Economy

As the country marked the anniversary of a 1956 uprising against Soviet rule, Orban, who was reelected for a fourth consecutive term in April elections, said next year would pose several challenges with the war in neighbouring Ukraine.”A war in the east, and an economic crisis in the West,” Orban told supporters in Zalaegerszeg, about 200 km (124 miles)west of Budapest, adding that there was “financial crisis and economic downturn in the EU”.In Budapest, teachers and students were due to stage a protest against the government later in the day.”In 1956 we learnt that unity is needed in difficult times … we will preserve economic stability, everyone will have a job, we can defend the scheme of caps on energy bills, and families will not be left on their own.” Caps on gas and electricity bills have been a key plank of Orban’s policies, but the costs of the scheme surged this year due to soaring energy prices, putting a huge burden on the state budget. The government was forced to scrap the cap for higher-usage households from Aug. 1.The government is due to discuss changes to the 2023 budget in December. The budget, approved in July, forecast economic growth at 4.1% next year while inflation was seen at 5.2% — forecasts since rendered obsolete by the surge in prices into double-digits. Headline inflation topped 20% in September and is still rising, while growth is expected to slow to 1% next year.Hungary, which still imports most of its gas and oil from Russia, has seen soaring energy prices widening its trade gap and current account deficit, which the central bank says could reach almost 8% of GDP this year. The forint currency plunged to record lows versus both the euro and the dollar earlier this month, forcing the central bank to ramp up interest rates in an emergency move on Oct. 14. More

DUBAI (Reuters) – A public spat between the United States and Saudi Arabia will not deter top Wall Street executives and U.S. business leaders from a flagship investment event starting on Tuesday where the kingdom will seek deals to reduce its economy’s reliance on oil.President Joe Biden has vowed “consequences” for U.S.-Saudi ties over an OPEC+ decision this month to cut oil output targets, which Riyadh defended as serving market stability. The dispute was the latest shadow to be cast over the annual Future Investment Initiative (FII), which was hit by a Western boycott over the 2018 murder of Saudi journalist Jamal Khashoggi and by the pandemic in 2020, leaving it a far cry from the 2017 inaugural event that Riyadh billed as “Davos in the Desert”.FII recovered in 2019 after the uproar over Khashoggi’s killing by Saudi agents, drawing big names from financial, defence and energy firms with strategic interests in the world’s top oil exporter, but garnered relatively meagre foreign inflows. More than 400 U.S. delegates are expected to attend this week, Richard Attias, CEO of the FII Institute, told Reuters, adding this was the largest representation of a foreign country.This year’s edition, running Oct. 25-27, includes JPMorgan (NYSE:JPM) boss Jamie Dimon, Pimco Vice Chairman John Studzinski and a BNY Mellon (NYSE:BK) executive as speakers, and they still plan to go, spokespeople for the companies told Reuters.Top executives from Goldman Sachs (NYSE:GS), Blackstone (NYSE:BX), Bridgewater Associates, Boeing (NYSE:BA) and Franklin Templeton are on the agenda. Goldman Sachs declined comment, while the rest did not respond.JPMorgan and Goldman Sachs made nearly $77 million and $42 million respectively in investment banking fees in Saudi Arabia last year, Refinitiv data showed. JPM remains at the top of the league table in 2022 with over $39 million so far.”For the most part, I do not see U.S. companies actively avoiding Saudi Arabia due to recent political tensions,” said Adel Hamaizia, managing director at Highbridge Advisory and a visiting fellow at Harvard University. “U.S. companies will be an important partner to Saudi’s investment and growth plans, in traditional sectors, but also in ‘newer’ fields including tourism, entertainment, EV production, technology and a nascent local defence industry,” Hamaizia said.The FII is a showcase for Crown Prince Mohammed bin Salman’s Vision 2030 development plan to wean the economy off oil by creating new industries that also generate jobs for millions of Saudis, and to lure foreign capital and talent.FDI FLATForeign direct investment still lags behind targets, though there has been movement in new sectors as the kingdom opens up. As Boeing netted an $80 million defence contract last year, Fedex announced a $400 million 10-year investment plan in the country, the Arab world’s biggest economy.At 15.3 billion riyals ($4.07 billion), inward FDI for the first half of the year was about a fifth of the $19.3 billion secured in 2021, which had included a $12.4 billion investment for Aramco (TADAWUL:2222)’s oil pipeline infrastructure. It is well below the 2030 target of $100 billion a year under a national strategy aiming for foreign direct investment equalling almost 6% of GDP by 2030.Uncertainty lingers around the regulatory and tax environment as well as high operational costs and lack of a skilled local workforce, even after Riyadh handed companies an ultimatum to locate regional headquarters in the kingdom by 2024 or lose out on lucrative government contracts.”FDI flows have remained stubbornly flat and low, under 1% of GDP, and some of the notable names that have invested have had only modest success, even with government backing,” said Justin Alexander, director of Khalij Economics and Gulf analyst at GlobalSource Partners. This has left the Saudi government and the Public Investment Fund to try to deliver on the crown prince’s diversification promises, aided by a petrodollar windfall.A worsening global economic outlook and oil market volatility has raised the stakes for the government in pursuing Vision 2030, which includes a $500 billion project to build a huge, high-tech economic zone on the Red Sea called NEOM eventually meant to house nine million people.”The government cannot afford to drive economic development indefinitely but for the time being there is no real alternative as domestic businesses are unfit to play that role, and FDI continues to disappoint,” said Neil Quilliam, associate fellow at Chatham House.($1 = 3.7575 riyals) More

Will the US post its first quarterly GDP increase of 2022?The US economy is expected to have grown in the third quarter of 2022 — largely helped by a shrinking trade deficit — despite forecasts for consumer spending to have weakened.The commerce department on Thursday is expected to report that US gross domestic product grew at an annualised rate of 2 per cent in the July through September period, according to economists polled by Reuters. That is down from an unexpected 0.6 per cent decline in the second quarter and a 1.6 per cent decline in the first three months of this year. Analysts at JPMorgan expect the growth in GDP to be attributed to “significant narrowing in the trade deficit during the quarter”. The US trade deficit shrank for the fifth consecutive month in August, as consumers spent more on services than goods and as retailers reduced overseas orders to manage excess inventories.Although the trade deficit is expected to drive GDP growth in the third quarter, some of the underlying details of the report are expected to be negative. Troy Ludtka, senior US economist at Natixis Americas, said consumer spending and investment were expected to weaken. In spite of projections that the economy grew in the third quarter, the US may still be on track for a recession next year, as the Federal Reserve continues to tighten monetary policy aggressively to curb inflation. In many countries, two consecutive quarters of GDP contraction are classified as a “technical” recession. But the National Bureau of Economic Research, the government entity that determines whether the US has entered a recession, has declined to declare it as the job market remains strong.“We’re right now basically teetering on the precipice of what could be a very major economic contraction at [the Fed’s] hands,” Ludtka said. “They are trying to make up for a mistake they made back in 2020 and 2021 with an even bigger mistake.” Alexandra WhiteWill the ECB raise rates by three-quarter points again?The European Central Bank is expected to announce its second consecutive 0.75 percentage point increase in interest rates on Thursday, reaffirming its determination to tackle continued record-setting levels of eurozone inflation.Spyros Andreopoulos, senior European economist at BNP Paribas, summed up expectations by saying the ECB was “still playing catch-up” in trying to contain inflation and it was still “too early for a dovish pivot in ECB communication”.The probable increase in the ECB’s deposit rate to 1.5 per cent — its highest level since January 2009 — is only one of several crucial decisions awaiting its president Christine Lagarde and the 24 other members of its governing council.Faced with eurozone inflation that reached an all-time high of 9.9 per cent in September, the central bank is looking at other levers it could pull to reduce price growth in the 19 countries that share Europe’s single currency.The council is expected to discuss ways to start shrinking the ECB’s almost €9tn balance sheet, which has ballooned over the past decade. One is to change the rules to stop banks earning almost €25bn of risk-free profits from the €2.1tn of ultra-cheap loans the ECB provided during the pandemic, known as targeted longer-term refinancing operations.Another is to signal plans to reduce the amount of maturing bonds it replaces in its €3.26tn asset purchase programme from early next year. Such a process, known as quantitative tightening, has already started at the US Federal Reserve and Bank of England. But given the scars left by the eurozone debt crisis a decade ago, the ECB is likely to tread carefully. Martin ArnoldWill the BoJ budge at its next monetary policy meeting?The yen slid past ¥150 against the dollar for the first time since 1990 last week, dropping through ¥151 on Friday, while official data showed that Japan’s inflation rate rose to an eight-year high of 3 per cent in September.The Japanese currency shot higher later in the session on Friday, touching ¥146.23 following a second intervention by Japanese authorities in a month to stem the yen’s slide.In all, the developments once again beg the question of whether the Bank of Japan is going to do anything when its board meets for two days through October 28.According to Masamichi Adachi, chief economist at UBS in Tokyo, the answer is “nothing”. BoJ governor Haruhiko Kuroda is expected to stand firm with its ultra-loose monetary policy and remain committed to keeping the 10-year Japanese government bond yield pinned below 25 basis points — even if that requires more emergency bond-buying operations.“His message has been persistently decisive: Japan’s consumer price index inflation will slow to below 2 per cent next year so policy tightening is not necessary and inappropriate at this stage,” Adachi said. “We agree with this inflation outlook.”There are few options to keep the yen from falling further as the gap widens between the BoJ’s dovish policy and the tightening demonstrated by most other major central banks. But Japanese authorities have indicated they are ready to step in if there is too much volatility and they still have firepower even after a $20bn intervention in September and last week’s action to prop up the yen. Kana Inagaki More

The government will double the ceiling of its corporate bond-buying facility run by state-run banks to 16 trillion won ($11 billion), Minister of Economy and Finance Choo Kyung-ho said on Sunday.The measure is aimed at easing volatility and concern of tight liquidity in corporate bond and short-term money markets, Choo said after a meeting with top financial officials, including the central bank governor and regulatory chief. Commercial paper issued by securities firms will be included in the facility’s purchase list, while an additional 3 trillion won of liquidity will be supplied by the Korea Securities Finance Corp for securities firms experiencing liquidity shortages, he said.The Bank of Korea’s monetary policy board will also consider its own measures, such as reactivating a special purpose vehicle to purchase corporate bonds and commercial paper first introduced during the pandemic, Governor Rhee Chang-yong told reporters.But premises to macroeconomic monetary policy are unchanged as this issue is temporary and particular to the commercial paper market, he said.There have been growing worries about signs of stress in South Korea’s short-term money market, with the central bank having raised its policy interest rate by 250 basis points since August last year from a record-low 0.5% to contain inflation.The official end-of-day yield on 91-day commercial paper rose to 4.25% on Friday from 1.55% at the start of the year, with the spread over the central bank’s policy rate widening to 125 basis points from 48 basis points over the same period.To help allay the situation, the Financial Services Commission on Thursday said it would delay by six months a plan to normalise requirements for banks to hold more liquid assets.Also, South Korea’s bond market stabilisation fund will resume buying corporate bonds and commercial paper worth up to 1.6 trillion won from Monday.($1 = 1,428.3200 won) More

LONDON/WASHINGTON (Reuters) – A failure to secure meaningful progress on a debt relief for the world’s poorest nations at the International Monetary Fund and World Bank annual meeting in Washington has left policymakers, campaigners and investors frustrated. Two years ago the Group of 20 launched the Common Framework – a mechanism designed to provide a swift and comprehensive debt overhaul to nations buckling under debt burdens after COVID-19 shock that would reach beyond temporary debt payment moratoriums.But results have proven elusive, hampered by a combination of a lack of progress in bringing key creditors around the table and getting them to commit to joint action, and establishing debt parametres that form the basis of talks as well as political upheaval in some of the countries.The world’s poorest countries face $35 billion in debt-service payments to official and private-sector creditors in 2022, more than 40% of that is due to China, the World Bank found.”Time is not our friend, interest rates are up, the dollar has appreciated and the debt burden has become heavier,” IMF chief Kristalina Georgieva told a conference in London after the Washington gathering ended mid-October.Debt restructurings can be protracted, getting a multitude of parties to agree on a shared process is no mean feat. But doubts are rife with progress having been glacial. “It isn’t a perfect instrument. I take responsibility for that as being one of the negotiators,” Guillaume Chabert, IMF deputy strategy chief who helped design the Common Framework during his time at the Paris Club, told a panel in Washington.”We need a fast, quick, orderly, reliable, predictable mechanism. The Common Framework is a good start, but you need some fixes.”To Zambia, Africa’s first COVID-era default in 2020, it was still unclear who will lead talks for renegotiating its nearly $6 billion debt with China. Ethiopia’s debt restructuring has ground to a halt with the country engulfed in a civil war.Official creditors found that Chad, the first to request Commond Framework treatment in January 2021, might not need debt relief after all thanks to the oil price surge, though they signalled readiness to reconvene if needed.CHAD CHALLENGE Especially Chad’s experience could dissuade other countries from applying for relief, experts said. Chabert said there was still a chance Chad’s creditors would fail to finalise their memorandum of understanding or its biggest private creditor, commodities firm Glencore (OTC:GLNCY), would back out, which would effectively halt existing IMF and World Bank programs. China’s role as a lender to poorer nations and Beijing’s foot-dragging on debt relief drew much ire at the Washington meeting. U.S. officials warning this could burden dozens of low- and middle-income countries with years of debt servicing problems, lower growth and under-investment. U.S. Treasury Secretary Janet Yellen and other Western leaders gathering in Washington ratcheted up criticism of China, the world’s largest bilateral creditor, as the main obstacle to moving ahead with debt restructuring agreements.Chabert said that in addition to speeding up the process, it was important to ensure the comparability of treatment for the much more diverse set of creditors now involved.JPMorgan (NYSE:JPM)’s Joyce Chang, whose bank held an investor seminar alongside the IMF World Bank gathering, said asset managers had more discussions on repayment challenges and restructurings for emerging markets than at any time since the 1990s.”Solutions remain elusive, and there was open discussion about the shortcomings of the common framework,” said Chang, chair of global research and the strategic research team at the Wall Street bank, in a round up of the meetings. For Kevin Gallagher, director of the Boston University Global Development Policy Center, the U.S. Treasury also needs to get more forceful with private creditors, as it did during the heavily indebted poor countries process or in Iraq. “We showed during the 1990s that we can compel the private sector to come to the table through carrots and sticks and we’re just not willing to do it,” he said, acknowledging the debt restructuring regime amounted to a “huge problem”. “It’s like walking into an emergency room with a bleeding head wound, and being told that you’re fine.” More

China will open its doors even wider, Xi also said to dozens of journalists packed into a room inside central Beijing’s Great Hall of the People.China’s development is inseparable from the world and the world also needs China, Xi added, according to state media. More

“The gap in Japan’s gross domestic product (GDP) is now around 15 trillion yen. It’s not enough to just fill this gap,” said Yoshitaka Shindo, executive acting chairperson of the ruling Liberal Democratic Party’s (LDP) policy research council.”Both quality and size is important,” Shindo said of the package, being crafted by Prime Minister Fumio Kishida’s administration to cushion the blow from rising fuel and raw material prices.The LDP handed its proposal to Kishida, the party leader, last week, Shindo told a programme on public broadcaster NHK.The remarks add to growing calls among ruling party officials for hefty spending to ease the strain from rising inflation on households.On monetary policy, Shindo said while the Bank of Japan must eventually exit ultra-easy policy, doing so now would be premature as Japan’s economy and wage growth remain weak.”No country uses monetary policy to manipulate currency rates,” Shindo said, brushing aside the view the BOJ should raise interest rates to moderate the yen’s steep drop to 32-year lows.Japan intervened in the foreign exchange market on Friday to buy yen for the second time in a month after its currency weakened to near 152 to the dollar, due in part to the widening gap between U.S. and Japanese interest rates.”What’s important is to achieve price stability. For this to happen, we must have higher wages.”The government is expected to announce the stimulus package by the end of this month, as the weak yen adds to households’ pain by inflating the cost of already expensive food and fuel.The government and LDP-led coalition are considering state outlays of more than 20 trillion yen ($140 billion) to fund the package, Kyodo news agency reported on Friday.The package could grow beyond that, given spending by municipal governments, with a significant portion to be financed by debt issuance, Kyodo said.($1 = 147.6400 yen) More

His death was confirmed by the championship-leading Red Bull Formula One team.The Styrian-born entrepreneur built a global empire around the energy drink Red Bull and was considered the richest man in Austria. Mateschitz’s fortune is estimated at around 25 billion euros ($24.65 billion). This puts him in 51st place on Forbes’ list on the world’s richest people.The self-made billionaire was considered a marketing genius. After graduating from the University of World Trade in Vienna, he worked as a marketing specialist for various companies in the 1970s. On his business trips to Asia, he got to know the market of energy and stimulant drinks. At that time, these drinks were still completely unknown in Europe and the United States. In 1983, he acquired the licence for such a drink in Asia. One year later, together with the Thai entrepreneurial family Yoovidhya, he founded Red Bull GmbH, in which he held a 49% stake. After modifying the recipe of a Thai energy drink and developing a marketing concept, Red Bull was introduced to the market in 1987. The bubbly, carbonated, sweet drink, whose taste is described as similar to that of gummy bears, rose to become the global market leader after a difficult market entry. The group achieved a turnover of 7.8 billion euros in 2021 and sold 9.8 billion Red Bull cans worldwide. The Fuschl am See, Salzburg-based company is also known for its creative advertising with the world famous slogan “Red Bull gives you wings”. An important milestone for Mateschitz was the entry into the U.S. market at the end of the 1990s. Today, every third can is sold in the United States. The entrepreneur paid a lot of attention to the image of the drink. He associated the Red Bull brand with adventure sports like surfing, mountain biking and cliff diving with the company eventually involved as a sponsor in a lot of them. Mateschitz was also the founder and owner of Red Bull Racing, a Formula 1 racing team based in Milton Keynes, Britain. He had taken over the football club SV Austria Salzburg, now known as “Red Bull Salzburg”. Little is known about Mateschitz’s private life. He was publicity shy and rarely gave interviews. He lived in Salzburg with his long-term girlfriend and once said years ago that he drank 10 to 12 cans of Red Bull a day himself. It is not clear what consequences the Red Bull empire will face after his death. His only son Mark, 30, who most recently acted as managing director of one of his father’s investment companies is seen as a possible successor. ($1 = 1.0142 euros) More