Economy

HAVANA (Reuters) – Cuba´s ailing economy has begun to recover in some sectors after two years of pandemic-induced contraction but soaring global prices for food and fuel require “audacious” measures to tame inflation, economy minister Alejandro Gil told Cuban lawmakers on Saturday.Gil said Cuba saw a 38% increase in exports in the first quarter, boosted by the rising price of nickel, a top mineral export. He said inflation had also slowed despite upward pressure on the price of imports.”We are beginning to see a clear and gradual recovery,” Gil said.But the price Cuba paid for imported goods jumped by nearly $700 million in the first quarter, outpacing the country´s modest gains in exports, a predicament Gil attributed to “imported inflation” driven by fast-rising prices for such products as fuel, corn for feeding livestock and wheat. U.S. sanctions and soaring food and fuel prices, in part due to the Russian invasion of Ukraine, have put Cuba´s tepid recovery at risk and threaten to worsen shortages already forcing citizens to line up for food, medicine and other basic goods. {nL2N2W20F1}Tourism, a top source of the foreign exchange necessary to pay for pricier imports, has also lagged well behind government targets, complicating recovery. Gil did not provide figures for overall gross domestic product nor did he address how first-quarter results contributed to meeting the government´s target of 4% growth in 2022.A major sticking point, Gil said, continues to be Cuba´s unofficial exchange rate, which has ballooned to five times the government rate of 24-1 in recent months, slashing buying power for the average Cuban.To combat this, Gil said Cuba will begin selling foreign currency at a rate between the official and black market rates, but limit those deals to certain state-run and private businesses in a bid to boost output of high-demand products.The economy minister said the more favorable exchange would underpin “production that will later be sold to the population in national currency.”Gil said citizens seeking to trade pesos for dollars would not be able to take part in the new exchange program, but that the cash-strapped government was working toward that goal.“These are bold, innovative measures. There are no magic … solutions that can solve all the problems at once,” Gil said. More

KABUL (Reuters) – Afghanistan faces a budget deficit of 44 billion Afghanis ($501 million) this financial year, the country’s Taliban authorities said on Saturday without clarifying how the gap between expected revenues and planned spending will be met.Announcing the first annual national budget since the Taliban took over the war-torn country in August last year, Deputy Prime Minister Abdul Salam Hanafi said the government foresaw spending of 231.4 billion Afghanis and domestic revenue of 186.7 billion.”The revenues are collections from departments related to customs, ministries and mines,” spokesman for the Finance Ministry Ahmad Wali Haqmal said. Since the 2001 U.S.-led invasion of Afghanistan, successive Western-backed governments relied mostly on foreign aid. In August 2021, foreign forces withdrew from Afghanistan, leading to the collapse of the government and a Taliban takeover.The world is yet to officially recognise the Taliban government. The country is dealing with rising security issues and an economic meltdown, while aid agencies figure out how to help 50 million Afghans without giving the Taliban direct access to funds. Hanafi said the budget for the current financial year, that runs to next February, had been approved by the council of ministries and confirmed by the Taliban’s supreme leader Haibatullah Akhunzada, and would use local funds only.Development works would take up 27.9 billion Afghanis, he said, but did not provide a breakdown of spending on areas such as defence.”We have paid attention to education, technical education, and higher education and our all focus is on how to pave the way education for everyone,” Hanafi said.Taliban authorities are yet to allow the restarting of older girls’ education across the country after committing to a start date earlier this year. ($1 = 87.7500 afghanis) More

German foreign minister Annalena Baerbock said the G7 group of industrialised nations was urgently seeking alternative routes for the export of Ukrainian grain as Russia’s war against its western neighbour raised the risk of a global “hunger crisis”.Speaking at the conclusion of a three-day meeting of G7 foreign ministers in Germany, Baerbock said some 25mn tonnes of grain were stuck in Ukrainian ports that were being blockaded by Russian forces — “grain that the world urgently needs”.“Every tonne we can get out will help a bit to get to grips with this hunger crisis,” she said. “In the situation we’re in, every week counts.” Wheat prices have been soaring in recent weeks over supply concerns caused by the Ukraine war, as well as a number of droughts around the world. The US Department of Agriculture forecast that global supplies for the coming crop year would fall for the first time in four years.Worries about the supply situation deepened on Saturday when India announced it was banning wheat exports, a move that is likely to push up food prices and fuel hunger in poor countries that rely on imports of Indian grain. The government in New Delhi said the ban was designed to “manage the overall food security of the country”.The issue of food emerged as one of the key issues in the G7 ministers’ weekend deliberations. Their final communique said Russia’s war had “generated one of the most severe food and energy crises in recent history, which now threatens those most vulnerable across the globe”.It said the G7 was “determined to accelerate a co-ordinated multilateral response to preserve global food security and stand by our most vulnerable partners in this respect”. Baerbock said the easiest way to resolve the food crisis would be for Russia to stop its combat operations and allow grain out of Ukrainian ports, a move that would help to “normalise global food prices”. But she said Russian president Vladimir Putin showed no inclination to do that. Instead, western governments were looking at alternatives to the sea route. She said some 5-6mn tonnes of grain per month are normally exported via Ukraine’s ports and the G7 was “analysing different rail routes that will allow us to get the grain out as soon as possible”. So far, she said, the Ukrainians had succeeded in transporting only a “fraction” of their grain harvest by rail, via Romania. “But the bottleneck there is due to the fact that Ukraine has a different track gauge [to Romania],” she said. “That’s the same for other connections too, for example, with Poland — freight cars can’t just pass through.”She said the G7 ministers had also discussed using Baltic ports to export grain. “But you have to reach them first”. “There won’t be a perfect solution so long as the [Russian] bombardments are continuing,” she said. In their communique, the G7 ministers expressed “deep concern” at the worsening state of food insecurity and malnutrition across the world, which had been exacerbated by the Covid-19 pandemic and the Russian war in Ukraine. “Food prices and costs for humanitarian agencies to deliver assistance to those in greatest need are both rising, at a time when 45mn people are already one step away from famine,” it said. More

COLOMBO (Reuters) -Sri Lanka lifted a nationwide curfew for 12 hours on Saturday, further easing tight curbs as new Prime Minister Ranil Wickremesinghe made first his cabinet appointments after clashes between pro- and anti-government groups killed nine people.More than a month of predominantly peaceful protests against the government turned violent this week after supporters of former Prime Minister Mahinda Rajapaksa stormed an anti-government protest camp in the commercial capital Colombo, burning tents and clashing with protesters and police. The initial violence and reprisals against government figures also left more than 300 injured.Hit hard by the pandemic, rising oil prices and tax cuts by the populist government, Sri Lanka is in the throes of its worst economic crisis since independence from Great Britain in 1948.Useable foreign reserves have dwindled, and rampant inflation and shortages of fuel have brought thousands onto the streets in protest. The government lifted the curfew from 6 a.m. (0030 GMT) on Saturday until 6 p.m. A 24-hour curfew imposed on Monday had been lifted for a few hours on Thursday and Friday to allow purchase of essential supplies.Rajapaksa stepped down after violence flared on Monday, leaving his younger brother Gotabaya Rajapaksa to rule on as president. Wickremesinghe, a five-time prime minister, was appointed to another term late on Thursday. He appointed four ministers from the Rajapaksas’ Sri Lanka Podujana Peramuna (SLPP), a decision unlikely to satisfy the protesters demanding the removal of the party from power. The appointments, announced by the president’s office, include G.L. Pereis, the SLPP chairman who had held the post before resigning on Monday.Wickremesinghe is the sole lawmaker from his United National Party to hold a seat in parliament, and is reliant on other parties to form a coalition government. The SLPP has pledged to support him. The main opposition has ruled out supporting him, but several smaller parties have said they would back policies by the new prime minister to stabilise the economy. More

Before Russia’s invasion of Ukraine, the Azovstal steelworks in Mariupol was a major exporter, its steel used in landmark buildings such as the Shard in London. Today, the vast industrial complex is a symbol of Ukraine’s dogged resistance, bombarded by Russia as the last part of the city still in the hands of Ukrainian fighters.While Azovstal remains under intense assault, its owner Metinvest, the country’s largest steel producer, has managed to resume production elsewhere. These are the first steps towards restarting the country’s iron and steel industry, which — including supply-chain accounts — makes up nearly 10 per cent of gross domestic product and employs half a million people.ArcelorMittal, the world’s second-biggest steel producer, which owns a large plant at Kryvyi Rih in the south, has also been able to restart work after the industry all but ground to a halt when the invasion began at the end of February.Volumes are much lower than they were, however, and while some exports have restarted, there are big logistical challenges, from the disruption to ports to the Russian missile attacks on the country’s railway network. The loss of supplies has been felt all over Europe. Russia and Ukraine are among the world’s biggest steel exporters. Before the war, the two together accounted for about 20 per cent of EU imports of finished steel products, according to industry trade body Eurofer. A worker processes liquid iron in a steel foundry at ArcelorMittal’s Kryvyi Rih steelworks in Ukraine © Ueslei Marcelino/ReutersMany European steel producers relied on Ukraine for raw materials such as metallurgic coal and iron ore. Ferrexpo, the London-listed Ukrainian miner, is a major exporter of iron ore. Other manufacturing companies imported slab, semi-finished flat chunks of steel, as well as rebar, rods used to reinforce concrete in construction projects.Russia’s invasion initially disrupted supplies and forced customers to source products from elsewhere. Yuriy Ryzhenkov, Metinvest’s chief executive, said the company typically exported about 50 per cent of its products to the EU and the UK. “It is a significant problem, especially for countries like Italy and the UK. [Many] of their supplies of semi-finished products were coming from Ukraine.”Italy’s Marcegaglia, one of Europe’s largest steel processing companies and a longstanding Metinvest customer, is among those that has had to scramble for alternative supplies. The company imported on average between 60-70 per cent of its slab from Ukraine.“A situation of almost panic was created [in the industry],” said chief executive Antonio Marcegaglia. “Many raw materials became difficult to find.” Despite the initial concerns over supplies, the company was able to keep production going at all of its plants, finding alternative sources in Asia, Japan and Australia.

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Other companies found new suppliers too, including in Turkey. But the added cost has been considerable because prices soared after Russia’s invasion. “The problem is the knock-on effect, with prices being pushed up,” said one steel executive in the UK. In parts of Europe, hot-rolled coil, a widely traded commodity used in manufacturing that is often seen as a benchmark for steel prices, jumped from €950 a tonne just before the invasion to more than €1,400 in April, according to price reporting agency Argus Media. It has since fallen back to trade at just over €1,200 at the start of May. “The immediate response to the invasion was a precipitous run-up in prices. People were very concerned about supply,” said Colin Richardson, head of steel at Argus.But he added that, after that: “The market started to slip quite quickly because people panicked and bought an awful lot of material. The supply disruption has not been quite as dramatic as people anticipated.” If initial concerns over supplies have abated as companies including Metinvest and Ferrexpo have managed to keep some exports flowing and customers have found alternative supplies, worries about soaring input prices — for raw materials and energy — have intensified. Eurofer warned this month that steel consumption in Europe could shrink by almost 2 per cent this year as a result of soaring energy prices, ongoing disruptions to supply chains and the shock of the war in Ukraine. A market contraction — which would be the third in four years — looks likely, it said. Despite the disruption from the war, the impact on European industry has been cushioned by relatively high stock levels of steel coming out of the pandemic, said Karl Tachelet, deputy director-general at Eurofer. Some buyers have been able to sit out the current crisis. Coils of cold-rolled steel at ThyssenKrupp’s plant in Duisburg, Germany © Ina Fassbender/AFP/Getty ImagesRepercussions from the war, however, had “manifested [themselves] in other parameters — a very sharp but temporary increase in prices”, said Tachelet. “Also, raw material prices and energy prices have exploded. These are shocks and they create immediate imbalances.” Cost inflation was the biggest worry right now, he added.It is a view shared by ArcelorMittal, which said this month that it expected steel consumption in Europe to decline by 2 to 4 per cent this year because of rising inflation, compared with its previous forecast of zero to 2 per cent growth. Arcelor chief financial officer Genuino Christino said there had been some “tightness on the supply side which has created some difficulties for customers to source [materials]”. He added he thought this would be temporary but that it was “fair to expect there will be some reduction in demand”.The European Commission and the US have both proposed suspending import duties on steel from Ukraine for one year but the big question is whether the country can keep producing — and exporting. “It all depends on the state of the railways,” said the executive of one European steel company that sources iron ore from Ukraine.“We do have alternatives for iron ore and coal. Poland is still a big producer of coal. We can get iron ore from Australia, Brazil. But our priority, as long as it works, is to get our raw materials from Ukraine,” he added, given its proximity. Metinvest’s Ryzhenkov said the company was working with Ukraine’s government to open up new export routes to Europe. “Yes, it’s difficult,” he admitted. While some routes are easier to plan, others require investment in new track and loading terminals. The company, he added, had managed to ship some materials to its facility in Bulgaria, and to customers in Romania and Hungary. It recently completed its first shipment since the war — of iron ore, bound for Algeria — through the Romanian Black Sea port of Constanța. Despite the crisis, Ryzhenkov said he was confident the company would be able to recover. It has also refocused some of its operations in Ukraine to make steel plates for bulletproof vests for the military, as well as anti-tank traps to tackle Russian forces. The company, he stressed, was still “operating and functioning” and able to service interest payments on its debts. Its assets in Europe and the US, which had previously been integrated into its operations, are also gradually adjusting as standalone businesses. Its steel rolling facilities in Europe have started procuring slabs from third parties to replace shipments from Ukraine.Rating agency Fitch said this month that the company should be able to service payments on a $176mn bond due in April 2023 from “existing cash and incremental cash flow” provided there are no material adverse changes in production and shipment levels. Ryzhenkov said: “It will take us some time to rejig the company . . . but it will be able to operate in the long run.”  More

Last month, the government announced a plan to help borrowers struggling with higher rates on mortgage loans amid the highest inflation in more than two decades. Poland has also lowered taxes on energy to tame the effects of higher prices for consumers. “(Hitting the inflation target) depends on budget policy, if we keep observing more transfers of funds for consumption, it will be very difficult. No rate hikes, even to the level of the real interest rate, will change that,” Litwiniuk told TVN24 television.Pointing to campaigning ahead of general elections planned for 2023, Litwiniuk – a university professor who was appointed to the MPC in January – said Polish inflation may remain elevated until 2025. Poland started a tightening cycle in October, later than central banks in the Czech Republic and Hungary. Its main interest rate currently stands at 5.25%, while inflation hit 12.4% year on year in April compared to the central bank’s inflation target of 2.5% with a tolerance of +/-1 percentage point. The mortgage plan would allow borrowers to make interest-free repayments on some installments and create an aid fund, worth 3.5 billion zloty from commercial banks’ profits. More

The subsidies are aimed at small firms, while graduates launching start-ups stand to get tax breaks, easier loan terms and even rent-free premises, the general office of the State Council, or cabinet, said in a notice. “China … encourages employers in COVID-hit regions to sign labour contracts with college graduates online,” it said, promising support for smaller and medium-size enterprises that hire more college graduates.China wants to promote healthy development of the online platform economy, it added, referring to a sector that is a big source of jobs, crucial at a time when a record 10.76 million are set to finish college this year.”‘Red lights’ and ‘green lights’ will be set up in order to promote healthy development of the platform economy and drive more jobs,” the notice said, referring to a system of incentives.But the worst COVID-19 outbreaks since 2020 have added to the pressures students face, and put at risk the small firms that are a mainstay of the world’s second largest economy.China’s “dynamic clearance” policy against the Omicron variant of coronavirus has led to full or partial lockdowns in dozens of cities, including a six-week halt citywide in the commercial centre of Shanghai.Small businesses, in particular, suffered in the accompanying disruptions to services and logistics. China wants to add more than 11 million urban jobs this year, rising to as many as 13 million, Premier Li Keqiang said in March. But recently he has called the employment situation “complicated and grim.”Li added, “Stabilising employment is critical to people’s livelihood, and is the key support for the economy to operate within a reasonable range,” in remarks prepared for a teleconference with provincial leaders on Saturday. China’s surveyed urban jobless rate hit its highest in nearly two years in March at 5.8%, while the rate for job seekers aged between 16 and 24 reached 16.0%, the highest since July 2021, official data showed.Policymakers should aim to get the labour market back on track to keep the economy growing, even if the annual GDP growth target could be hard to meet, analyst Julian Evans-Pritchard, of Capital Economics, said in a note on Thursday. More

Until very recently, the stock market seemed to defy gravity, producing double-digit returns that provided many Americans with financial comfort even as everything else crumbled around them.When the pandemic began upending society, the market sank for a few weeks and then recorded one of the greatest rallies in history. Stock prices rose the day rioters breached the U.S. Capitol, and they were up during the week that protests roiled many American cities after the murder of George Floyd. During this time of great upheaval, the market seemed to flash a contrarian signal that things were going to be OK — economically, at least.But real world problems have finally crashed the stock market’s party. Soaring inflation, fueled by rising food prices and the war in Ukraine, has prompted the Federal Reserve to raise interest rates significantly for the first time in many years, which has sent stock prices plummeting to earth.Stocks rose 2.4 percent on Friday, but not enough to make up for a week of declines. It was the sixth consecutive week of losses for the stock market, the first time that has happened since 2011. The S&P 500, which has been flirting with a bear market, or a drop of 20 percent, is down more than 16 percent since its peak in January. It may fall further as inflation persists and a recession looms.Even after the bleeding stops, stock market investors, who include more than 50 percent of Americans, could face years of relatively meager returns that will leave them with substantially less money to pay for their children’s college education and support themselves in retirement.This reckoning comes just months before the midterm elections, deepening problems for Democrats who are already struggling to convince voters that their party and President Joseph R. Biden are steering the economy on the right track.Former President Donald J. Trump often took credit for the stock market’s meteoric rise. Now, Mr. Biden and his party will almost certainly take some of the blame for its recent fall.In reality, the stock market is not a perfect measure of the real economy. Unemployment is low and consumer spending is still holding up, but more than a month of punishing losses can damage the country’s financial psyche.“People look at the stock market as a barometer of the economy and how they are faring financially,” said Mark Zandi, chief economist at Moody’s Analytics. “They feel good when they see green on the screen and crummy when they see red.”Years of low rates have been rocket fuel for stock prices, partly because other investments, like bonds, that are pegged to interest rates produce such minimal returns. The stock market became one of the few places where investors could make big money.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Interest Rates: As it seeks to curb inflation, the Federal Reserve began raising interest rates for the first time since 2018. Here is what the increases mean for consumers.State Intervention: As inflation stays high, lawmakers across the country are turning to tax cuts to ease the pain, but the measures could make things worse. How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.During the pandemic, rates went even lower, as policymakers sought to support businesses and consumers through the shutdowns — and it worked. Investors piled into companies’ stocks and kept them flush with capital, which allowed them to keep hiring, paying rent, ramping up production and, of course, rewarding shareholders with ample dividends and stock buybacks.But inflation, which puts a heavy burden on families trying to make ends meet, also helped kill the market’s mood. Steadily rising food costs and record high gasoline prices prompted the Fed to raise rates and try to slow the economy.The stock price of Alphabet, Google’s parent, is down about 20 percent since the start of the year.Laura Morton for The New York TimesWall Street has been expecting this moment to come for a long time. But the market’s reaction — which some refer to as a “reset” and others call a necessary “comeuppance” for stock investors — is painful nonetheless.“I don’t think people recognized how fragile of a foundation the stock market was resting on,” said Emily Bowersock Hill, founder of Bowersock Capital Partners and chairwoman of the investment committee of the Kansas Public Employees Retirement System, a pension fund with more than $20 billion.Ms. Hill said some of the declines were probably good for the market because it was clearing out the froth that created the conditions for “meme stocks”: companies with dubious business prospects like AMC Theatres, BlackBerry and Bed Bath & Beyond, whose share prices were driven up by speculators.But the downdraft has sunk the share prices of companies that represent innovation and the future, too; Amazon is down more than 30 percent since the start of the year and Alphabet, Google’s parent, is off about 20 percent, as investors rethink those companies’ real value.Virtually no stocks have been spared from losses. The market decline has “gone on and on, and it’s depressing,” Ms. Hill said.Perhaps no one understood that emotional symbolism of the market better than Mr. Trump.“The reason our stock market is so successful is because of me,” Mr. Trump said in November 2017 — one of many statements in which he boasted about rising stock prices or publicly pressured the Fed to further lower interest rates to juice the economy.Early in the pandemic, in April 2020 — with stores, offices and churches shut, children marooned at home attempting remote school, and morgues running out of space for virus victims — Mr. Trump tweeted that the United States had “the biggest Stock Market increase since 1974.”While a majority of Americans have some money invested in the stock market, it remains a rich person’s game. According to an analysis by the New York University economics Professor Edward Wolff, the top 5 percent of American wealth holders own 72 percent of all stocks.But the stock market’s symbolic value matters. “It’s the one story that makes the news every night,” said Richard Sylla, a professor emeritus of economics at New York University’s Stern School of Business.Is the market up or down? Are we winning or losing today, this week, this year, this presidency?On Friday, the University of Michigan’s consumer sentiment index fell lower than expected, a drop that some economists attribute partly to stock market losses. The index is now 13 points below the low when Covid first hit, noted Ian Shepherdson, chief U.S. economist at Pantheon Macroeconomics. Such deep pessimism “suggests that people have short memories,” Mr. Shepherdson wrote in a research note.It also suggests trouble for the Biden administration. Not only is the stock market party ending under President Biden’s watch, it could be a while before another one gets going.“Now nobody is going to be getting much richer from stocks,” one market historian predicts.Gili Benita for The New York TimesMr. Sylla, who co-wrote a book about the history of interest rates and tracked two centuries of stock market returns, correctly predicted in September 2011 that the coming decade would produce high returns.Inflation F.A.Q.Card 1 of 5What is inflation? More