Czech monetary policy will shift in 2017

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Short Term ◽  
Fiscal Stimulus ◽  
The Czech Republic ◽  
Content Type ◽  
East European ◽  
Main Driver ◽  
Low Levels ◽  
The Government ◽  
Growth Deceleration

Subject The outlook for Czech monetary policy. Significance With second-quarter GDP growth slowing to 2.5% year-on-year, the Czech Republic is no longer the fastest-growing Central-East European (CEE) economy. The cyclical upswing that characterised the Czech economy from early 2014 has come to an end. Growth is foreseen to decelerate further in the quarters ahead, owing to unfavourable base effects and a larger-than-expected drop in EU-funded investment and manufacturing inventories. The government is thus expected to introduce short-term fiscal stimulus measures to support consumption. Impacts CEE central banks are expected to hold their rates at current historically low levels for the next quarter at least. Without room for further cuts, few will consider rate tightening before Q1 2017, when the ECB will start winding down quantitative easing. Growth deceleration in the second half of 2016 will necessitate fiscal stimulus by the government ahead of the 2017 general election. Further rises in nominal wages and a firmer labour market will bolster purchasing power, with private consumption the main driver of growth.

Weak consumption may thwart Slovak growth plans

2016 ◽  
Keyword(s):  
Infrastructure Investment ◽  
Gdp Growth ◽  
Industrial Output ◽  
Short Term ◽  
Fiscal Deficits ◽  
Consumption Growth ◽  
Content Type ◽  
Low Levels ◽  
The Government ◽  
The Eu

Subject The government's latest GDP expectations for 2016-19. Significance On September 19, days before surviving a parliamentary no-confidence vote, the government announced GDP projections for 2016-19, based on improvements in consumption growth and the labour market, where registered unemployment hovers at historically low levels. Despite its weakened position following the recent departure of junior coalition partner Siet, Smer-Social Democracy (SD) is upbeat about the prospects for robust GDP growth in 2016, revising its forecast upwards to 3.6% from 3.2%. Impacts Industrial output, GDP and inflationary pressures may pick up post-2018, as consumers spend more and auto industry investments create jobs. The government may miss its targets in the short term, but fiscal deficits should remain below the EU limit of 3% of GDP in 2016-18. More public-private partnerships, modelled on the Bratislava ring-road, plus EU funding, may support infrastructure investment after 2017.

Renzi may shift EU macroeconomic narrative

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Member State ◽  
Public Investment ◽  
Policy Coordination ◽  
State Governments ◽  
European Policy ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Policy Strategy ◽  
The Government

Subject Renzi's bid for more growth-friendly policies. Significance In its paper, 'A shared European policy strategy for growth, jobs, and stability', the Ministry of the Economy and Finance (MEF) sketches a plan to create more flexibility in EU macroeconomic policy coordination. The immediate goal is to enable member-state governments to use more fiscal stimulus and public investment to boost growth. Impacts If Renzi's constitutional reforms do not go through in October, the government will be in disarray. The ECB is likely to ease policy further tomorrow, while reminding markets that monetary policy accommodation is insufficient on its own. The March 17 European Council summit will be Renzi's chance to reframe the macroeconomic conversation.

Florida voters react to Biden's Caribbean policy

2021 ◽  
Keyword(s):  
Disaster Relief ◽  
Electoral Politics ◽  
The State ◽  
Pivotal Role ◽  
Economic Recovery ◽  
Short Term ◽  
Content Type ◽  
Family Connections ◽  
The Caribbean ◽  
The Government

Significance Many areas of the Caribbean have trade, investment and family connections with communities in Florida. As the state now plays a pivotal role in US electoral politics, crises in the region can take on added political importance for parts of Florida’s electorate. Impacts Forecasts of short-term economic recovery for Florida remain highly uncertain given the continuing impact of the pandemic. Clashing interests across the Caribbean may demand greater coordination of US policy than the government can currently offer. Healthcare and disaster relief capabilities within the state are severely overstretched and could be overwhelmed by a new crisis.

Indonesia’s new investment ministry faces headwinds

2021 ◽  
Keyword(s):  
Central Bank ◽  
Foreign Investment ◽  
Short Term ◽  
Sovereign Wealth Fund ◽  
Content Type ◽  
Speed Up ◽  
The Government ◽  
Roll Out

Significance The government hopes greater domestic and foreign investment can help turn around the pandemic-hit economy. The governor of Bank Indonesia (BI), the central bank, last week said GDP should grow by 4.6% in 2021, compared with last year’s 2.1% contraction. Impacts Indonesia will count on private vaccination, whereby companies buy state-procured jabs for their staff, to help speed up its roll-out. The Indonesia Investment Authority, a new sovereign wealth fund, will prioritise attracting more investment into the infrastructure sector. Singapore will continue to be Indonesia’s largest source of FDI in the short term.

German shift on austerity would risk 'wrong' lessons

2015 ◽  
Keyword(s):  
Euro Area ◽  
Credit Rating ◽  
Bond Yields ◽  
Trade Surplus ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Black Spots ◽  
Angela Merkel ◽  
Deficit Financing ◽  
The Government

Significance Chancellor Angela Merkel faces a rising tide of euro-area members in favour of a policy shift away from austerity and possibly towards more favourable debt deals for euro-area black spots. Adding to the pressure for change, her own voters may prefer a slower pace of debt reduction: German government debt has already been falling as a percentage of GDP -- from over 80% in 2010 to under 77% at the end of 2014 -- and debt is starting to fall in absolute terms as well. The government has delivered enough stabilisation (ie, austerity) and growth to tame the 2009-10 debt surge and maintain its AAA credit rating, but is now over-achieving in terms of its own tough targets because the greater-than-expected fall in debt interest costs is pushing the budget into surplus. Some modest spending adjustments look likely to curb this windfall surplus, yet many will argue that more could be done to re-energise the sluggish economy -- and boost the euro-area. Impacts The plummeting euro will provoke another rise in German exports (already near 50% of GDP) and tensions over Germany's bulging trade surplus. While a fiscal stimulus and/or higher wage payments could address these tensions and raise imports, there is no sign of such action. Germany's critics are gathering support to end austerity, to the point of ignoring the risks of deficit financing and reneging on debts. Ultra-low German bond yields, encouraged by the prospective supply fall, are dragging down euro-area yields, delivering wider benefits.

Swiss policy turn may dampen Polish consumption

2015 ◽  
Keyword(s):  
Central Europe ◽  
Banking Sector ◽  
Balance Sheet ◽  
Capital Adequacy ◽  
Financial Risks ◽  
Short Term ◽  
The Czech Republic ◽  
Content Type ◽  
Credit Portfolio ◽  
The Impact

Subject The impact on Central Europe of the reverse in Swiss monetary policy. Significance The Swiss National Bank's (SNB) decision in January to scrap its exchange-rate peg against the euro raised concerns about a mortgage repayment crisis and lending practices in Central Europe (CE). Banks across the region are well capitalised on the whole, and better placed to absorb the impact of financial risks arising from the decision than those of countries further south-east, where deleveraging has continued. Banks in the Czech Republic and Hungary are the least exposed to foreign exchange (FX) risk; those in Poland are the most exposed. Impacts Poland's capital-adequacy ratios and strong credit portfolio will offset balance-sheet risks, but profits may fall in the short term. Hungary's banking sector is under heavy strain as a result of the government's FX debt relief programme. However, the Funding for Growth Scheme, and high forint and FX reserves, provide a liquidity buffer. Czech banks are CE's most profitable and liquid and will not be affected owing to tiny exposure to Swiss franc denominated loans.

Politics set to slow Pakistan's divestment drive

2016 ◽  
Keyword(s):  
Public Sector ◽  
Economic Reform ◽  
Prime Minister ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Reform Agenda ◽  
Political Patronage ◽  
The Government ◽  
Core Condition

Subject Pakistan's divestment drive. Significance Prime Minister Nawaz Sharif's government describes divestment of public sector enterprises (PSEs), involving 69 firms, as an essential part of its 2013-18 economic reform agenda. Progress thus far is limited, but the government faces rising pressure from the IMF, which made divestment a core condition of its 6.6-billion-dollar, three-year loan in September 2013. Impacts Another government led by Sharif would continue gradual divestments after 2018. Since PSEs are an important vector for distributing political patronage, structural reforms will face stiff resistance. Divestment of profitable PSEs defeats the purpose of the exercise, but the government will use them for a short-term cash boost.

Monetary easing may quicken in Brazil this year

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Recession ◽  
Government Debt ◽  
Domestic Demand ◽  
Private Debt ◽  
Content Type ◽  
Positive Effects ◽  
The Government

Significance At its first meeting of 2017, on January 10-11, the COPOM reduced the benchmark Selic interest rate to 13%. The 75-basis-point (bp) rate cut decision, the largest in nearly five years, accelerated the monetary easing cycle that started in October 2016. Economic recession has been relieving inflationary pressures and opening room for more intense cuts in interest rates. Impacts Further reductions of interest rates may contribute to controlling government debt. Private debt renegotiations at lower interest rates may facilitate a recovery in domestic demand and output. Any positive effects of monetary policy on activity may help contain popular dissatisfaction with the government.

Chinese state land ownership speeds up development

2015 ◽  
Keyword(s):  
Local Governments ◽  
Land Ownership ◽  
Easy Access ◽  
Property Development ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Land User ◽  
Perverse Incentives ◽  
Near Term ◽  
The Government

Subject State land ownership and the implications for development in China. Significance The government owns all land in China -- one of the reasons that the country claims still to be a 'socialist' state, despite the role of markets in most areas of the economy. A de facto land lease system has emerged in which land 'use rights' are traded. However, the rights of the owner -- the state or local government -- take precedence over the rights of the land user. As a result, requisitioning land for infrastructure or property development is much faster than in countries with a genuine land market. Impacts In the near term, local authorities' easy access to land will make infrastructure-based fiscal stimulus measures faster to execute. The tight timeframes of China's urbanisation goals are more plausible given the government's powers over land. Local governments' power to expropriate land creates perverse incentives and opportunities for corruption. Reforms to make the system more market-oriented are likely in the long term, but will be gradual.

Brazil faces stagnation risk in 2017

2017 ◽  
Keyword(s):  
Government Spending ◽  
Pension Reform ◽  
Investment Decisions ◽  
Fiscal Crisis ◽  
New Wave ◽  
Short Term ◽  
Business Investment ◽  
Content Type ◽  
The Government

Subject The risk that the Brazilian economy will stagnate, rather than recover, this year. Significance The recent passage of legislation freezing government spending and the ambitious pension reform currently under discussion in Congress are the flagship policies of the government of President Michel Temer. Both seek to defuse Brazil’s fiscal time bomb in the long term. However, they offer little support to immediate expansion in an economy that not only has been in recession since the second quarter of 2014 but is also locked in a low-growth trap will few apparent short-term escape routes. Impacts Popular dissatisfaction may trigger a new wave of demonstrations, further weakening the government. As long as the fiscal crisis persists, the government’s ability to stimulate the economy will be limited. Political risk will be a crucial factor in business investment decisions in Brazil.

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