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

More than 200 groups urge G20 to back IMF issuance to help poor countries in pandemic

WASHINGTON - Jubilee USA Network, Oxfam and 215 other civil society groups on Wednesday urged Group of 20 finance officials to back an issuance of $3 trillion of the IMF's own currency, or Special Drawing Rights, to help countries weather the COVID-19 pandemic.

In an open letter to the International Monetary Fund and G20 finance ministers, the groups said a new allocation of SDRs would boost the reserves of all countries and avoid pushing low- and middle-income countries further into debt distress.

G20 finance ministers and central bankers will discuss a possible SDR issuance - a move akin to a central bank printing money - when they meet by video conference on Friday. Proponents note that such a move will not add cost for the IMF members.

Italy, which leads the G20 this year, is pushing for a smaller $500 billion allocation of SDRs, which can be converted to hard currency by IMF members - a move backed by France, Germany and others, but still lacking support from Washington.

The United States had opposed such a move under former President Donald Trump, but has not yet communicated a firm position on a new SDR allocation under President Joe Biden.

Treasury has declined to comment on the issue.

IMF Managing Director Kristalina Georgieva on Wednesday also called for the G20 to take strong policy action to reverse a "dangerous divergence" that she said threatened to leave most developing economies languishing for years.

In a blog ahead of Friday's meeting, Georgieva said a new SDR allocation would substantially boost countries' liquidity without increasing their debt burdens. It would also expand the capacity of donor countries to provide new resources, she said.

Religious groups have also weighed in. On Tuesday, the US Conference of Catholic Bishops and Jubilee USA Network urged President Joe Biden to back a $3 trillion allocation to help poor countries bolster US trade with the developing world.

Anti-poverty group ONE on Wednesday backed an allocation of $650 billion.

-reuters

EU leaders tell Britain to exit swiftly, market rout halts

LONDON/BRUSSELS - European leaders told Britain on Tuesday to act quickly to resolve the political and economic chaos unleashed by its vote to leave the European Union, a move the IMF said could put pressure on global growth.

Financial markets recovered slightly after the result of Thursday's referendum wiped a record $3 trillion off global shares and sterling fell to its lowest level in 31 years, but trading was volatile and policymakers said they would take all necessary measures to protect their economies.

British Finance Minister George Osborne, whose attempt to calm markets had fallen on deaf ears on Monday, said the country would have to cut spending and raise taxes to stabilize the economy after a third credit ratings agency downgraded its debt.

Firms have announced hiring freezes and possible job cuts, despite voters' hopes the economy would thrive outside the EU.

European countries are concerned about the impact of the uncertainty created by Britain's vote to leave on the 27 other EU member states. There is little idea of when, or even if, the country will formally declare it is quitting.

"The process for the United Kingdom to leave the European Union must start as soon as possible," French President Francois Hollande said. "I can't imagine any British government would not respect the choice of its own people."

European Commission President Jean-Claude Juncker sent a similar message as he prepared for talks with British Prime Minister David Cameron before an EU summit in Brussels, although he did not anticipate an immediate move.

"We cannot be embroiled in lasting uncertainty," Juncker said in a speech to the European Parliament, which he interrupted to ask British members of the assembly who campaigned to leave the EU why they were there.

Cameron, who called the referendum and tendered his resignation when it became clear he had failed to persuade Britain to stay in the EU, says he will leave it to his successor to formally declare the country's exit.

Arriving for the EU summit, he said: "I'll be explaining that Britain will be leaving the European Union but I want that process to be as constructive as possible, and I hope the outcome can be as constructive as possible.

Holding out hope of maintaining good relations with other European countries, he said Britain wanted "the closest possible relationship in terms of trade and cooperation and security. Because that is good for us and that is good for them."

His party says it aims to choose a new leader by early September. But those who campaigned for Britain's leave vote have made clear they hope to negotiate a new deal for the country with the EU before triggering the formal exit process. European leaders have said that is not an option.

"No notification, no negotiation," Juncker said.

No cherry-picking

After Cameron has addressed EU leaders on Tuesday evening, they will meet the next day to discuss Brexit without him.

Leave campaigners in Britain including Boris Johnson, a likely contender to replace Cameron, suggest the country can retain access to the European single market and curb immigration -- but those goals are mutually incompatible under EU rules.

German Chancellor Angela Merkel said Britain would not be able to "cherry-pick" parts of the EU, such as access to the single market, without accepting principles such as freedom of movement when it negotiates its exit from the bloc.

"I can only advise our British friends not to fool themselves ... in terms of the necessary decisions that need to be made in Britain," she told German parliament in Berlin.

Cameron will meet other European counterparts one-on-one before addressing them all at what promises to be a frosty dinner to discuss what has become known as Brexit.

EU lawmakers say they want him to trigger the exit process at the dinner, but an EU official said that was unrealistic given the political chaos in London, where both Cameron's party and opposition Labour lawmakers are deeply divided.

The ruling Conservative Party is split into pro- and anti-EU camps and Labour Party leader Jeremy Corbyn was facing a no confidence vote on Tuesday from parliamentarians who accuse him of lukewarm support for the EU.

The European Parliament jeered when Nigel Farage, the leader of Britain's euroskeptic UKIP party, said in a scathing speech that Europe had deceived its population and Britain would be its "best friend" if it agreed to extend a tariff-free trade deal.

But the vote has caused new friction in the EU at a time of crises over a mass influx of refugees, economic weakness and tensions on its borders with Russia.

Poland's foreign minister demanded Juncker and other leaders of the executive European Commission quit for not preserving the Union. The prime minister of Greece, enduring austerity measures in return for aid, said Europe must change direction.

Germany's financial market regulator delivered a double blow to London, saying it could not host the headquarters of a planned European stock exchange giant after Britain leaves the EU, and could not remain a center for trading in euros.

Fitch joined other credit ratings agencies in downgrading its sovereign debt on Monday, and Osborne said Britain faces tax rises and spending cuts.

"We are going to have to show the country and the world that the government can live within its means," Osborne, who campaigned to stay in the EU, told BBC radio.

Mayor seeks more autonomy for London

The 52-48 percent vote to leave has deepened multiple geographical as well as political and social divisions in the United Kingdom.

Sadiq Khan, the mayor of London, where a majority voted to stay and people fear job losses if the city loses its status as a global financial center, said access to Europe's market was key. "On behalf of all Londoners, I am demanding more autonomy for the capital - right now," he said.

Scotland, where people voted strongly to remain in Europe, is weighing a possible second referendum on leaving the United Kingdom given the vote to leave the EU.

Scottish leader Nicola Sturgeon denounced what she called a vacuum of leadership in London and said three months of political drift until a successor to Cameron is in place would further damage Britain's economy. She said she would meet EU leaders on Wednesday to discuss how Scotland could remain.

The impact looked likely to spread far beyond Britain's borders although European shares rose after a heavy sell-off, partly due to hopes of a more co-ordinated central bank response to financial market losses. Sterling also rose and Wall Street opened higher as investors hunted for bargains.

European Central Bank President Mario Draghi said central banks around the world should aim to align monetary policies to mitigate "destabilizing spillovers" between economies.

Shares in European banks have come under particular pressure, especially those based in Britain, over doubts about future market access, and Italy, with high levels of bad loans.

Brexit creates huge political uncertainty and will put pressure on global growth, the International Monetary Fund (IMF)'s Deputy Managing Director Zhu Min said on Tuesday at the World Economic Forum in Tianjin in northern China.

Asian stocks rose and Chinese stocks, protected by capital controls, hit a three-week closing high. Chinese Premier Li Keqiang sought to reassure investors by saying the country would not allow "roller-coaster" rides in capital markets.

Dutch Prime Minister Mark Rutte said England had collapsed "politically, monetarily, constitutionally and economically".

US President Barack Obama told National Public Radio there had been some hysteria "as if somehow NATO's gone, the trans-Atlantic alliance is dissolving, and every country is rushing off to its own corner. That's not what's happening."

In view of the disarray in Britain, some people questioned whether Brexit would happen at all. Nordea bank analysts gave it a likelihood of 70 percent and a senior EU official involved in the process said he thought the country may find a way never to announce its formal departure to the bloc. (Additional reporting by Alastair Macdonald, Paul Taylor, Gabriela Baczynska, Phil Blenkinsop and Jan-Robert Bartunek in Brussels; Sudip Kar-Gupta and Guy Faulconbridge in London and Alistair Scrutton in Stockholm)

source: interaksyon.com

World oil prices edge higher on OPEC remarks

LONDON - The oil market drifted higher Thursday as investors digested an upbeat demand forecast from the head of the OPEC crude producers' cartel.

Brent North Sea crude for delivery in November added seven cents to stand at $51.40 per barrel just after midday in London.

US benchmark West Texas Intermediate for delivery in November won eight cents to $47.89 per barrel compared with Wednesday's close.

"Oil prices are... recouping some of the losses they suffered yesterday," said Commerzbank analyst Carsten Fritsch.

"The optimistic remarks made about oil demand by OPEC Secretary General El-Badri still appear to be having after-effects," he added.

Traders were mulling remarks by Abdalla Salem El-Badri, secretary-general of the Organization of the Petroleum Exporting Countries, who stated that demand will rise more than projected this year.

"World oil demand is estimated to increase by 1.5 million barrels per day in 2015, higher than the initial projection," El-Badri said in a statement to the International Monetary Fund (IMF).

"In 2016, improvement in global economic activities is anticipated to support world oil demand to grow by 1.3 million barrels per day."

Prices had tumbled Wednesday after a US Department of Energy report showed commercial crude stockpiles rose more than expected in the week ending October 2, indicating softer demand in the world's top oil consuming nation.

Stockpiles rose by 3.1 million barrels, more than the market estimate of 2.25 million barrels. That brought inventories to 461.0 million barrels, more than 27 percent higher than a year ago.

US production, which had fallen by 40,000 barrels per day in the previous week, unexpectedly surged by 76,000 barrels per day, dousing hopes of an easing in the global crude oversupply.

Sanjeev Gupta, who heads the Asia Pacific oil and gas practice at professional services firm EY, added that traders were waiting for Thursday's release of minutes of the last meeting of the Federal Reserve for further clues on the health of the US economy.

source: interaksyon.com

Greece submits fresh plan on eve of EU emergency summit

ATHENS, Greece - Greek Prime Minister Alexis Tsipras presented new proposals to European leaders Sunday aimed at ending his country's debt crisis, on the eve of a summit that could determine whether Greece crashes out of the eurozone.

In a telephone call with German Chancellor Angela Merkel, French President Francois Hollande and European Commission President Jean-Claude Juncker, Tsipras detailed a "mutually beneficial deal", the Greek premier's office said in a statement.

Italian Prime Minister Matteo Renzi urged the two sides to seize a "window of opportunity", saying all conditions were in place for them to reach a "win-win accord".

Athens said its new proposals were aimed at reaching a "definitive solution" to the five-month standoff between Athens and its creditors -- the European Commission, International Monetary Fund and European Central Bank -- as fears deepened over a potential "Grexit" from the eurozone.

The heads of the 19 eurozone countries will hold an emergency summit on the crisis in Brussels on Monday under pressure to prevent Greece from defaulting on its debt with a June 30 payment deadline fast approaching.

Sanity will prevail

The head of Greece's biggest bank said she thought "sanity will prevail" on Monday.

"To enter into such uncharted waters and take up all the risk both for the eurozone and for Greece for two or three billion (euro) difference, I think it's insane," National Bank of Greece chief Louka Katseli told BBC radio.

Greece's anti-austerity government met Sunday to refine its proposals, while a European source said Tsipras and Juncker "held talks Saturday and will again speak Sunday", adding that there were many exchanges and "informal work under way to find a solution".

Failing a deal, Greece is likely to default on an IMF debt payment of around 1.5 billion euros ($1.7 billion) due on June 30, setting up a potentially chaotic exit from the eurozone.

Last Wednesday the Greek central bank put the risk in stark terms saying: "Failure to reach an agreement would... mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and -– most likely -– from the European Union."

The IMF was called in to help rescue Greece at the end of 2009 when the debt-plagued country could no longer borrow on international markets.

The EU's involvement in the huge bailout, which was to provide 240 billion euros ($270 billion) in loans in exchange for drastic austerity measures and reforms, runs out at the end of this month, but IMF support was supposed to continue to March 2016.

Talks between Greece's radical-left government and its lenders have been deadlocked for five months over the payment of the final 7.2 billion euro tranche of the bailout, with talk also turning to an extension of the European help.

For the Greek government any extension of the bailout should be about kickstarting the country's devastated economy and not further austerity.

They also want an easing of the country's crippling debt burden, which officially stood at 312.7 billion euros, or 174.7 percent of gross domestic product, in March.

The international lenders have rejected a series of proposals from Athens, insisting on their own mixture of cuts and reforms.

Minister of state Nikos Pappas, who is close to Tsipras, said the counter-proposals would be "unacceptable to whichever Greek political party" was in power.

Bridging the gap

Alekos Flambouraris, another Tsipras minister, said Saturday that Athens would propose reworked measures that "bridge the gap", while also predicting that Greece's creditors would not be satisfied with the gestures, Greek media reported.

"You'll see they won't accept loosening budget (restrictions), or our proposal on the debt," he said of two main sticking points in the talks.

But the country's Finance Minister Yanis Varoufakis, whose flamboyant style has irked many of his European counterparts, turned the tables by putting the onus on the leader of paymaster Germany to do a deal.

"The German chancellor has a clear decision to make on Monday," he wrote in an op-ed for the Frankfurter Allgemeine Zeitung.

"On our side, we will come with determination to Brussels to agree to further compromises as long as we are not asked to do what the previous (Greek) governments have done: accept new debt under conditions that offer little hope for Greece to repay its debts," he wrote, without specifying the compromises.

Demonstrators around Europe on Saturday took to the streets to protest against spending cuts and austerity measures taken by their governments, and expressing solidarity with Greece.

source: interaksyon.com

People living longer but cost of aging rising faster -IMF

People worldwide are living three years longer than expected on average, pushing up the costs of aging by 50 percent, and governments and pension funds are ill prepared, the International Monetary Fund said.

Already the cost of caring for aging baby boomers is beginning to strain government budgets, particularly in advanced economies where by 2050 the elderly will match the numbers of workers almost one for one. The IMF study shows that the problem is global and that longevity is a bigger risk than thought.

"If everyone in 2050 lived just three years longer than now expected, in line with the average underestimation of longevity in the past, society would need extra resources equal to 1 to 2 percent of GDP per year," it said in a study to be released in its World Economic Outlook next week.

For private pension plans in the United States alone, an extra three years of life would add 9.0 percent to liabilities, the IMF said in urging governments and the private sector to prepare now for the risk of longer lifespans.

Demographers for many years have assumed that the lengthening of lifespans would slow in developed countries. But with continual advances in medical technology, that has not happened as acutely as expected. In emerging economies, rising standards of living and the expansion of health care also are adding to lifespans.

To give an idea of how costly this could prove, the IMF estimated that if advanced economies were to plug the shortfall in pension savings of an extra three years immediately, they would have to stash away the equivalent of 50 percent of 2010 GDP, and emerging economies would need 25 percent.

These extra costs fall on top of the doubling in total expenses that countries can expect through 2050 from an aging population. The faster countries tackle the problem, the easier it will be to handle the risk of people living longer, the IMF said.

These estimates cover only pensions. They do not account for healthcare costs, which also rise the longer someone lives.

In a December 2009 study, the MacArthur Research Network on Aging estimated that Americans are living between three and eight years longer than commonly expected, adding $3.2 trillion to the Medicare and Social Security, the government-backed healthcare plan for the elderly and pension program.

In North America and advanced Europe, lifespans increased by eight years between 1970 and 2010, and are projected to increase by an additional four years through 2050 -- that's about five weeks more per year.

At the same time old-age dependency, or the ratio of population over 65 to those in the prime working ages of 15 to 64, is expected to increase from 24 percent to 48 percent of the total population in advanced economies by 2050 -- in other words roughly one worker for every retired person.

Emerging Europe has seen lifespans grow more slowly by 1.1 years in the 40 years to 2010 but can expect longevity to rise sharply by 6.8 years in the next 40 years, the IMF said. For emerging economies, their old-age dependency ratios are expected to rise from 13 percent today to 33 percent by 2050.

Steps governments can take to manage the risk of people living longer are to raise the retirement age, increase taxes to fund public pension plans and lower benefits -- all steps most advanced economies are already considering.

They also could help the private sector by educating citizens better on how to prepare for their retirements and by promoting retirement products that protect people against the risk that they outlive their assets.

"Although longevity risk is a slow-burning issue, it increases the vulnerability of the public and the private sector to various other shocks," the IMF said in its study.

source: interaksyon.com