Economy

The three-decade era of globalisation risks going into reverse, according to company executives and investors, as world leaders prepare to meet in the Swiss town of Davos for the first time since the coronavirus pandemic began. The geopolitical fallout from Russia’s war in Ukraine, combined with the disruption to global supply chains caused by the virus, recent market turmoil and the rapidly worsening economic outlook leave corporate leaders and investors grappling with vital strategic decisions, several told the Financial Times in interviews. “Tension between the US and China was accelerated by the pandemic and now this invasion of Ukraine by Russia — all these trends are raising serious concerns about a decoupling world,” said José Manuel Barroso, chair of Goldman Sachs International and a former president of the European Commission. Onshoring, renationalisation and regionalisation had become the latest trends for companies, slowing the pace of globalisation, he added: “[Globalisation faces] friction from nationalism, protectionism, nativism, chauvinism if you wish, or even sometimes xenophobia, and for me, it is not clear who is going to win.” “Pretty much no one has seen” these conditions “during the arc of their investing career”, according to the head of one of the world’s largest private equity groups. Charles “Chip” Kaye, chief executive of Warburg Pincus, said geopolitics had been “on the fringe of the way we thought” since the fall of the Berlin Wall and that this had “provided a certain oxygen to global growth”.However, he said, geopolitics was now “front and centre” of investment decisions just as the “pretty powerful tailwind to asset prices” provided by years of falling inflation and low interest rates comes to an end. “You’re not optimising the economic outcome, you’re creating friction in the system,” he said of rising geopolitical tensions.Happy Monday. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — SophiaFive more stories in the news1. ‘Millions’ at risk of death as Ukraine war hits food supplies Egypt, which sourced most of its wheat from Russia and Ukraine before the war, is the world’s biggest wheat importer and subsidises a bread programme for 70mn people. Finance minister Mohamed Maait warns that “millions” could die as the global wheat shortage intensifies and triggers a food price crisis. 2. ‘Quad’ security group plans to track China’s illegal fishing The US, Japan, Australia and India will unveil a maritime initiative tomorrow aimed at curbing illegal fishing in the Indo-Pacific. China is allegedly responsible for 95 per cent of illegal fishing in the region, which has “drastically depleted global fish stocks and undermined traditional livelihoods of many countries,” said Charles Edel, Australia chair at CSIS.3. Biden and Yoon agree to step up deterrence against North Korea During president Joe Biden’s visit to Asia, he and South Korean president Yoon Suk-yeol have discussed the “timely deployment” of US strategic assets — including fighters, bombers, and missiles — to reinforce deterrence as Pyongyang continues to develop nuclear weapons.4. Lukoil’s ex-chief warns the EU against banning Russian oil Vagit Alekperov, the former head of Russia’s second-biggest oil group, has warned that a European ban on the country’s “impossible to replace” crude would be “the most negative scenario” for all parties as EU discussions on an embargo intensify.5. Saudi Arabia signals support for Russia as Opec+ partner As Russian output falls and the oil group’s production quotas are set to expire in three months, energy minister Prince Abdulaziz bin Salman said Riyadh will stand by Russia despite tightening western sanctions on Moscow and a potential EU ban on Russian oil imports.The day aheadResults Zoom releases their Q1 results today, and Kingfisher gives a Q1 trading update.European Union The EU General Affairs Council meets in Brussels today. Plus, the eurogroup of 19 finance ministers from member states that adopted the single currency also meet in Brussels.Middle East Turkish foreign minister Mevlüt Çavuşoğlu visits Israel and the Palestinian Authority to discuss the appointment of ambassadors with his Israeli counterpart as part of improving relations between the countries.Biden in Asia US president Joe Biden will present his Indo-Pacific Economic Framework in Tokyo today.What else we’re readingIs the global economy heading for recession? Four different problems are stalking the global economy as it recovers from the pandemic: strict Covid-19 lockdowns, tightening monetary policy, a soaring cost of living crisis, and food crises. Chris Giles lays out the deteriorating outlook in The Big Read.How Elon Musk and Jack Dorsey aligned behind Twitter deal The billionaire “bromance” relationship between Musk and Dorsey has already shaken up the future of Twitter. The alliance has angered staffers — and fuelled speculation about the scope of Dorsey’s role in the deal and the company’s future.London lawyers helping Russia’s super-rich Top London law firms have made fat profits helping Russian oligarchs with issues such as alleged libel or data protection — but the equation has changed in the wake of the Ukraine war, bringing these legal arrangements under increasing scrutiny.The truckers who keep our world moving The history of humanity — from Bronze Age trade in the Indus valley to lorries carrying aid to Ukrainian refugee children — is the story of supply chains. Horatio Clare hitches a long-distance lift with a truckie to see the world from a startling new angle.Death notices for the city are premature It’s not just the cost or duration of travel that is preventing urban dwellers from spending five days a week in the office, John Burn-Murdoch writes. It’s that standing nose-to-armpit on a packed commuter train is not fun, but sitting on an airy train to a pub full of friends is.ArtThe Andy Warhol silkscreen “Shot Sage Blue Marilyn” — which sold for a record $195mn at a New York auction — deserves the cliché “iconic”, but Tim Harford argues there is a much more obscure portrait that has a claim to being Warhol’s most interesting and definitive work.

The 1964 painting “Shot Sage Blue Marilyn,” by Andy Warhol © AP More

The three-decade era of globalisation risks going into reverse according to company executives and investors, as world leaders prepare to meet in the Swiss town of Davos for the first time since the coronavirus pandemic began.The geopolitical fallout from Russia’s war in Ukraine, combined with the disruption to global supply chains caused by the virus, recent market turmoil and the rapidly worsening economic outlook leave corporate leaders and investors grappling with vital strategic decisions, several told the Financial Times in interviews.“Tension between the US and China was accelerated by the pandemic and now this invasion of Ukraine by Russia — all these trends are raising serious concerns about a decoupling world,” said José Manuel Barroso, chair of Goldman Sachs International and a former president of the European Commission.Onshoring, renationalisation and regionalisation had become the latest trends for companies, slowing the pace of globalisation, he added: “[Globalisation faces] friction from nationalism, protectionism, nativism, chauvinism if you wish, or even sometimes xenophobia, and for me, it is not clear who is going to win.”“Pretty much no one has seen” these conditions “during the arc of their investing career”, according to the head of one of the world’s largest private equity groups. Charles ‘Chip’ Kaye, chief executive of Warburg Pincus, said geopolitics had been “on the fringe of the way we thought” since the fall of the Berlin Wall and that this had “provided a certain oxygen to global growth”.

However, he said, geopolitics was now “front and centre” of investment decisions just as the “pretty powerful tailwind to asset prices” provided by years of falling inflation and low interest rates comes to an end.“You’re not optimising the economic outcome, you’re creating friction in the system,” he said of rising geopolitical tensions.Talk about deglobalisation among companies has mounted in recent weeks. Mentions of nearshoring, onshoring and reshoring on corporate earning calls and investor conferences are at their highest level since at least 2005, according to data provider Sentieo.The subject will be high on the agenda for attendees at the World Economic Forum in Davos this week. Since its last meeting in January 2020 world events have scrambled the supply chains that underpin the globalisation that the WEF champions. “Companies are saying I need my production closer to my customers,” said Jonathan Gray, president of Blackstone Group.The head of Asia’s largest pharmaceutical company said the era of globalisation based on outsourcing functions to cut costs was over.Christophe Weber, chief executive of Takeda, which is headquartered in Tokyo, Japan, said drugmakers would continue to seek growth in international markets, particularly China because of its high potential. But corporate focus had shifted to a more sustainable form of globalisation, he said: “It’s a question of de-risking your supply chain.”“It would be a short-cut to say that globalisation is over but the globalisation that people have in mind is not true any more,” Weber said. “The globalisation which existed a few years ago, trade without constraints, and the ‘world is flat’ idea, is finished.” Takeda has implemented a dual sourcing policy to build more redundancy into its supply chains, Weber added: “I never thought [outsourcing] would work long-term but I think this is clear for everyone now.”Consumer industries are also experiencing a shift away from globalisation, according to Rachid Mohamed Rachid, chair of Valentino and Balmain.Some luxury companies are rethinking their strategy, which tended to rely heavily on global branding, selling to tourists and shipping goods around the world, he said: “The business has gone local . . . Stores today in London or Paris or Milan are now catering for their local residents more than they used to before.”

In the past two years companies have begun to “look local and start acting locally instead of acting globally”, he told the FT’s Business of Luxury conference earlier this week. “In different markets like the US, Europe, Asia, even smaller markets like Latin America and Africa, people are looking locally now and I’m sure there’ll be a lot of local deals taking place.”Dominik Asam, chief financial officer at Airbus, warned this could have severe economic consequences.“If a meaningful part of decades of productivity gains driven by globalisation was reversed in a short period of time, this would drive inflation up and result in a major, protracted recession,” he said. “This is exactly why I believe that major economic powers will come to the conclusion that they have to do everything they can to avert such a devastating scenario.”Barroso blamed a less co-operative spirit at a political level within the G20 now when compared with the financial crisis in 2008. Political leaders should distinguish between serious geopolitical differences and the necessity to tackle challenges such as public health and climate change, he said.Germany’s central bank chief Joachim Nagel listed deglobalisation as one of the “three Ds” that would “add to inflationary pressures” alongside decarbonisation and demographics.The shift away from globalisation was being “fuelled by geopolitical tensions and the desire to reduce economic dependencies”, the Bundesbank president said after a meeting of G7 finance ministers and central bank governors in Königswinter, Germany, earlier this week.Additional reporting by Brooke Masters and Sylvia Pfeifer in London and Martin Arnold in Frankfurt More

Hello and welcome to the working week.Democracy can be a messy business, as several events coming up this week will show.There has been much excitement in the British media about the publication of the partygate report by senior civil servant Sue Gray into how prime minister Boris Johnson and members of his government broke lockdown rules. It could be published on Monday, but it’s more likely to be Tuesday or Wednesday. However, when it does appear we may all have to curb our enthusiasm. The details are likely to be uncomfortable (to say the least) for Johnson, but received wisdom is that he will cling on in office because his Conservative MPs do not have a plan B. Perhaps those with most to worry about are the civil servants, who Gray is likely to name, resulting in disciplinary action. The most senior of these, Cabinet secretary Simon Case, has already reportedly been assessing his options outside Westminster. It would be somewhat ironic if the main casualties of partygate were the unelected officials carrying out the nefarious requests of elected politicians.This week’s election watch (should I make this a new permanent section?) is Colombia’s presidential contest this Sunday, most likely to be won by the leftwing former anti-US guerrilla fighter, Gustavo Petro.If you want to learn more, our man in Latin America, Michael Stott, had first-hand experience of being stopped and searched by M-19 guerrillas back in the 1980s, when he was teaching English to university students as part of his degree course. Petro’s only serious political rival appears to be Federico Gutiérrez, the former mayor of Medellín, who has emerged as the main “stop Petro” candidate.

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Colombia is a breathtakingly beautiful country — just ask Unhedged writer Rob Armstrong — but a victory for Petro is concerning to politicians in Washington, who view Colombia as its most important strategic alliance in South America. A Petro administration is likely to rethink some key tenets of the US-Colombia relationship, such as the war on drugs, a free trade deal and a US-led push to unseat the revolutionary socialist government in next-door Venezuela. The country is on edge amid rumours of a possible military coup or an election postponement.While we are diarising, you might want to note down the next significant South American election: Brazil in October.What are you looking out for this week? I’m interested. Email me at [email protected] dataThe US, France and Germany all report first-quarter gross domestic product estimates this week. There will also be a chance for international comparisons from the S&P Global purchasing managers’ index data, out on Tuesday. Then on Wednesday, US markets will digest the publication of the Federal Open Market Committee’s minutes from its May meeting.CompaniesThe end to another earnings season is approaching so company reports are relatively thin this week. Retail is a theme as is the utility industry in the UK. Twitter is among those holding their annual general meetings this week — should be lively.Marks and Spencer chief executive Steve Rowe will be checking out after 39 years with the British retailer when he presents the company’s full-year results on Wednesday. Over the past year M&S has surprised on the upside, twice increasing its profit forecasts. However, those upgrades along with the change of chief executive are already baked into the share price, so all eyes will be on the outlook for the current year.Rivals such as Next and Primark have already telegraphed price increases to offset the impact of rising commodity and other costs — and that was before US titans Walmart and Target sent the sector into a tailspin last week with their own warnings. That does not bode well for dividends. M&S has not paid one since January 2020 and had already indicated a resumption of payouts was “unlikely” this year.Meat processing business Cranwick is expected to report healthier profits on Tuesday owing to cost-cutting measures. However, investors will want to know how the UK company is addressing the challenges in the pig farming industry from labour shortages to the impact of the Ukraine war on feed prices.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayEU, European Central Bank publishes eurozone investment fund statisticsGermany, monthly IfA business confidence indexResults: Kingfisher Q1 trading update, Zoom Q1TuesdayEurozone, France, Germany, UK, US: S&P Global flash composite (manufacturing and services) purchasing managers’ index (PMI) dataUK, CBI quarterly distributive trades survey plus April public finances and public sector net borrowing dataResults: Best Buy Q1, Cranswick FY, Homeserve FY, Ralph Lauren Q4WednesdayEU, ECB publishes its twice-yearly stability review plus OECD publishes economic outlook for the eurozoneFrance, consumer confidence figuresGermany, final Q1 GDP figures plus GfK consumer confidence surveyNew Zealand, Reserve Bank of New Zealand’s monetary policy statementSwitzerland, ECB president Christine Lagarde, Ireland’s taoiseach Micheál Martin, Dutch prime minister Mark Rutte and the president of the European Parliament Roberta Metsola join a Davos forum on the EU’s unity in response to Russia’s invasion of UkraineTwitter AGMUS, Federal Open Market Committee releases minutes of its May meetingResults: Hollywood Bowl 1H, Marks and Spencer FY, Nvidia Q1, Pets At Home FY, Severn Trent FY, SSE FYThursdayCanada, March retail trade figuresUK, CBI quarterly service sector survey plus official figures for the number of 16-24-year-olds not in education, employment or training (Neet).US, Q1 GDP figures (second estimate) and Q1 consumer spending dataResults: Alibaba FY, Baidu Q1, Dell Technologies Q1, Intermediate Capital Group FY, Johnson Matthey FY, Macy’s Q1, Ted Baker FY, United Utilities FYFridayFrance, Q1 preliminary employment figures plus final Q1 GDP figuresUS, April personal income and spending dataWorld eventsFinally, here is a rundown of other events and milestones this week. MondayAustria, Germany: the European Geoscience Union 2021 begins its annual general assembly in Vienna plus in Bonn the European Space Agency holds its Living Planet Symposium, described as the largest earth observation conference in the worldEU, the eurogroup of 19 finance ministers from member states that adopted the single currency meet in Brussels ahead of the Ecofin council meeting of all EU finance ministers. Plus, the EU General Affairs Council meets in Brussels.Ghana, the 57th annual meeting of the African Development Bank and the 48th annual meeting of the African Development Fund begin in AccraTurkish foreign minister Mevlüt Çavuşoğlu visits Israel and the Palestinian Authority to discuss the appointment of ambassadors with his Israeli counterpart as part of improving relations between the countriesTokyo, US president Joe Biden will present his Indo-Pacific Economic Framework, diluted at the eleventh-hour on Friday in a move designed to attract more countries to join the dealTuesdayUK, London’s £18.9bn east-west express rail link, the Elizabeth Line, officially opens, three-and-a-half years later than originally planned. Meanwhile, a ballot for strike action over jobs and pay involving thousands of workers with some of the UK’s biggest train operators and Network Rail will close. The National Union of Rail, Maritime and Transport Workers said a Yes vote among its 40,000 members could lead to the biggest UK rail strike in modern history. Separately, in the capital, the Chelsea Flower Show opens at the Royal Hospital Chelsea.WednesdayTurkish president Recep Tayyip Erdoğan and UN secretary-general António Guterres meet in AnkaraUS, second anniversary of the death of George Floyd, which ignited Black Lives Matter protests in various countries. Thursday is the 10th anniversary of Trayvon Martin’s death, which sparked the creation of Black Lives Matter.ThursdayAscension day celebrated by the western protestant churchAustralia, Sorry Day commemorates the forced removal of Aboriginal children from their parentsGermany, the presentation of the international Charlemagne Award for European unity is scheduled to take place in the town of AachenUK, Hay Literary Festival begins, this year both online and in person in the Welsh market town of Hay-on-WyeUS, New Zealand prime minister Jacinda Ardern gives commencement speech to graduates at Harvard UniversityFridayLithuania, Nato parliamentary assembly begins its annual spring session in VilniusUK, MCM London Comic Con opens at the ExCeL conference centreSaturdayFrance, the Uefa Champions League final between Liverpool and Real Madrid kicks off at the Stade de France. Plus, the winners of the Palme d’Or awards are announced at the close of the Cannes Film Festival.SundayColombia, presidential election. If no candidate gains a majority of the vote, a second round will be held on June 19.US president Joe Biden gives the University of Delaware’s graduation ceremony commencement address More

Technology often transcends borders. The internet is the clearest example: a network encircling the globe, connecting billions of people for everything from business to romance. Its role in enabling remote working has been underlined during the two years of the pandemic.Yet, as it has become ever clearer that the development, reach and success of technology are highly dependent on tightly linked supply chains, the very structure of those connections has become increasingly fragile. From the Russian invasion of Ukraine to national digital security concerns, geopolitics can threaten both the supply of physical components and the tech communities that are essential for innovation.For business students, it is becoming essential to understand that, while globalisation has been of great benefit to companies, they must also be aware of the risks posed by international turbulence such as trade disputes and security concerns — and consider ways to mitigate them.The physical supply chains of technology have been the subject of discussion and dispute for years, most notably focused on Chinese tech group Huawei. In 2019, the US blacklisted the company on security grounds and warned its allies they should not use Huawei equipment for 5G mobile networks.The inability to access crucial US computer chips led to a significant decline in Huawei’s revenue last year, forcing the company to try to expand other parts of its business, including its cloud services and the manufacturing of components for electric cars.But Huawei is far from the only company with a reliance on vulnerable international supply chains. Eric Thun, associate professor in Chinese business studies at Oxford university’s Saïd Business School, says it has become harder than ever to isolate a business from risks to supply chains. “You’ve seen an increasing complexity in supply chains and they scale much more rapidly than before,” he says. A growing concentration of market share at each level of production has actually created fragmentation — a company may dominate in microchips, but is reliant on another firm for the raw materials. In turn, that makes it difficult for governments to secure supply chains as a whole for complex products with dozens of parts, each made up of smaller components.

Work to replace Huawei equipment on a Hull tower block after a UK government decision to remove the Chinese company’s technology from the 5G network © Ian Forsyth/Bloomberg

Employers must also consider that while the internet, and the remote working it enables, mean workers can now be drawn from further afield, geopolitical issues can have a serious impact on their lives and on the businesses that employ them.

Russia’s invasion of Ukraine highlighted this problem, given that both countries were tech hubs for companies elsewhere looking for relatively cheap but highly skilled developers and programmers. Some Ukrainian employees have fled the violence, while others are obliged, under government rules, to stay and fight. Companies relying on Russian developers, meanwhile, may find it difficult to settle their bills since various banking and payment services were suspended.“What has been very interesting is that almost every company in fintech has been impacted,” says Itamar Lesuisse, co-founder and chief executive of crypto company Argent. “It’s personal for a lot of people,” he continues, noting that Ukraine has been a hub for cryptocurrency project developers and engineers.It also creates a considerable moral imperative for businesses to actively intervene with local partners. “A lot of companies are looking at moving teams to Lviv [in the west of Ukraine], and helping those who can leave to get out,” Bruce Macfarlane, co-founder and managing partner at MMC Ventures, told the FT in March.Some companies have supported staff who are at risk. For instance, Revolut, the digital-only bank, offered relocation support for Ukrainian employees either within the country or abroad in February.

But the situation does not end with temporary assistance for Ukrainian workers, Macfarlane stressed. In the longer term, companies will have to deal with the issue of employees who wish to return to their home countries.At a time when ESG (environmental, social and governance) concerns have come to the fore, business executives and students need to carefully consider the ethical aspects of supply chains. The advantages of globalisation and an increasingly remote workforce in sectors such as technology must be weighed against the challenges and need for employee safety.The geopolitics of business are difficult to navigate, particularly when the situation on the ground can change so rapidly. The Russian invasion of Ukraine transformed supply chains within a month, with companies forced to make swift political decisions. For those working both upstream and downstream, the impact can be felt quickly and without warning.Such challenges make it essential that business school teaching engages with these problems. If the leaders of tomorrow consider such concerns only once they face a crisis, it may be too late. More

“Sell in May and go away,” runs the old market adage, referring to stocks’ tendency to underperform from May to October. The third week of May 2022 may come to be seen as a bigger tipping point. Sharp falls in US and other markets last week were the moment when a sell-off that had started in the most speculative assets and technology stocks and spread to more profitable and established tech names became much more broad-based. That reflected a shift in investor sentiment. Worries about inflation have been joined by worries about recession — one that central banks may cause or worsen in their efforts to cool economies.The catalyst, surprisingly, was earnings from two of the biggest big-box retailers, Walmart and Target. Both said sales were up but profits fell because of increasing costs and tightening margins. Both experienced double-digit share price falls more akin to moves seen in profitless growth stocks than dependable sellers of consumer goods. The market sell-off spread to other consumer staple stocks.Apparent signs that even these powerful retailers were struggling to pass on cost pressures made investors fret that the record-high corporate profit margins and buoyant US consumer spending that have underpinned market returns in recent years were coming to an abrupt end. That took concerns into new territory. Previously, the withdrawal of liquidity after years of cheap money had mostly blown the froth off the most speculative assets, notably cryptocurrencies. The prospect of higher interest rates had chiefly hit tech and growth stocks whose valuations rely on bigger profits in the distant future. Growing anxiety about the impact of the Federal Reserve’s response to inflation is coinciding with problems elsewhere. Lockdowns prompted by China’s zero-Covid policy are both crimping domestic growth and gumming up international supply chains. European consumers are being squeezed by soaring energy costs thanks to Russia’s war in Ukraine.This leaves markets at a delicate point, and some money managers fear that if they go into a steeper slide, structural issues could magnify price falls. A new generation of portfolio managers has limited experience of managing bear markets. Trading conditions are clunkier, in part because banks have been constrained by capital adequacy rules from warehousing securities intraday and smoothing big movements as they used to before the 2008 financial crisis. Funds that have made bad speculative investments may be forced into firesales of higher-quality assets.Such doomsday scenarios may not come to pass. Closer examination of Walmart and Target’s earnings reveals they ran up unusually large inventories — in Target’s case of big-ticket items such as furniture and TVs that consumers were buying in the pandemic but less so now — and had to cut prices to clear them. If what we are seeing is a sign that a late pandemic shift — the skewing of US demand towards goods and away from services — is unwinding, that could help to curb inflation by removing a force that had turbocharged goods prices. Falls in asset prices to date will also have wealth effects that might yet make it easier for the Fed to achieve its objectives without raising rates as far as it might otherwise have expected.With US inflation above 8 per cent and Treasuries — unusually — also selling off in recent weeks, there are few safe places for investors. Commodities and energy stocks may be safer than some, though investors may have to hold their noses over ESG concerns. But amid such uncertainties, another market adage that proved a successful strategy in recent corrections — “buy the dip” — does not seem a safe bet. More

Egypt’s finance minister has warned that “millions” could die globally because of the food price crisis triggered by the Ukraine war, echoing warnings made by the UN and G7 countries as worries about a worldwide wheat shortage intensify.In an interview during a visit to London, Mohamed Maait warned of “food insecurity” around the world. However, he insisted Egypt had enough wheat to last until the end of the year. “This is something that we have to be very careful about,” said Maait. “We will feel shame if we find that millions of people are dying because of food insecurity. They are not responsible for that, they didn’t do anything wrong.”His comments come days after UN secretary-general António Guterres warned the Ukraine conflict risked plunging “tens of millions” into famine.“Global hunger levels are at a new high,” said Guterres. The war in Ukraine, climate change and the Covid-19 pandemic were also all contributing to a crisis that could last for years, he warned. G7 countries last week launched a “Global Alliance for Food Security” with the World Bank, to co-ordinate a short-term response. The group aims to increase supplies of food, fertiliser and fuel and to provide financial support to help vulnerable countries avert famine.

Egypt’s finance minister Mohamed Maait is confident Egypt will not fall into recession this year despite global crises © Chris J Ratcliffe/Bloomberg

Egypt is the world’s biggest wheat importer and runs a large-scale subsidised bread programme that serves almost 70mn people. Until the war it sourced most of its wheat from Russia and Ukraine. Mostafa Madbouly, the prime minister, said this month that the country had wheat reserves for four months. In addition, the government aims to buy 6mn tonnes of locally grown wheat. But it is seeking new import sources, including potentially Pakistan and Mexico.Maait also told the FT he was confident Egypt would not fall into recession this year. “The issue of going to recession, I’m ruling [it] out,” he said. “Egypt was one of the few countries able to grow positively over the two years of Covid-19.” The government is predicting 5.5 per cent growth in the fiscal year that starts in July.The minister was optimistic that a new three-year funding package, requested by Cairo in March, would be agreed with the IMF. Discussions with the fund were “going very well”, he said. No figure had yet been suggested by the government or by the IMF, he added.The government has signalled its intention to sell off state assets including some military companies to raise revenue. Egypt has been left in a precarious position as a result of increasing inflation internationally, which has raised the cost of government borrowing. Domestic inflation has risen from 5 per cent before the war to about 14.5 per cent now.

Maait said the government was still planning to “rationalise” bread subsidies, which cost more than $3bn annually — a prospect raised before the outbreak of the Ukraine conflict but which has been delayed. “So as long as the cost of bread and the cost of producing bread increases, so the cost of subsidy on the budget increases . . . It cannot go like that,” he said. Altering bread subsidies was “not an imminent action”, but “the intention to move is there . . . over a gradual basis”. Maait said Cairo also planned to reform the cash credits received by millions of Egyptians for food, streamlining the list of those eligible to ensure only the needy received them.Egypt is hosting the UN COP27 climate summit this year and Maait said the country would be issuing new national climate targets, and a new green funding plan, in the coming weeks. More

This week, the global elite will convene once again in Davos, Switzerland, after a two-year pandemic break, for the World Economic Forum. The conversation will revolve around deglobalisation and its discontents. I expect the headlines will be that decoupling between China and the US is untenable, free trade always works just as David Ricardo thought it would, and unless we return to the mid-1990s status quo of neoliberalism, doom awaits.Readers of this column will know I don’t agree. Yes, our most recent round of globalisation produced more wealth than the world has ever known. Unfortunately, as the economist Dani Rodrik has pointed out, for every $1 of efficiency gain from trade, there is typically $50 worth of redistribution towards the rich. The economic and political consequences of that are the key reason that we are now in a period of deglobalisation.Even as supply chains are fast becoming more regional and local, academics and policymakers continue to debate whether decoupling is possible. They should get out of the ivory tower and speak to more executives and labour leaders. As economists debate the “possible”, business is simply getting on with the new reality of a post-neoliberal world and adapting in creative and, in some cases, even growth-enhancing ways.Emerging markets in Latin America, Africa and Asia, for example, are building regional production networks for crucial goods. Ultimately, this could create more resilient trade pathways and new development models that aren’t entirely pinned to exporting cheap goods to a handful of rich nations across long transport routes that are becoming more expensive and politically contentious.Nearly everywhere, decentralised technologies and big data are allowing more “local for local” production, something that may also end up being good for the planet. Additive manufacturing is another big topic on the Davos agenda. 3D printed homes, for example, are springing up not only as a quick housing solution in disaster zones, but in rich countries like the US as a possible solution to rent inflation.In short, the post-neoliberal world isn’t all bad or all good — it’s just different. And crucially, it’s more of a reflection of realities on the ground. One of the great myths of laissez-faire trade is that politics and cultural values didn’t matter — if two countries could trade together, both would always be richer and better off, full stop. That’s the classic Ricardian trope, but even Ricardo himself didn’t fully believe it.Not only did he not imagine the technology that would allow for the outsourcing of entire production chains (rather than raw goods for finished products, which was the norm in 1817), he believed that “most men of property [will be] satisfied with a low rate of profits in their own country, rather than seek[ing] a more advantageous employment for their wealth in foreign nations.” Clearly, he’d never been to Davos.Nationalism isn’t to be encouraged. But questioning the conventional economic wisdom is. Consider the debate around manufacturing, another WEF topic. Many economists point to the fact that manufacturing represents a small and declining proportion of jobs in rich countries and in many poor ones, too. Countries should cast off factory work as they move up the food chain to services. But as anyone in the business world knows, these sectors have always been more intermingled than jobs data would indicate, and they are becoming much more so in our era.Research shows that knowledge-intensive businesses of all sorts tend to spring up more frequently in manufacturing hubs, spurring higher levels of growth in countries that create them. The continuing shift to our next stage of digital development, from the consumer internet to the “internet of things”, will put this trend on steroids. As data lives in manufactured products, there really is no line between factory work and knowledge work any more. Consider something as simple as an automobile tyre. As vehicles become autonomous, the tyre becomes the key information gathering node between the road and the car, monitoring conditions, tracking movement and so on. Companies such as Bridgestone, Pirelli, Michelin and others are incorporating sensors in products to collect this valuable data, which will be analysed by any number of other companies and industries, creating entirely new businesses and jobs we can’t even imagine yet. Who owns this data? Most likely, the companies and countries making the products.This isn’t an argument for tariffs or import substitution or even for industrial policy (though I’m not against the latter). Rather it is a plea for a bit more inductive reasoning when thinking about our emerging economic order. Too often, we tend to fall back on the old thinking because there isn’t yet a unified field theory for our new world. That doesn’t make outdated models work any better.Globalisation isn’t inevitable, despite what we were told by politicians in the 1990s. In order for any political economy to work, it has to serve domestic needs. The shifts that we are going through today come with both challenges and opportunities. In that sense, deglobalisation is not so very different than what came [email protected] More

Has inflation slowed US consumer spending?EY-Parthenon chief economist Gregory Daco says the US has already reached peak inflation, but the big factor for consumers will be the pace at which price growth cools, and what level it eventually reaches. The core personal consumption expenditures price index, a measure that strips out food and energy prices, has begun receding. Core PCE rose 5.2 per cent year over year in March, compared with a 5.3 per cent increase in February. Economists expect a further decline to a 4.9 per cent rate of increase in the April data, which are published on Friday. PCE is released after other inflation reports, including the consumer price index, but as the Federal Reserve’s preferred inflation measure, it is closely watched by investors. Oren Klachkin, lead US economist at Oxford Economics, will also be monitoring the consumer spending figures that are included in the PCE data to see if there is a shift from goods to services. “We actually want to see a rotation towards services,” he said. “It means that we’re returning towards normal after two-plus years of dealing with Covid.”Daco said a pullback in goods consumption was expected, but that a decline in services spending, particularly in leisure categories, would indicate that the economy was more fragile than expected.Recent quarterly earnings show that spending on goods may be slowing. Walmart cut its full-year profit forecast last Tuesday and Target reported a 52 per cent decline in net income a day later. Jaren KerrWill Turkey’s central bank act to steady the lira?The Turkish lira has returned to choppy waters in recent weeks, losing 16 per cent of its value against the dollar this year amid soaring inflation and a challenging global economic outlook. But that does not mean that Turkey’s central bank will take action. Members of its monetary policy committee will almost certainly opt to keep the policy rate on hold at 14 per cent on Thursday.The bank — which is effectively run by president Recep Tayyip Erdoğan, who holds unconventional views on monetary policy — has sat on the sidelines even as inflation has reached 14 times its official target of 5 per cent, hitting almost 70 per cent last month.As deeply negative real interest rates have put pressure on the currency, authorities have sought to hold the lira steady using an array of unconventional measures. They include a government-backed saving scheme that seeks to tempt Turkish residents into holding lira by promising to protect them from exchange rate losses. The central bank has also increasingly put pressure on corporations not to buy foreign currency — and urged commercial banks not to sell it to them.But analysts warn that these tactics may be reaching their limits. Per Hammarlund, chief emerging markets strategist at the Swedish bank SEB, said that a “perfect storm” was building for the lira with rising inflation, a growing current account deficit, high global energy prices and the risk of a slump in vital export revenues as growth slows worldwide. “A rate hike and a credible commitment to bring down inflation would stabilise the lira more permanently,” he wrote in a recent note to clients. “But with President Erdoğan staunchly opposed to hikes, it will be a last resort only.” Laura Pitel How is eurozone business activity holding up?Business activity has held up in the eurozone so far this year. But economists worry this could soon change if the fallout from Russia’s invasion of Ukraine and China’s strict coronavirus lockdowns take a heavier toll on output.A key test will come on Tuesday from S&P Global’s latest survey of purchasing managers, which will be watched by European Central Bank policymakers as they weigh how soon to stop buying more bonds and start raising interest rates.The survey is expected to show eurozone business activity has been stable in May from the previous month, with the composite PMI reading slipping 0.5 points to 55.3, according to a poll of economists by Reuters. Services companies are expected to report a slight boost to their activity from the lifting of coronavirus restrictions, offsetting a slowdown in growth at manufacturers due to the fallout from the war in Ukraine and supply chain disruptions. Annalisa Piazza, an analyst at MFS Investment Management, said China’s coronavirus lockdowns would hit eurozone industry in two ways. “It will cause more supply constraints and this will further slow down production, primarily of intermediate industrial goods,” said Piazza. “But for eurozone exports, there is also sure to be an immediate impact.”German manufacturers are particularly vulnerable to such headwinds. Investors will learn more about their outlook on Monday when the Ifo Institute in Munich publishes its latest business survey results, which are expected to show a dip in sentiment due to expectations dropping to a two-year low. Martin Arnold More