industry from 2022 until 2030.Warning signs included Intel’s second-quarter results, which it announced in July. The company posted a rare loss and a 22 percent drop in revenue, blaming its own missteps and customers who cut chip inventories.At Micron, the mood also changed quickly. In May, the company gave bullish presentations at an investor event in San Francisco about long-term demand for its memory chips. By the next month, it was warning of slowing demand and falling chip prices.In September, the company reported a 20 percent drop in fourth-quarter revenue. It also slashed planned spending on factories and equipment by nearly 50 percent in the current fiscal year.The swing in demand might seem to undercut Micron’s widely publicized expansion plans, which include the Syracuse complex and a new $15 billion factory in Boise. But chip manufacturers often juggle different time schedules. Since new factories take roughly three years to complete, waiting too long to build can leave them short-handed when sales rebound.“The long-term outlook for memory and storage is robust,” said Mark Murphy, Micron’s executive vice president and chief financial officer. The cuts in near-term capital spending, he added, are a needed response “to bring our supply in line with demand.”Intel’s situation is even more complex. The company has major factory expansions underway in Arizona, Oregon, New Mexico, Ireland and Israel, in addition to the new manufacturing campus in Ohio and one planned for Germany. Intel is also determined to start competing with T.S.M.C. in manufacturing for other companies, as well as making chips it designs.The Taiwan Semiconductor Manufacturing Company is a potent player in semiconductors, with factories that churn out chips designed by companies including Apple, Amazon and Qualcomm.An Rong Xu for The New York TimesIntel now plans to construct factory buildings while holding off on purchases of the costly machines inside them, which are a much bigger expense.Those purchases can be tailored to emerging demand for particular kinds of chips, said Keyvan Esfarjani, Intel’s executive vice president who oversees construction and operation of its factories. He said the long-term need to reduce U.S. and European dependence on chips made in Asia was too important to be halted by short-term business cycles.“This is beyond Intel,” Mr. Esfarjani said in an interview last month. “This is important for people, for communities, for the United States. It’s important for national security.” More

The IMF said it had reached a $3bn loan deal with Egypt after Cairo agreed to a key bailout condition and floated its currency.The Egyptian pound slid 14.5 per cent to 23 to the US dollar on Thursday after the country’s central bank said it was moving to a “durable flexible exchange rate regime that leaves the forces of supply and demand to determine the value of the Egyptian pound against other currencies”.This means abandoning a policy of drawing on its reserves to support the pound, which was aimed at reducing the cost of imports and maintaining social stability in a country where 60 per cent of the population are poor or vulnerable to price shocks.Egypt has been in talks with the IMF for months amid soaring commodities prices and a foreign currency crisis stemming from Russia’s invasion of Ukraine, which accelerated billions of dollars of outflows as foreign debt investors exited the country.The pound had already been allowed to fall by roughly 22 per cent since March, but Cairo was understood to have been resisting fully floating the pound in order to contain the impact on prices.The fund said that, as well as the $3bn, the currency deal would “catalyse a large multi-year financing package” from other donors, including about $5bn in the financial year to the end of June next year, reflecting “broad international and regional support for Egypt”.It said Cairo had also requested financing under its new Resilience and Sustainability Facility, which could unlock up to $1bn.Analysts noted that Egypt had committed to floating its currency when it secured a $12bn loan from the IMF in 2016, but subsequently reverted to controlling the exchange rate.Jason Tuvey, senior emerging markets economist at Capital Economics in London, said it was likely “both the government and the IMF learnt from their mistakes. The government kept too tight a grip on the currency for too long, and the IMF did not push.”He added: “I don’t think investors will give them the benefit of the doubt. They will only return if there is a firm commitment to exchange rate flexibility.”The central bank also raised its key interest rates by 200 basis points to 13.25 per cent. It said it would “give priority to its main aim” of targeting inflation in order to achieve price stability. Inflation was at 15 per cent in September and analysts expect that at least in the short term it will rise further as a result of the fall in the pound.Tuvey agreed this would “add to inflation pressures”, but was nonetheless “a welcome step, and with an IMF deal . . . will go a long way to restoring macroeconomic stability in Egypt”.Cairo this week announced a $3bn “social protection package”, which includes increasing the minimum wage and a rise to pensions, civil service and public-sector salaries.The IMF said the reform programme it agreed with Egypt was also aimed at pushing “forward deep structural and governance reforms to promote private sector-led growth and job creation”.Egypt is the second-biggest debtor to the IMF after Argentina and this is its fourth loan agreement since 2016. The economy has grown even during the pandemic, but state and military investments in infrastructure projects have driven the expansion while private sector investment and manufactured exports have continued to lag behind.Analysts and Egyptian entrepreneurs argue that the state needs to improve the environment for business and scale down competition from the military to allow space for the private sector to thrive. More