Asia facing 'stagflationary outlook' amid Ukraine war: IMF

WASHINGTON - Asian nations, like the rest of the world, are being battered by countervailing forces such as the war in Ukraine that are raising prices while holding back growth, the IMF said.

"The region faces a stagflationary outlook, with growth being lower than previously expected, and inflation being higher," said Anne-Marie Gulde-Wolf, acting director of the IMF's Asia and Pacific Department.

The regional outlook, which follows the World Economic Outlook released last week, shows the growth forecast for Asia was cut to 4.9 percent, impacted by the slowdown in China, which is having ripple effects on other closely-linked economies.

Inflation is now expected to rise 3.2 percent this year, a full point higher than expected in January, she said.

"Despite the downgrade, Asia remains the world's most dynamic region, and an important source of global growth," Gulde-Wolf said in remarks prepared for delivery to a press briefing.

But the Russian invasion of Ukraine and Western sanctions on Moscow have driven up food and fuel prices worldwide, while major central banks are raising interest rates to combat inflation, which will pressure countries with high debt loads.

A larger-than-expected slowdown in China due to prolonged or more widespread Covid-19 lockdowns or a longer-than-expected slump in the property market presents "a significant risk for the region."

"This a challenging time for policymakers as they try to address pressures on growth and tackle rising inflation," the IMF official said, noting that the headwinds will exacerbate the damage from the Covid-19 pandemic.

Outlooks vary within the region, depending on countries' reliance on imported energy and links to China, with growth in Pacific island nations slowing sharply, while Australia saw a slight upgrade, she said.

Governments will need strong responses, starting with targeted aid to poor families most harmed by higher prices, the IMF said.

Many will need to tighten monetary policy amid rising inflation, while those with high debt loads may have to cut spending and even seek debt relief, the fund economists said in a blog post.

"Slower growth and rising prices, coupled with the challenges of war, infection and tightening financial conditions, will exacerbate the difficult policy trade-off between supporting recovery and containing inflation and debt," the blog said.

Agence France-Presse

Asian stocks hit three-month highs, oil slides

SYDNEY - Fresh signs of global economic stability drove Asian stocks to a three-month high on Tuesday as investors turned their attention to more data out of China, while oil nursed heavy losses as fears of an imminent U.S. military strike against Syria receded even further.



Russia on Monday proposed to work with Damascus to put its chemical weapons under international control, a move that President Barack Obama said could be "potentially positive".



Benchmark Brent oil prices fell 0.8 percent to $112.85 in early Asian trade, extending Monday's 2.1 percent slide. Lower oil prices are usually a positive development for Asia, a region that relies heavily on imports for its energy needs.



MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, extending Monday's 1.3 percent gain to reach highs not seen since early June.



Tokyo's Nikkei climbed 0.8 percent, adding to Monday's 2.5 percent rally on euphoria that Tokyo has won the rights to host the 2020 Olympic Games.



China's trade and inflation data this week have pleased investors and the market is hopeful that industrial output and retail sales will provide more evidence the world's second biggest economy has averted a sharp slowdown.



A recent run of upbeat factory activity data from China, Europe and the United States further underlined that the global economy was on a firmer footing.



In a slight twist to this narrative, however, market sentiment, particularly for emerging markets, found further support after disappointing U.S. jobs data on Friday raised doubts about whether the Federal Reserve can scale back stimulus in any significant way next week.



A Reuters poll on Monday showed economists generally expect the Fed to announce a reduction in its massive $85 billion monthly bond-buying program by a very modest $10 billion.



Such an outcome should be good news for emerging markets, which have suffered from an outflow of funds as investors positioned for a world with less easy money from major central banks.



On Monday, Thai stocks boasted gains of 3.6 percent, while Indonesia rose 2.9 percent. That spread to Latin American markets overnight.



The MSCI emerging equities index advanced 1.9 percent to a three-month high on Monday and has rallied more than 4 percent in the last four trading sessions.



"There is no denying that the market backdrop for now is more supportive, especially if you also consider the strong data coming from China. But I am afraid what we are currently observing is a just a short-term bounce," said Benoit Anne, strategist at Societe Generale.



"I don't buy the argument that the global emerging market correction is over. Outflows have been robust over the past few weeks and are showing no signs of reversal. But at the same time, positioning in local debt markets remains rather elevated. This to me suggests that there is more pain to come."



The disappointing U.S. jobs data has cast a long shadow on the dollar, which fell further on Monday as investors continued to cut bullish positions.



Adding to the uncertainty, San Francisco Federal Reserve Bank President John Williams said on Monday he hasn't made up his mind yet over whether to support a reduction in the Fed bond purchases.



The dollar wallowed at a 1-1/2 week low against a basket of major currencies, having fallen 1 percent since Friday.



That helped the euro recover from last week's selloff sparked by dovish comments from the European Central Bank. The common currency last traded at $1.3254, having hit a 1-1/2 week high of $1.3281 on Monday.



The greenback fared better against the yen, which sagged on Monday as the Nikkei rallied. The Japanese currency has tended to move inversely to the Nikkei this year.



The dollar fetched 99.68 yen, down from a pre-jobs data high of 100.24 on Friday.



Analysts at BNP Paribas said it was too early to turn bearish on the dollar. "This is more of a temporary setback than a game changer for USD bulls," they wrote in a note.



They cited Fed tapering risk, the chance of U.S. data surprising to the upside and the possibility of Larry Summers being nominated for the Fed Chairman position as dollar positive factors.



Copper, benefiting from growing optimism over China, was steady at $7,205 a ton, having climbed from last week's trough of $7,082.

source: interaksyon.com

Job-creating foreign investments up more than a tenth in 1H

Foreigners pulled out more money than they invested in job-generating businesses at the close of the first half of the year, data released today by the Bangko Sentral ng Pilipinas (BSP) showed.

In a report, the BSP said the country suffered from $61 million in net outflows of foreign direct investments (FDI) last June, a reversal of the $307 million net inflows in the same month last year.

Despite the net pullout of investments last June, the country still enjoyed net inflows of $2.2 billion in the first six months of the year. This was 10.9 percent more than the nearly $2 billion in net inflows in the same six-month period last year.

In June alone, all categories of FDI registered weaker growth, if not contracted altogether. Equity capital reversed to net outflows of $193 million from last year's net inflows of $78 million.


Reinvested earnings fell sharply from $123 million in June last year to $59 million in the same month this year. Likewise, loans that foreign companies granted their local subsidiaries or affiliates fell from $106 million in 2012 to $72 million this year.

The government has been counting on the country's credit rating upgrade to fuel inflows of brick-and-mortar investments. Two of the world's three major rating firms lifted the Philippines to investment grade.

Fitch was the first to upgrade the Philippines, followed by Standard and Poor's, leaving Moody's as the only rating firm that has yet to deliver an increase in the country's debt score. Investment grade confers lower borrowing costs for a country, thus leaving it more resources to finance economic growth.

source: interaksyon.com

Burberry warning sends shiver through luxury sector

LONDON - British fashion brand Burberry issued a profit warning on Tuesday, the clearest sign yet that slowing economic growth in China and Europe's debt crisis are bringing a boom in demand for luxury clothes and accessories to a halt.

The company, famous for its raincoats lined with a distinctive camel, red and black check pattern, said it expected underlying full-year profit to be around the lower end of market forecasts.

That sent its shares down 19 percent and dragged down rivals including LVMH, the world's largest luxury goods group.

China has been one of the main drivers of a boom in luxury brands, with consumers eager to buy designer labels, including Burberry's raincoats and other high-end fashions.

But luxury goods firms' shares have wobbled in the past few months over worries about Europe's sovereign debt crisis and slowing growth in China and other emerging markets, where demand for designer brands has managed to offset weaker trends in the United States and Europe.

Morgan Stanley analysts said in a note to clients on Tuesday that Burberry's statement was the first major disappointment for European luxury companies.

Shares in France's LVMH and PPR were both down 4 percent, while Switzerland's Richemont was down 3 percent.

Burberry said comparable store sales didn't grow in the 10 weeks to September 8, the bulk of its financial second quarter, compared with a year earlier. Total sales rose 6 percent, underpinned entirely by new store openings.

That represented a marked slowdown from first-quarter retail revenue growth of 14 percent and comparable store sales up 6 percent.

The company reported a fall in first-quarter sales growth in July, as China slowed.

"Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability," Chief Executive Angela Ahrendts said on Tuesday.

Analysts had expected Burberry to post pretax profit for the year to March 2013 of between 407 and 451 million pounds ($652-$722 million), with a consensus of 433.21 million, according to a Reuters poll of 18 analysts.

"Burberry's latest results show that even the top end of the market isn't functioning at full capacity in the current economic climate," said Jaana Jatyri, CEO of fashion forecasting company, Trendstop.com.

"The global economic crisis is dragging on and the longer it drags on the less confident even wealthier individuals become. Unfortunately, people lacking confidence do not shop at Burberry."

source: interaksyon.com

Eurozone headed back towards recession

BRUSSELS - The eurozone veered back towards recession with the latest growth figures out on Tuesday showing its economy shrinking by 0.2 percent and analysts warning of falling economic output right through 2013.

Germany steered clear of the worst of the debt crisis to post better-than-expected growth of 0.3 percent in the period from April to June, and France held on for zero growth, but the experts saw precious little good news going forward.

"The big picture is that the economic growth required to bring the region's debt crisis to an end is still nowhere in sight," said London-based Jonathan Loynes of Capital Economics.

"The slowdown has spread from the periphery into the core," said Tom Rogers, an analyst with Ernst & Young in London, one of many analysts to highlight a growing "north-south divide."

"Positive readings in Germany and the Netherlands (0.2 percent) are to be welcomed, but with conditions in the rest of Europe deteriorating further, and export markets farther afield also cooling, it is looking increasingly likely that output in the core economies will contract during the second half of the year," Rogers added.

Italy's economy lost 0.7 percent during the quarter and Spain 0.4 percent, with the economic implosion in Greece continuing unabated -- a 6.2 percent contraction after a 6.5 percent contraction in the first quarter of 2012.

These were to be expected, but, said Howard Archer of IHS Global Insight, it was "notable and worrying that GDP also contracted in Belgium and Finland," by 0.6 percent and 1.0 percent respectively.

Tipping an overall GDP contraction for the eurozone in 2012 of 0.5 percent, he said these countries "are being dragged down by the problems of Greece, Spain, Italy and Portugal."

He said IHS forecasts thereafter "are based on the assumption that Greece leaves the eurozone around mid-2013.

"We expect a strong policy response to limit the fall-out but modest eurozone recession is still expected as a consequence in the second half of 2013," Archer added, tipping a 0.2 percent contraction for next year too.

A recession is commonly defined as two consecutive quarters of contracting activity. The eurozone posted flat growth in the first quarter of this year.

The flash estimates from the EU also show how badly Europe now lags behind its main economic and trade partners, with comparative Eurostat figures saying GDP rose by 2.2 percent quarter-on-quarter in the United States and 3.6 percent in Japan.

"Only once the Eurocrisis is back under control can a rebound in investment lead to a return to trend growth in core Europe," said Christian Schulz of Berenberg in a note issued in London.

He highlighted France as a case apart between Germany and similarly-structured neighbouring economies such as Austria that are broadly holding on, and the tumbling economies of the south.

"In terms of economic confidence, it remains firmly part of core Europe, but it is losing competitiveness ... France has to bring down its excessive public deficit eventually," he underlined.

Schulz noted France is continuing to lose competitiveness to southern eurozone countries going through difficult adjustments, with imports outpacing exports and taking the trade deficit to record highs.

French Finance Minister Pierre Moscovici, whose Socialist government has to cut its budget deficit from around 4.5 percent of GDP this year to the EU limit of 3.0 percent by the end of 2013, called the result "very weak" but held to the government's forecast for 0.3 percent growth in 2012.

Germany's economy grew fractionally faster than the 0.2 percent forecast by analysts, but slower than the 0.5 percent seen in the first quarter.

"Positive impulses came from both consumer spending and from net foreign trade," national statistics office Destatis said.

Not all experts were gloomy for Germany's prospects, Newedge Strategy analyst Annalisa Piazza stating that "the German economy remains relatively resilient and the expected effects of the eurozone debt crisis remained limited."

source: interaksyon.com

Improving Economy

MANILA, Philippines — The country’s economic growth will likely be accelerated by increased public spending, investment, and private consumption over the next two years, says the Asian Development Bank (ADB).

A bright forecast that we should work at and realize.

***

However, long-standing structural weaknesses remain an obstacle to realizing the government’s 7-8% growth target, the ADB points out.

Let’s heed the warning of ADB: Ay, may Dapat pang Baguhin!

***

ADB’s Asian Development Outlook (ADO) forecasts Gross Domestic Product (GDP) growth for the Philippines to recover to 4.8% in 2012 and 5.0% in 2013, from only 3.7% in 2011.

Up, up, from awry.

***

“Remittance and lower inflation will sustain private consumption, and strong business sentiment will continue to support private investment… However, issues like poor infrastructure and weak governance must be tackled if the country’s economic gain are to benefit all,” says the ADB country director.

Action, reforms, and growth for all.

***

The Philippine economy likely grew faster this first quarter than the 3.7 percent recorded in the fourth quarter of last year, says Socio-Economic Planning Secretary Cayetano Paderanga.

Internal forecast is also favorable.

***

“Infrastructure spending is all over. Business optimism is high and investor confidence has improved,” Paderanga adds.

Yes to more public spending, business optimism, and confidence.

***

The Philippine government needs to show evidence of sustained reforms to secure investment grade, adds Fitch Ratings.

Okay, let’s improve our “structural factors” and raise our ratings.

***

Finance Sec. Cesar Purisima assures that the country will move toward an investment upgrade through reforms such as sustained improvement in the government’s debt portfolio through longer maturities and more local fund sourcing.

Yes to reforms and upgrade!

***

Meanwhile, the country’s export earnings post a 14.3 percent growth in February this year to $4.43 billion, from the $3.86 billion recorded in February of 2011, reports the National Statistics Office (NSO).

Yes to improving exports statistics. And sell “made in the Philippines” better!

article source: mb.com.ph

IMF: Europe crisis could halve China's growth

WASHINGTON — An escalation of Europe's debt crisis could slash China's economic growth in half this year, the International Monetary Fund said Monday, urging Beijing to prepare stimulus measures in response.

The IMF, in an economic outlook report on the world's second-largest economy, highlighted China's vulnerability to global demand.

"The global economy is at a precarious stage and downside risks have risen sharply," the IMF said.

"The most salient risk is from an intensification of feedback loops between sovereign and bank funding pressures in the euro area, resulting in more protracted bank deleveraging and sizable contractions in credit and output in both Europe and elsewhere."

The IMF outlined the negative impact if the eurozone crisis tipped Europe into a deep recession, dragging China's growth lower mainly due to shocks through trade.

In that "downside scenario" China's growth would fall by around 4.0 percentage points this year from the 8.2 percent rate the IMF projected in January, the Washington-based institution said.

In that case, "China should respond with a significant fiscal package."

"The weak external outlook underscores the importance of accelerating the transformation of China's economy to reduce its vulnerability to the vagaries of global demand."

The IMF forecast last month that its "downside scenario" would shave 1.75 percentage points off 2012 global growth, currently projected at 3.3 percent. — Agence France-Presse


source: gmanetwork.com