Economy

How much has US economic growth slowed? The US is expected to report that economic growth slowed significantly in the first quarter, driven largely by a reversal of the previous quarter’s unexpected boom in inventory accumulation. The commerce department on Thursday is forecast to show that the US economy grew at an annualised rate of 1 per cent in the first three months of the year, according to economists surveyed by Reuters. That is down from a 6.9 per cent pace in the fourth quarter of 2021, and would mark the slowest growth since the recession induced by Covid lockdowns in 2020.As the flow of goods around the world eased late last year, businesses produced far more than they sold in the fourth quarter, driving inventories higher. That boosted gross domestic product growth for the fourth quarter of 2021 at a faster rate than had been forecast, and far faster than the 2.3 per cent growth in the third quarter.Credit Suisse analysts do not expect that phenomenon to repeat. Instead, they expect a rise in personal consumption to bring down excess inventories. The GDP growth data comes at a time of intense concern among economists and investors over high inflation and the risk that central bankers’ response to it will tip the economy in to recession. Higher commodity prices and borrowing costs are likely to hit growth in the coming months, but the effects in the first quarter may have been limited, as financial conditions remained loose and household finances were strong. Kate DuguidWhat will the Bank of Japan say on rates and the yen? The Bank of Japan will meet at a time when its policy of holding bond yields low comes under heavy pressure from global market shifts.The central bank’s long-term policy of yield curve control — buying bonds to stimulate the economy and spur inflation — has become difficult as investors dump global debt, sending yields higher elsewhere. Michael Metcalfe, head of macro strategy at State Street Global Markets said Fed Chair Jay Powell’s suggestion last week of a 0.5 percentage point interest rate rise in the US “put even more pressure on the Bank of Japan”.The gap between US and Japanese policy is also leaving a mark on Japan’s currency, which has dropped to a two-decade low. One dollar now fetches ¥129, from ¥115 at the start of March. “The currency markets will keep pushing the yen down until the BoJ makes a move,” Metcalfe added. Analysts and traders are watching for signs that authorities could make the rare move of intervening to prop the currency up.Japan’s dovish approach appears set to continue. The BoJ launched four days of unlimited bond buying last week to keep Japanese yields in check, as deputy chief cabinet secretary Seiji Kihari told Reuters, “there’s no such thing as good or bad” exchange rates. “Stability is important,” he said. Ian JohnstonHow has the eurozone economy weathered the war in Ukraine? Eurozone economic growth is expected to have weakened in the first quarter, as the war in Ukraine and high Covid-19 infections took their toll on activity. At the same time, inflation is projected to have remained in line with its record high of 7.4 per cent in March.Flash inflation data for April, due on Thursday, and growth figures for the eurozone and several member countries on Friday, will provide the most comprehensive indication so far of the impact of the war on economic activity.Economists polled by Reuters expect inflation to have edged up to 7.5 per cent in April. They also forecast GDP to have grown 0.3 per cent in the first quarter, the same pace as in the previous three months.This is despite analysts expecting the German economy to have returned to growth after contracting at the end of last year. Tempering region-wide gains, the recovery is thought to have slowed in France and reversed in Italy.Eurozone growth figures mark a notable slowdown from the 2.2 per cent annual rate seen in the third quarter, reflecting weaker momentum at the end of last year at a time of rising Covid infections and energy prices, as well as supply bottlenecks.These factors, along with the Russian invasion of Ukraine in February, also constrained economic growth in the first quarter of 2022, as Christine Lagarde, president of the European Central Bank, recently noted.Speaking last week, she said medium-term momentum could benefit from the reopening of the economy, the strengthening of the labour market and the savings accumulated during the pandemic.However, she added that “the war has led to rising uncertainty, further increases in energy costs and heightened concerns about supply bottlenecks, posing clear downside risks to economic activity”. Valentina Romei More

Wang Yiming, a member of the Monetary Policy Committee of the People’s Bank of China, told an economic forum the effective management of macroeconomic policies was critical in laying the foundation for the country to achieve the national growth target of around 5.5%.Gross domestic product rose 4.8% in the first quarter from the same period last year.Beijing should “actively and effectively” expand domestic demand, stabilise the country’s industrial supply chains and manage market expectations, Wang said.His comments come as Shanghai – China’s most populous city and most important economic hub – battles the country’s biggest COVID outbreak.Shanghai’s lockdown, which for many residents has lasted over three weeks, has fuelled frustration over access to food and medical care, lost wages, family separation and quarantine conditions.This has also dragged on the world’s second-largest economy, with factory production disrupted by snarled supply chains and difficulties faced by locked-down residents returning to work. More

But his centre-right Slovenian Democratic Party faces a strong challenge from the environmentalist Freedom Movement, which wants more investment in renewable energy and more transparency in state institutions.”Today we are voting for change,” said Milena, 58, who cast a ballot in the capital Ljubljana. “We do not want these politicians in power anymore. The last two years have been desperate in every way. We want new faces, we want normality and stability.”A poll published by Ninamedia polling agency on Friday put the Freedom Movement on 27.7% and Jansa’s SDS on 24%.Jansa, an admirer of former U.S. President Donald Trump and an ally of nationalist Hungarian Prime Minister Viktor Orban, has clashed with Brussels over media freedoms and opponents accuse him of undermining democratic standards.Jansa denies the accusations.The 63-year-old populist has campaigned on promises to improve the economy and provide energy security in the small Alpine country of about 2 million people that is a member of the European Union and the NATO military alliance.Whoever wins will have to secure coalition partners to form a new government. The two main left-leaning parties have ruled out serving in a coalition led by the SDS.Some 1.7 million people were eligible to vote from 7 a.m. (0500 GMT) and polling stations will close at 7 p.m. Exit polls are expected to be published soon afterwards.KYIV VISIT Jansa, who served as prime minister from 2004 to 2008, from 2012 to 2013 and from 2020 until now, is a staunch advocate of EU enlargement, including membership for Ukraine.He was among the first EU leaders to visit Ukraine and show solidarity with Kyiv after Russia’s invasion on Feb. 24, and has promised to reduce Slovenia’s reliance on Russian gas imports.Jansa says he has managed the economy well and hopes to benefit from measures implemented to soften the economic impact of the COVID-19 pandemic.”These elections will decide how Slovenia will develop not only for the next four years, but for the next decade,” Jansa said after casting his vote in a rural area near the industrial town of Velenje.The Freedom Movement is led by Robert Golob, a former executive of a state-owned energy company. It backs EU sanctions on Russia over the war in Ukraine but accuses Jansa of seeking to exploit the war for his own political benefit, a charge that Jansa dismisses. More

Argentina is one of the world’s top food exporters and the sector is key to Latin America’s third-largest economy. Protesters waved Argentinian flags and rode tractors onto a road in front of the Casa Rosada presidential palace in the capital. It is rare for farmers to protest in Buenos Aires, as they usually hold such demonstrations in rural areas. Fernandez has intervened in the grains and meat sector, at one point limiting how much meat producers could export in order to prioritize domestic supply.Protesters held signs reading: “We pay for roads but instead get swamps” and “lower the taxes.” They also issued their demands for a reduction in taxes in a letter to the government that was read at the protest and later provided to the media.”We have a simple demand: we are no longer willing to fund the rope that is being used to choke us,” the letter read.The protest was not organized by a specific organization.Taxes rose under former President Mauricio Macri, a conservative, and have continued to rise under Fernandez, a leftist. A 12% tax is levied on wheat and corn exports, which rises to 33% in the case of soy, flour and cooking oil exports. Argentina has battled extremely high inflation for years – it hovered around 50% in 2021 – making food policy a particularly delicate task for the government. In the past year, farmers have also protested against limits on meat exports that Fernandez eventually relaxed. More

Eyeing the prices at a Budapest market hall, retired school nurse Maria Veres said she was grateful for a big January pension bonus from Viktor Orban’s government. It encouraged her to vote to re-elect the premier this month, but the windfall is almost gone already.Hungary’s highest inflation in 15 years is cutting into her freshly padded savings but has not yet hit her confidence in Orban, who she expects can protect citizens from rising prices and other economic problems.“These price tags are horrific,” she said, looking at a dozen eggs costing about 600 forints, or just over €1.50, up one-third from a year ago. “This sort of inflation, I thought it was a thing of the past. I hope Orban defends us from this somehow.”While he is buoyed by a fourth consecutive election win that extends his tenure as the EU’s longest-serving leader, Orban — who has said he is determined “to preserve financial stability” — faces some of the biggest economic challenges of his time in office.Soaring energy costs are straining Hungary’s ability to maintain state-imposed price caps, while global disruption from Russia’s invasion of Ukraine is denting prospects for growth. Heavy pre-election spending, and a row with Brussels that is delaying more than €7bn in EU aid, is further constraining room for economic manoeuvre.The EU funds are meant to finance projects to boost Hungary’s recovery from the pandemic. Orban wants to borrow the funds in the meantime but analysts said that would increase Budapest’s debt levels and financing costs.Ahead of Hungary’s election, Viktor Orban’s government gave away about €5bn in the first quarter in family tax rebates and pension bonuses, which strained the country’s finances © Bernadett Szabo/Reuters“If we can access [recovery funds], we will have to take smaller steps toward the financial market; if not, then we will be forced to take larger ones,” Orban told journalists this month, calling the strategy “prefinancing” until the EU money arrives.Part of the squeeze on Hungary’s finances stems from Orban’s generosity in the run-up to the April 3 election. The government gave away about €5bn in the first quarter in family tax rebates and pension bonuses. It also now faces lower growth and tax receipts because of the economic disruption caused by the Ukraine war. KBC’s Hungarian economist David Nemeth said the EU funds “would go a long way to help solve the budget problems” for Orban, who could then spend more on maintaining price caps and other measures to fight inflation.Despite his need for EU cash, Orban has said he will not make concessions to improve relations with the EU. “No matter the pressure on us, we will never back down,” Orban said.Fitch Ratings said this month that Orban’s clear election victory, and Brussels’ decision to start a process to penalise alleged rule of law abuses in the country, “could signal a hardening of both sides’ stances” and threaten growth forecasts. It also warned that a deterioration in governance standards in Hungary could undermine investor confidence and affect the country’s credit rating. Budapest’s rating is now two notches into investment grade with a stable outlook from all three major rating agencies.Lower ratings would raise borrowing costs. A negative spiral of higher debt, rising debt payments and lower credit ratings is a possibility, said Peter Oszko, Hungary’s last finance minister before the Orban era, which began in 2010.“Market debt is very expensive, hurts the budget balance, the interest on it is rising, but [Orban] can tap that for a while, hoping for an agreement with the EU,” said Oszko. “Time is tight but he will try to take his time, try a few vetoes, form a few alliances.”Oszko said the government should worry most about inflation. “Orban is not afraid to levy extra taxes on lucrative business sectors or issue bonds, as long as he can avoid leaning on the voters directly,” he said. “But a sustained double-digit inflation rate hurts everyone.”Gergely Suppan, an economist at Takarekbank, said he expected Orban would halt investment or allow the budget deficit to exceed 5 per cent, compared with the EU’s usual 3 per cent limit, before he touches price caps, which keep gas bills below €100 a month for an average household, far below western Europe’s.“If market prices were introduced, most people would fail to pay their bills,” said Suppan. “Utility prices have not changed since 2014, during which time net salaries more than doubled. We could handle 10, 20 per cent, but a fivefold increase would be nonsensical.”Orban has not ruled out more taxes on sectors like finance, energy, telecommunications and retail. “Whether special taxes on multinationals or others become necessary is up to the EU,” he said. “If Europe is unable to halt the energy price increase, we will be forced to take steps in Hungary.”Peter Virovacz, an economist with ING, said a fiscal adjustment of about 1 per cent of gross domestic product could be achievable via spending cuts but greater recalibration would mean tax increases.“We wouldn’t expect measures affecting the tax burden on labour but rather some sectoral taxes [in] banking, telecommunication and/or retail,” Virovacz said. “The caveat with these could be that companies will pass on the costs to households — which would strengthen inflation further.” More

WASHINGTON (Reuters) – The International Monetary Fund said on Saturday it held “fruitful technical discussions” with Sri Lanka on its loan request, while the World Bank said it was preparing an emergency aid package for the crisis-stricken country.Sri Lanka, an island country of 22 million people, is struggling to pay for imports amid a crushing debt crisis and sharp drop in foreign exchange reserves that has fueled soaring inflation. Prolonged power cuts and shortages of fuel, food and medicines have sparked nationwide protests.Sri Lankan Finance Minister Ali Sabry has been in Washington this week talking to the IMF, the World Bank, India and others about financing help for his country, which has suspended payments on portions of its $51 billion in external debt.The World Bank’s emergency response package includes $10 million to be made immediately available for the purchase of essential medicines, funds shifted from its ongoing COVID-19 health preparedness project, a World Bank spokesperson said.The global lender, which along with the IMF held its spring meetings this week, did not provide a total value for its package, but Sabry said on Friday that about $500 million in aid was being considered.The World Bank spokesperson said the package would leverage existing bank-financed projects and repurpose funds to quickly provide medicines, meals for school children and cash transfers for poor and vulnerable households.Support to provide cooking gas, basic food supplies, seeds and fertilizers and other essentials is also under discussion, the spokesperson said, adding that the World Bank was “deeply concerned” about the situation in Sri Lanka.The IMF said in a statement on Saturday that talks between its staff focused on the need for Sri Lanka to implement “a credible and coherent strategy” to restore macroeconomic stability, and to strengthen its social safety net and protect the poor and vulnerable during the current crisis.”The IMF team welcomed the authorities’ plan to engage in a collaborative dialogue with their creditors,” IMF Sri Lanka mission chief Masahiro Nozaki said in a statement after the country took steps to explore a restructuring of some $12 billion in sovereign bondsSabry told reporters on Friday that the talks with the IMF were focused on a more traditional Extended Fund Facility program, but that $3 billion to $4 billion in bridge financing was needed while this could be finalized.The IMF has said that Sri Lanka’s debt needs to be put on a sustainable path before it could make new loans to Colombo – a process that could require lengthy negotiations with China and the country’s other creditors.Sabry said on Friday that in addition to the IMF loan and World Bank assistance, Sri Lanka is discussing with India some $1.5 billion in bridge financing to help continue essential imports, and added that he has also approached China, Japan and the Asian Development Bank for help. More

PARIS (Reuters) – President Emmanuel Macron, a former investment banker who was elected in 2017 on a promise to be neither of the left nor the right, is projected in voter surveys to win a second term against a resurgent far-right Marine Le Pen, although with a smaller margin of victory.Here are his main policy proposals:ECONOMY* Raise the minimum pension age to 65 from 62 and increase the minimum monthly pension to 1,100 euros ($1,187).* Require 15-20 hours a week of training for welfare benefit recipients* Cut taxes by 15 billion euros with half for households and the rest for businesses.* Further loosen labour market rules and reform unemployment insurance to make payments vary according to the state of the economy* Raise the threshold over which inheritance tax kicks in from 100,000 euros to 150,000 eurosEUROPE, INTERNATIONAL AFFAIRS* Make the European Union more self-sufficient in defence, agriculture, energy and strategic economic sectors* Strengthen the capacities of national European armies, increase co-ordination between them and create a “common military doctrine”* Create European industrial champions including a “European metaverse”* Reform the European electricity marketIMMIGRATION & SECURITY* Make long-term residence permits conditional on a French exam and employment* Expel foreigners deemed to be trouble-makers* Create a rapid-action force to restore order in troubled “banlieues”, economically deprived suburbs.* Broader scope for on-the-spot-fines for petty crime ENERGY* Build six new nuclear reactors and launch studies for another eight, increase solar energy capacity tenfold, build 50 wind farms at sea by mid-century* Take control of certain energy companies, suggesting that the government would revive stalled plans to buy out minority shareholders in nuclear utility EDF (EPA:EDF)* Renovate 700,000 homes a year* Leasing scheme to make electric vehicles more accessible* Put the next prime minister directly in charge of “green planning” to make France the “first great nation”. Stop using oil, coal and gas($1 = 0.9264 euros) More

“We are not going to change the goals of the program with the IMF,” Guzman told local media. The South American country’s center-left Peronist government led by President Alberto Fernandez struck a staff-level agreement with the international lender at the beginning of March to avoid a default. The deal lays out a fresh schedule of financing over a 30-month period to replace a failed $57 billion program from 2018 that the grains-producing country was unable to pay back after years of recession, spiraling inflation and capital flightHowever, Guzman cautioned without giving more details that there will be a change in emphasis to focus on the social safety net due to the fallout from the Russian invasion of Ukraine which has triggered worldwide inflation. Argentina has long suffered from extremely high inflation. However, the war has increased price surges in Argentina as well as much of Latin America. Argentina’s 2021 inflation hit above 50%. More