Tag: Global Economy

Samvat 2079: Vetri Subramaniam expects earning cuts as global recession fear looms

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Vetri Subramaniam, CIO of UTI AMC believes that given the rising probability of recession, one should begin to see earnings cuts. He was talking to CNBC-TV18 about global markets and the economy.

“Global earnings growth, and particularly the US, have not been cut too much for ’23, and given the rising probability of a recession or some sort of a setback in their economy, you should start to see earnings cuts there. And some of that will translate into the Indian earnings numbers as well.”

According to him, there is certainly some downdraft on the earnings forecast at this point in time.

Also Read |  Samvat 2079: Economists evaluate India and growth ahead

India has been outperforming its peers and Subramaniam believes that there are two ways of looking at this. “You could look at the last year of the market return and say, we are down 4-5 percent or you could look at how all the other markets have done which are down 20-30 percent, and then realize how much better off you are in a relative sense.”

Also Read: Old Bridge Capital’s Kenneth Andrade on where to invest in Samvat 2079

“We are only talking about outperformance; you cannot really decouple because 21 percent of your GDP is exports of goods and services and that is going to be the area which will first get hit if global growth slows down, but there will be a second level effect on other sectors,” he added.

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OPEC+ oil supply cuts could tip world into recession, IEA says

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices firmed on Thursday, finding continued support from an OPEC+ decision last week to cut supplies, as the International Energy Agency warned that those cuts may push the global economy into recession.

Last week, the producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia pushed prices higher when it agreed to cut supply by 2 million barrels per day (bpd).

“The OPEC+ … plan … has derailed the growth trajectory of oil supply through the remainder of this year and next, with the resulting higher price levels exacerbating market volatility and heightening energy security concerns,” the IEA said on Thursday.

The IEA downgraded its oil demand growth estimates slightly for this year to 1.9 million bpd and by 470,000 bpd in 2023 to 1.7 million bpd.

This comes after OPEC on Wednesday cut its outlook for demand growth this year by 460,000 bpd to 2.64 million bpd, citing the resurgence of China’s COVID-19 containment measures and high inflation. It lowered its 2023 oil demand forecast by 360,000 bpd to 2.34 million bpd.

“The prospect of sustained growth is deteriorating fast because of entrenched inflationary pressure, quantitative tightening, continuous hikes in borrowing costs, a strong dollar, and COVID-related constraints in the world’s second biggest economy, China,” PVM analyst Tamas Varga said.

Worsening demand for crude oil is contributing to inventory builds. US crude oil stockpiles rose by about 7.1 million barrels for the week ended Oct. 7, according to market sources citing API data.

The energy market is under pressure as well from the US dollar, which has rallied broadly, including against low-yielding currencies like the yen.

The Federal Reserve’s commitment to keep raising interest rates to stem high inflation has boosted yields, making the US currency more attractive to foreign investors.

Brent crude futures rose 49 cents, or 0.5 percent, to $92.94 a barrel by 08:33 GMT. US West Texas Intermediate crude was up 37 cents, or 0.4 percent, at $87.64 a barrel.

Also Read: Russia offers to supply gas to Europe via one intact part of Nord Stream 2 pipeline, Germany says ‘nice try’

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Global economy to grow 2.7% in 2022 and will slow down further in 2023: Moody’s

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the world stares at recession concerns, the global economy shall grow at 2.7 percent in 2022 and the growth is expected to slow down to 2.3 percent in 2023, the latest Moody’s report said on Monday.

Moody’s has reduced the global real GDP forecast to 2.7 percent in 2022 (September baseline) from 4.2 percent in its January forecast. For 2023, the GDP projection has been revised lower to 2.3 percent from 3.6 percent.

“While we project that the global economy will grow in 2022, any policy missteps or additional risks would increase the threat of a global recession in the next 12 months above our current assessment of just over even odds,” financial services firm Moody’s Analytics said in its report titled “Global Outlook: Global Economy on Edge”.

It noted that business sentiment remains muted and is consistent with a global economy that is just avoiding recession. According to the research firm, the global environment is more fragile as record-high inflation continues to gain momentum and growth decelerates. It added that stagflation risks have risen worldwide, but a stagflationary environment would take months to be realised.

The report follows the United States and half a dozen other countries’ rate hikes last week. Back home, the Reserve Bank of India (RBI) will deliver its monetary policy decision later this week.

Global consumer price inflation gained momentum in August, driven by soaring price gains in most major countries.

According to Moody’s report, price growth accelerated to 11.9 percent year-over-year, its 12th consecutive increase and the highest rate since January 1981. The inflationary environment continues to be driven by two strong waves of negative supply shocks, it said.

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“Even as the global economy continued to work through the cost increases stemming from the widespread factory and retail lockdowns at the outset of the COVID-19 pandemic, the Russian invasion of Ukraine exacerbated the existing cost-push inflation and growth risks. Inflation that started to rise in March 2021 above the 2 percent target set by central banks accelerated sharply worldwide following February’s invasion, especially for food and energy categories,” the report pointed out.

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Rich countries gobble up fuel while poorer nations stuck with brewing unrest

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Russia’s war in Ukraine has Europe bracing for a tough winter, but the costs are piling up higher in emerging nations as governments struggle to keep energy flowing to citizens hit by surging inflation.

Pakistan’s government is triggering rolling blackouts and boosting power bills because it can no longer secure enough fuel. Shops in Bangladesh are closing at 8 p.m. as part of energy austerity measures, while Mexico’s government has bolstered subsidies to cushion residential electricity costs.

The crunch comes at a particularly difficult time: The global shift to cleaner energy sources meant developed economies weren’t investing in efforts to boost fossil fuel production, while poorer nations were being pressed to adopt cleaner-burning natural gas.

Now, with gas prices more than 150 percent higher since the Russian invasion in February, and wealthier nations able to pay more to ensure adequate supplies, emerging nations can’t compete.

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“It doesn’t look like there is any way they can outbid the developed countries,” said Muqsit Ashraf, who leads Accenture’s Global Energy Industry practice in Houston. “It is having significant economic implications; it will also have an impact on their ability to fund other economic and national priorities.”

It’s a problem playing out across the developing world.

Already, gas deliveries that were scheduled for Pakistan or India are being redirected to Europe, where buyers are able to afford higher prices, according to energy traders.

Sri Lanka is struggling to secure fuel from its regular suppliers, while Argentina didn’t buy liquified natural gas cargoes for August after prices surged.

The energy import bills for developed nations are between 2 percent and 4 percent of gross domestic product, according to Ashraf. For comparison, those costs for some emerging nations have climbed above 25 percent of GDP, he said.

Meanwhile, plummeting currencies are keeping import costs prohibitively high, exacerbating efforts to control inflation.

Governments across Latin America have responded by ramping up subsidies and cutting taxes on gasoline and diesel to appease angry citizens still struggling to rebound from the pandemic.

Mexico will spend about USD 25 billion on fuel and electricity subsidies this year. In Panama, the government was forced to act after angry protesters took to the streets.

In Africa, the World Bank took the unusual step of subsidizing bus passengers in Mozambique to mitigate the crisis while in Burundi, gasoline shortages are compelling drivers to buy fuel on the black market at three times the official price.

Ghanaian President Nana Akufo-Addo is now seeking to double International Monetary Fund support to USD 3 billion after protests over issues including rising fuel prices.

For much of the last decade, coal and gas were cheap and abundant —  and fast-expanding emerging economies benefited. A flurry of new LNG export facilities came online from Australia to the US, while consumption in Japan and South Korea — the commodity’s top importers — plateaued.

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Moves by rich governments to abandon dirty coal resulted in a supply glut, and the shale revolution flooded international markets with crude oil.

Those days are over.

Indian natural gas distributor Gail has been unable to secure enough LNG for its domestic customers, forcing it to cut supply to major users such as petrochemical plants and fertilizer makers. In Thailand, retail electricity tariffs were hiked by 17 percent this week because of pricey LNG imports.

With LNG rates rallying about 1,300 percent in the last two years, Pakistan and Bangladesh haven’t been able to secure a single spot shipment for months.

BSRM Steels Ltd., Bangladesh’s largest steelmaker by market value, cut production by at least 20 percent due to the nation’s power crisis, according to Aameir Alihussain, a managing director at the company.

“Nobody is insulated from this crisis,” he said.

Tawfiq-e-Elahi Chowdhury, the adviser on power, energy and mineral resources to Bangladesh’s prime minister, called for patience, saying earlier this month that “I can’t promise anything unless we find a huge reserve of gas.”

But citizens in many nations have run out of patience.

Pakistani protesters have blocked roads across the country. In one incident, demonstrators threw stones at the police, which had to resort to using water cannons to disperse the crowd. In Panama, highways and ports were blocked.

‘Ripple Effect’

“The longer the energy crisis goes on, the more likely there is to be civil unrest around the world,” said Susan Sakmar, a visiting assistant professor at the University of Houston Law Center.

It’s not just the developing world that is suffering. Germany may not have enough gas to get through winter if Moscow cuts off supplies.

The UK is buying Australian LNG for the first time in at least six years amid tight supplies. And a surge in US gasoline prices earlier this summer may do lasting damage to President Joe Biden’s Democratic party in November midterm elections.

But those nations have options poorer ones don’t. Developing nations have long complained that rich countries aren’t channeling enough money to help with the energy transition and ambitious climate change targets. Now that gap is widening and they are getting left behind.

“When energy is so central to everyday life, it can have a ripple effect that goes well beyond the energy equation,” said Accenture’s Ashraf.

“It may prompt another rethink in the developing world about taking steps in the energy transition more slowly until energy systems are stabilized.”

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India getting back to age of controlling one-fourth of global economy: Karan Adani

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India can get back to the age of controlling one-fourth of global economy like the way it used to do earlier, Adani Ports and SEZ CEO Karan Adani said on Wednesday. While speaking at Amazon Smbhav 2022, son of Asia’s richest man Gautam Adani, said that there is fire in the belly of Micro, Small and Medium Enterprises (MSMEs) in rural India and tier 2 or 3 three cities where there is need to improve technical infrastructure to tap into the firepower the country has for growth.

He said that earlier people used to call India “Sone ki Chiddiya” (golden bird). “It used to control one-fourth of the world’s GDP, and I think we are getting there again. I personally feel in my lifetime we will see India going back to that golden age where we would be controlling one-fourth of the global economy,” he added.

“I think people, entrepreneurs, as well as young people, unless they are part of this mission, India cannot reach that goal. I think we just need to believe in India, we have to believe that we can reach there,” Adani said.

Also read: ICRA forecasts economy to grow around 13% in first quarter

He said that the country needs to tap the potential rural India has and make smalll businesses more powerful. “What I personally feel is that the power of India is actually in rural India and tier two or tier three cities. I think the kind of ambition, thinking, solution orientation and the kind of firepower, I would say, the fire in the belly, if I may, the entrepreneurship that you will find in these kids and in these city’s, it’s unbelievable,” Adani said.

He said that the technology has removed barriers that checked access to information markets and knowledge. In response to questions on decision making dynamics between him and his father, Karan said he has very open communication with his father.

“I must appreciate my dad on this front because he’s very curious. He’s actually more curious than all of us in terms of understanding how the world is moving towards what young minds are thinking. How are they thinking? Why are they thinking what they are thinking? And I think we have that environment of push and pull,” he said. Adani said that after the discussion whatever his father decides gets implemented.

“Most important is that once we leave the room, we don’t go back and say, ‘You know, I don’t agree with this’, ‘This was not the right decision’, or ‘I’m not going to implement that’. You know, that’s the way we work,” he said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India likely to overtake countries to become 3rd biggest economy by 2030: Mukesh Ambani

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reliance Industries (RIL) Chairman and Managing Director Mukesh Ambani on Wednesday said that Asia is leading march towards an inclusive global economy and that India is likely to overtake countries to become the 3rd largest economy by 2030.

In a chat with Dr Raghunath Anant Mashelkar at the Asia Economic Dialogue, he said that it was becoming increasingly obvious that “the centre of attention for global economy has shifted to Asia”.

The RIL Chairman also highlighted that in 2020, Asia’s GDP overtook the combined GDP of the rest of the world. “Asia accounts for 60 percent of the world’s population,” he said, adding that “the mismatch between demography and development is closing”.

“The trend is also reinforced by the fact that India is likely to overtake Japan as Asia’s second largest economy and the oldest third largest economy by 2030. Dr Mashelkar, I am very confident that the India growth story will be more exciting if not more than that of a child in the coming decades to come. It is India’s time,” said the billionaire.

Ambani’s comments come at a time when the Indian economy is on the recovery path after being severely hit by the COVID-19 pandemic which left a number of sectors disrupted.

Earlier this month, the Reserve Bank of India (RBI) in its February monetary policy said that the central bank has been continuously taking efforts to limit disruption caused by the pandemic to the economic activity. It said that policy actions of RBI have yielded desired result and now the central bank has turned to rebalance liquidity. However, the central bank stated that continued policy support is needed for durable and broad-based recovery.

On Tuesday, foreign brokerage Barclays said the Indian economy is likely to have expanded by 6.6 percent in the December quarter.

While it said that the economy had a relatively stable Q3 with many sectors getting back to their pre-pandemic level of businesses, the mild third wave did have an effect and may mean a downside risk to the earlier growth forecast of 10 percent in FY22.

Ambani at the Asia Economic Dialogue also pointed to climate change as the biggest threat to mankind and called for a green industrial revolution.

“Transition to clean energy is not an option anymore, it’s a compulsion,” he said. “There is no Planet B, we only have one planet,” he added.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Nearly half of GDP in cities at risk from nature loss: WEF survey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cities contribute nearly 80 per cent to the global economy but they also account for nearly three-fourths of greenhouse gas emissions and nearly half of the GDP in cities around the world or USD 31 trillion is at risk of disruption from nature loss, a new study showed on Monday.

In the report released on the first day of its online Davos Agenda 2022 summit, the World Economic Forum (WEF) said there is an urgent need to protect and add nature back into urban environments to stem this GDP loss.

The good news is that nature-based solutions for infrastructure are 50 per cent cheaper than alternatives and deliver 28 per cent greater added value in terms of productivity, while they can also create much-needed jobs nearly 60 million by 2030 if necessary investments are made. Geneva-based WEF, which describes itself as an international organisation for public-private cooperation, said cities can take a leading role in unlocking economic opportunities with nature-based solutions.

Also Read: WEF’s online Davos summit begins today; PM Modi, Jinping to deliver special addresses

The Forum has been hosting its annual meeting in the Swiss ski resort town of Davos for 50 years every January as a congregation of leaders from across the world, but it had to be cancelled last year and has been deferred this year due to the COVID-19 pandemic. Accordingly, the online Davos Agenda summit is being held for the second consecutive year during the scheduled week of the annual meeting. The virtual event will be held through January 21 and is being attended by leaders from across the world, including Prime Minister Narendra Modi.

Also Read: Wealth of India’s 10 richest enough to fund school, higher education of every child for 25 years: Study

“Integrating nature-positive solutions can help protect cities from growing risks associated with extreme weather while driving sustainable economic growth,” it added. The report has been published by the WEF’s ‘BiodiverCities by 2030 Initiative’, in collaboration with the Alexander von Humboldt Institute and the Government of Colombia.

The WEF said the goal of its 2030 initiative is to reverse this existential global threat and move forward with a plan that will result in cities and nature co-existing in harmony by the end of the decade. The report called for multistakeholder action to integrate nature as infrastructure into the built environment.

In making the economic case for BiodiverCities, Nature-based Solutions (NbS) for infrastructure and land-sparing are found to be cost-effective ways for cities to innovate and meet current challenges. Spending USD 583 billion on NbS for infrastructure and on interventions that release land to nature could create more than 59 million jobs by 2030, including 21 million livelihood-enhancing jobs dedicated to restoring and protecting natural ecosystems.

“In the conventional paradigm, urban development and environmental health are like oil and water, said Akanksha Khatri, Head of Nature and Biodiversity at WEF. “This report shows that this does not have to be the case. Nature can be the backbone of urban development. as living systems, we can support conditions for the health of people, planet and economy in urban areas,” she added.

in natural capital, cities can unlock the benefits of nature, as per the report. “As cities think about building for the post-pandemic future, they have a priority to provide their citizens with a more equitable and prosperous quality of life by protecting their natural resources,” said Mauricio Rodas, Co-Chair of the Global Commission on BiodiverCities by 2030 and former mayor of Quito, Ecuador.

Cities don’t need to be concrete jungles in conflict with nature in and outside their boundaries, rather they should be places where all people and nature co-exist and thrive together, according to the report. In a separate report, the WEF said 65 per cent of China’s GDP or about USD 9 trillion is at risk from disruption from nature loss, but implementing nature positive solutions could create nearly USD 2 trillion in business opportunity and add 88 million jobs by 2030. “Businesses can create a virtuous cycle between people, planet and profit. Investing in and living in harmony with nature will better secure sustained performance and prosperity. Chinese businesses can harness technologies and innovation, while adopting and promoting the UN Global Biodiversity Framework to collectively shape a more resilient and beautiful future for China,” said Gim Huay Neo, Managing Director, WEF.

The report, prepared in collaboration with Golden Bee, shows how significant business opportunities can be created if new business practices are adopted across three socio-economic systems: food, land and ocean use; infrastructure and the built environment; and energy and extractives. These systems are interconnected and can unlock untapped economic potential.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

World economy to top $100 trillion in 2022 for first time: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The world’s economic output will exceed $100 trillion for the first time next year and it will take China a little longer than previously thought to overtake the United States as the No.1 economy, a report showed on Sunday.

British consultancy Cebr predicted China will become the world’s top economy in dollar terms in 2030, two years later than forecast in last year’s World Economic League Table report.

India looks set to overtake France next year and then Britain in 2023 to regain its place as the world’s sixth biggest economy, Cebr said.

“The important issue for the 2020s is how the world economies cope with inflation, which has now reached 6.8 percent in the US,” said Cebr deputy chairman Douglas McWilliams.

“We hope that a relatively modest adjustment to the tiller will bring the non-transitory elements under control. If not, then the world will need to brace itself for a recession in 2023 or 2024.”

The report showed Germany was on track to overtake Japan in terms of economic output in 2033. Russia could become a Top 10 economy by 2036 and Indonesia looks on track for ninth place in 2034.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow