Junior Digest

Bangladesh seeks 1 bln USD budget support from World Bank

Dhaka, Aug 22,2024: Bangladesh’s interim government has sought 1 billion U.S. dollars from the World Bank as budgetary support.

The call came from the country’s Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan’s meeting with Abdoulaye Seck, the World Bank’s country director for Bangladesh and Bhutan, in Dhaka Wednesday.

He made the plea as the ministry owes more than 2 billion dollars to suppliers in import costs of power and energy.

Khan mentioned that the interim government, which was formed with many pressing mandates, is due to settle a 2 billion U.S. dollars debt left by the previous government in the power sector.

He said they have already suspended activities under the much-criticized Quick Enhancement of Electricity and Energy Supply Act 2010 and abolished the government’s power to set energy prices without any public hearing.

Retail inflation dips to 59-months low of 3.54 pc in July

New Delhi, Aug 12,2024: Driven by lower food prices, India’s retail inflation measured by consumer price index (CPI) dropped to 3.54% in July 2024 on annualised basis from 5.08% in the previous month, as per data released by Ministry of Statistics & Programme Implementation on Monday.

With this, retail inflation has now dipped below the Reserve Bank of India’s medium-term target of 4% for the first time in nearly five years.

The official data showed food inflation in the month of July 2024 fell to 5.42% from 9.36% in the previous month. Food inflation for July 2024 is the lowest since June 2023.

“There is a sharp decline in the year-on-year inflation rate based on the All India Consumer Price Index (CPI) number for the month of July, 2024, which is the lowest in the last 59 months. Year-on-year inflation rate based on the All India Consumer Price Index (CPI) number is 3.54% (Provisional) for the month of July, 2024. Corresponding inflation rate for rural and urban is 4.10% and 2.98%, respectively,” an official press release said.

During the month of July 2024, downward trend was witnessed in inflation for all the groups. Significant decline was seen in the vegetables, fruits and spices subgroup.

Commenting on the inflation numbers, ICRA chief economist Aditi Nayar said, “While eight of the 12 sub-segments in this group witnessed a lower YoY (year-on-year) inflation in July 2024 vis-à-vis June 2024, the chief driver of the downtrend was vegetables inflation, which declined quite sharply to 6.8% from 29.3% in the previous month, led by the favourable base. In MoM (month-on-month) terms, however, vegetable prices shot up by 14.1% in July 2024, after having risen at a similar pace in June 2024.”

China vows to ‘transform’ economy, sets ambitious growth target

BEIJING, March 5,2024: Chinese Premier Li Qiang announced an ambitious 2024 economic growth target of around 5% on Tuesday, promising steps to transform the country’s development model and defuse risks fueled by bankrupt property developers and indebted cities.
Delivering his maiden work report at the annual meeting of the National People’s Congress, China’s rubber-stamp parliament, Li also flagged higher defence spending, while hardening the rhetoric on Taiwan.
In setting a growth target similar to last year, which will be harder to reach as a post-COVID recovery is losing steam, Beijing signals it is prioritising growth over any reforms even as Li pledged bold new policies, analysts said.

Pressure grows on China for big policy moves to fix economy

BEIJING, Feb 22,2024: As the annual meeting of China’s parliament approaches next month, its leaders are facing the greatest pressure in almost a decade to take bold policy decisions that safeguard the economy’s long-term growth potential.

The start of the year saw Chinese stocks tumbling to five-year lows on growth concerns and deflation deepening to levels unseen since the global financial crisis, prompting comparisons with the 2015 turmoil that forced policymakers into action.

“The last time the Chinese leadership faced this kind of pressure was in 2015,” said Tommy Wu, a senior China economist at Commerzbank, who added, “2024 is a crucial year for China to stabilize the economy.

“However, the current situation is a lot more complicated.”

China overcame the 2015 crisis by devaluing the yuan and tightening its capital account to prevent outflows, while pouring resources into property and infrastructure, and slashing interest rates by more than 100 basis points.

But that policy ammunition is now spent, bent or broken, limiting its options to fix a stuttering economy and find a way out of what threatens to become a self-feeding downward spiral in consumer and investor confidence and economic growth.

The property market has been in free fall since 2021 because of a series of defaults among developers after years of overleveraged, bad investments. Infrastructure spending is difficult to sustain because of high levels of local government debt.
China’s debt was 3 times the GDP in 2022

Further monetary policy easing risks a run on yuan assets due to a yawning interest rate gap with other economies and could exacerbate deflationary pressures as cheap credit flows into China’s industrial complex, ridden with overcapacity.

As China’s rubber stamp parliament, the National People’s Congress (NPC), begins its annual meeting on March 5, there has been no indication of major stimulus or a grand reform plan in the making.

“It is widely underappreciated how constrained Beijing is at this point, in terms of options to stimulate the economy via fiscal policy, or through more rapid credit growth from banks,” said Logan Wright, a partner at Rhodium Group.

“There will be no policy bazookas unveiled at the NPC, in part because China has no good options to maintain growth via its traditional channels.”
China economy
‘STUCK BY CHOICE’

Fleeing investors have expressed frustration that authorities have not unveiled a clear roadmap to fixing structural issues laid bare last year when the Chinese economy failed to replicate the explosive recovery experienced by other economies after COVID-19.

Markets want clear, long-term plans for cleaning up the property sector, restructuring municipal debt, and switching to a more sustainable growth model that relies less on debt-fuelled investment excesses and more on household consumption.

The NPC is not the traditional venue for Chinese leaders to declare momentous policy shifts, which are usually reserved for events known as plenums, held by the ruling Communist Party between its once-every-five-year congresses.

One such plenum was initially expected in the final months of 2023, and while the meeting could still take place in the near future, the fact that it has not yet been scheduled has deepened investor concerns over policy inaction.

At the NPC, Premier Li Qiang is expected to deliver his annual work report and set the year’s economic targets, including steady growth for 2024 at around 5%, and a budget deficit of 3% of gross domestic product.

But setting a target similar to last year’s without new policies to redirect resources from infrastructure and manufacturing investment to households runs the risk of hurting confidence, rather than boosting it, analysts say.

Fathom Consulting estimates that every additional 10 yuan invested in the Chinese economy today generates 0.2 yuan in output, down from 2.1 yuan in 2002.

On the demand front, consumer confidence languishes at record lows more than a year after China ended its COVID lockdowns.

Italian ruling coalition votes against ESM reform

ROME, Dec 21,2023: Italy’s lower house of parliament voted on Thursday against a long-awaited reform of the euro zone bailout fund, throwing into doubt ratification of an EU treaty that is designed to provide help for failing banks.

The vote confirmed the deep hostility within Prime Minister Giorgia Meloni’s ruling coalition to the overhaul of the so-called European Stability Mechanism (ESM), which has been approved by all other eurozone countries bar Italy.

“For six months here, there will be no talk about ESM,” Ylenia Lucaselli, from Meloni’s nationalist Brothers of Italy party, told reporters.

Deputy Economy Minister Maurizio Leo said parliament was sovereign and the government had to recognise its decision.

Meloni and Economy Minister Giancarlo Giorgetti were not in the chamber on Thursday for the debate and subsequent vote, which saw approval for the ESM defeated by 184 votes against to 72 in favour, with 44 abstentions.

Brothers of Italy party and Giorgetti’s League both voted against, whilst the other main coalition group, Forza Italia, abstained. The opposition 5-Star Movement, headed by former Prime Minister Giuseppe Conte, also opposed the motion.

The ESM can offer a lifeline to euro zone governments cut off from markets, or recapitalise banks and provide precautionary credit. However, many Italian parties fear the pact could trigger a restructuring of Italy’s huge public debt.

The original ESM remains operational, but it cannot support the Single Resolution Fund, responsible for dealing with ailing banks, without Rome signing up to the deal.

Earlier on Thursday the ruling coalition in the budget committee also voted against ratification, complaining that the treaty did not guarantee the involvement of parliament in any eventual request for help.

Meloni has repeatedly criticised the ESM for requiring countries to implement austerity or financial reform programmes in return for its help, saying this would increase the risk of a debt restructuring.

The ESM vote came the day after EU member-states clinched a deal on more lenient fiscal rules. Meloni said the newlook Stability and Growth Pact was better than the old one although she was disappointed it had not excluded strategic investments from countries’ deficit and debt calculations.

The Italian government indicated earlier this month that it would not approve the ESM treaty unless there was first an agreement on the stability pact.

Argentina’s Milei starts shock therapy by devaluing peso by 50 percent

Dec 14,2023: Argentina’s government has announced it will slash the value of its currency, the peso, by more than 50 percent against the US dollar as its new far-right president seeks radical solutions to fix the country’s worst economic crisis in decades.
President Javier Milei‘s economy chief announced the painful measure on Tuesday, saying it was necessary for Argentina to “avoid catastrophe”.
The devaluation would drop the peso’s value from 400 to the dollar to more than 800 to the dollar, a blow to tens of millions of Argentinians already struggling to make ends meet.
Economy Minister Luis Caputo announced a raft of other austerity measures, including sweeping subsidy cuts, the cancellation of tenders for public works projects, and plans to axe nine government ministries.
However, the government plans to double social spending for the poorest to help them absorb the economic shock.
“For a few months, we’re going to be worse than before,” Caputo said in his televised address.
“If we continue as we are, we are inevitably heading toward hyperinflation,” he said.

The planned measures drew praise from the International Monetary Fund (IMF), to whom Argentina owes $45bn, but sparked harsh criticism from some progressive activists.
Left-wing activist Juan Grabois said that Caputo had declared “a social murder without flinching like a psychopath about to massacre his defenceless victims”.

“Your salary in the private sector, in the public sector, in the popular, social and solidarity economy, in the cooperative or informal sector, for retirees and pensioners, will get you half in the supermarket,” Grabois said. “Do you really think that people are not going to protest?”
Jimena Blanco, chief analyst with risk consulting firm Verisk Maplecroft, said Milei’s government was trying to temper an otherwise guaranteed economic crash landing.

“He promised a very tough pill to swallow and he’s delivering that pill,” she said. “The question is how long will popular patience last in terms of waiting for the economic situation to change.”
Economic shock

The economic overhaul is part of the new strategy by Milei, who was sworn in on Sunday and has aggressively sought to tackle the fiscal deficit he believes is the root of Argentina’s economic woes.

A self-described “anarcho-capitalist”, Milei argues harsh austerity is needed to put Argentina back on the path to prosperity and that there is no time for a gradualist approach. However, he has promised any adjustments will almost entirely affect the state rather than the private sector.

Argentinians, disillusioned with skyrocketing inflation and a 40 percent poverty rate, have proven surprisingly receptive to his vision.

US national debt exceeds $33 trillion for first time in history

Washington, Sep 19,2023: The US national debt exceeded $33 trillion for the first time in the country’s history, according to US Treasury Department data.
The US national debt stands at approximately $33.04 trillion, the Treasury Department said.
The milestone comes as Congress works to fund the government before the end of the month, lest they risk a government shutdown.
A number of US House Republicans have expressed opposition to a short-term funding bill proposed by the chamber leadership, citing concerns about excessive government spending.
On Monday, US Congressman Dan Bishop said the United States has added $1 trillion to the existing national debt since June to exceed $33 billion, adding that the per family share is $260,000.
Bishop said the Congress’ answer to the record level of debt is to pass another continuing resolution to continue to fund the government. The congressman referred to Congress and the government as “the swamp” – a popular reference for the bureaucracy in Washington.
Earlier on Monday, US Treasury Secretary Janet Yellen said that she is comfortable with the economic path of the United States despite the rising inflation and interest rates.

Junior Digest

Bangladesh seeks 1 bln USD budget support from World Bank

Retail inflation dips to 59-months low of 3.54 pc in July

China vows to ‘transform’ economy, sets ambitious growth target

Pressure grows on China for big policy moves to fix economy

Italian ruling coalition votes against ESM reform

Argentina’s Milei starts shock therapy by devaluing peso by 50 percent

US national debt exceeds $33 trillion for first time in history

Telangana CM joins trillion tree campaign at Davos to promote environmental sustainability

Sanjay Malhotra appointed as new RBI Governor

Union Budget 2025 Highlights

India sets record with over USD 111 bn in remittances in 2022: UN report

PM Modi lays foundation stone of Vadhvan Port Maharashtra-India’s largest deep water port

Rs 2.5 lakh crore allocation for Railways in interim budget: Vaishnaw

Record GST collection in April, breaches Rs 2L crore mark

Economic Survey pegs FY26 GDP growth at 6.3-6.8 pc

No change in tax rates, focus stays on capex in interim Budget

Interim Budget 2024-25 Highlights

India eyeing 10 pc of global space economy in next two decades: ISRO chief

India set to achieve $150 billion bio-economy by 2025: Dr Jitendra Singh

Cong slams govt’s poverty elimination data

Nobel Prize in Economics 2024 awarded to Daron Acemoglu, Simon Johnson and James A. Robinson

“Ten years of NDA testimony to courageous, far-reaching decisions”: PM Modi

Manmohan Singh: Former Prime Minister died at 92

World Economic Forum opens in Swiss City of Davos on Monday