Tag Archive for 'Macroeconomics'

The emerging economies have had a great decade. That was the easy part

Published on October 12, 2011 in Emerging Markets. 0 Comments Tags: , , , , .

The IMF’s latest forecast is that emerging economies will grow by more than 6% in 2011 and 2012. But growth in the rich world is likely to be below 2%.

Twenty of the 42 economies covered in the back pages of The Economist grew by 3% or more in the year to the latest quarter. Only two of these, Austria and Sweden, are from the traditional group of rich countries. The rest are developing economies, such as Brazil and Turkey, or newly rich ones, such as Taiwan and Hong Kong.

Yet the growth of emerging economies is unlikely to continue at the same rapid pace or without occasional downturns. As economies become richer, they can rely less and less on the brute force of capital spending, coupled with a steady flow of cheap rural migrants, to fuel their expansion. They have a greater need of a skilled workforce and a modern financial system that is attuned to where the best returns might be found.

The shift will not be easy. The coming decade is therefore likely to prove harder for the emerging markets. China and others are entering the tricky middle-income stage of development in which the big advances from absorbing rich-world technology start to run out [Read more].

Norway rides wave of prosperity on back of oil

Published on August 31, 2011 in International Business and International Finance. 0 Comments Tags: , , , , .

Blessed with large petroleum reserves, as well as robust public finances, Norway’s economy has managed to largely circumvent the EU debt crisis.

Blessed with large petroleum reserves, Norway is riding a wave of prosperity brought by high oil prices and robust public finances while the rest of Europe is mired in a debt crisis.

This Scandinavian nation of 4.9 million is the biggest oil producer and exporter in western Europe, with most of the oil production taking place offshore in the North Sea. Norway was also the world’s second largest exporter of natural gas after Russia last year, when crude oil, natural gas and pipeline transport services made up nearly 50% of its exports value.

To make sure future generations also benefit from the oil resources first discovered in 1969 and which will eventually run out, Norway saves petroleum revenues in a pension fund valued at roughly $550 billion. The so-called 4% fiscal rule limits the swings in the Norwegian economy; under the rule, the government aims to spend only 4% of the pension fund annually, though the exact percentage can vary [Read more].

Northern light: Sweden’s economy ‘a little Germany’

Published on August 31, 2011 in International Business and International Finance. 0 Comments Tags: , , , , .

Sweden is one of Europe’s fastest growing economies and its success is noteworthy given
the debt woes plaguing southern Europe.

Residents of this capital radiate a sense of well-being and it’s not only because they live in a beautiful city built on 14 islands that draws comparisons to Venice. It’s also because they call home one of Europe’s fastest growing economies.

The success of this export-oriented Nordic nation is noteworthy, because it’s in stark contrast to the debt woes plaguing Greece, Portugal and other southern euro-zone countries. Sweden is a member of the European Union, but it has chosen to keep its own currency. Public debt levels are relatively low and the government expects a budget surplus this year [Read more].

The Global Response to Federal Reserve QE2

Published on January 11, 2011 in Emerging Markets and International Business. 1 Comment Tags: .

In early November, the Federal Reserve put all speculation to rest when it formally announced that it would move forward with another found of quantitative easing, as it would inject an additional $600 billion of emergency liquidity into the United States economy. The global response to the Fed’s decision to move forward with QE2 was heated, to say the least. However, let’s first put the Fed’s decision in context. In June, when key data out of the U.S. began missing expectations on a consistent basis, traders began selling the dollar quite aggressively into higher-yielding assets such as emerging market currencies like China, India, Russia, Brazil, and the Eurozone.

When capital flows into an emerging market, it is good until a certain point. However, after a certain point, then increased capital flows actually become destructive. They drive up a country’s currency exchange rate, which causes their exports to become less attractive in foreign markets, which threatens to destabilize economic growth, since most emerging markets are heavily reliant on their exports.

Therefore, the global response to QE2 was frustration. China accused the U.S. of artificially devaluing its currency, Brazil increased a tax on foreign bond holders, and several emerging market Central Banks began intervening in the fx market in an attempt to drive down their exchange rates.

Currently, the United States is not necessarily on the good side of these emerging markets. Even Germany has lashed out at the U.S. regarding its tendency to print money at such substantial levels. Suffice to say, there is much volatility and uncertainty in global forex market, and this volatility will most likely remain in place until the global economy returns to stable growth, and that could be some time yet.

Most Competitive Economies 2010

Published on May 21, 2010 in International Business and Ranting and Raving. 0 Comments Tags: , .

The World Competitiveness Yearbook 2010 from Swiss business school IMD finds the U.S. and Europe losing their edge to fast-growing Asian economies.

A lot can change in 12 months. At this time last year, Western nations dominated the annual ranking of the world’s most competitive countries prepared by the IMD business school in Lausanne, Switzerland.

Now, in the most recent ranking released May 19, five of the top 10 are from the Asia-Pacific region. Emerging-power China, ranked No. 18, has gained ground, even as No. 3-ranked U.S. and No. 22-ranked Britain slipped in the global pecking order. Check out the top 10 here.

The Era of the Renminbi?

Published on November 21, 2009 in International Finance. 1 Comment Tags: , , , , .

RenminbiA recent side-by-side comparison of the U.S. and Chinese economies produced a startling result: There were $34.8 billion of initial public offerings in China this year and only $13.7 billion in the U.S.

With numbers like that, is it any surprise that Western fund managers are scrambling to get a bite of the immensely profitable Chinese market for new companies? As the New York Times reported, U.S.-based Blackstone Group has formed a partnership with Shanghai’s municipal government to raise a $732 million private equity fund.

What’s different this time is that Blackstone’s fund is denominated in the Chinese currency, which is officially called the renminbi. Blackstone’s idea is to take advantage of capital from China’s increasingly wealthy institutional and private investors. The fund will then use the investments to buy companies and take them public, earning a hopefully large profit along the way. There is plenty of interest in the Chinese market for new companies—Carlyle Group announced this week that it had invested $60 million in three Chinese growth companies. So there is no shortage of domestic companies ripe for turnaround [Source].

Asian Economies are Growing Strong

Published on September 22, 2009 in Emerging Markets. 0 Comments Tags: , , .

Growing Asian EconomiesThe economies of China and India are set to grow by more than previously thought in 2009, the Asian Development Bank (ADB) has said [Source].

Furthermore, when the chairman of the Federal Reserve, Ben Bernanke, told a Washington think-tank this month that “the recession is very likely over at this point”, he was careful to add that the American economy would remain weak for some time yet. Analysis released on Tuesday September 22nd by IMF economists who have been studying the aftermath of 88 banking crises over the past four decades, supports Mr Bernanke’s cautious talk. While most discussion of the worst recession since the Depression looks at the immediate pain from lost jobs and shuttered shops, the IMF analysis suggests that the effects of the downturn will be felt long after it is technically over [Source].

Globalisation at large

Published on August 2, 2009 in International Business. 0 Comments Tags: .

globalisationEconomic and financial globalisation and the expansion of world trade have brought substantial benefits to countries around the world. But the current financial crisis has put globalisation on hold, with capital flows reversing and global trade shrinking.

Some analysts see the drivers of the recent globalisation wave getting undermined, with protectionism on the rise.

Even supporters of globalisation agree that the benefits of globalisation are not without risks—such as those arising from volatile capital movements. The IMF works to help economies manage or reduce these risks, through economic analysis and policy advice and through technical assistance in areas such as macroeconomic policy, financial sector sustainability, and the exchange-rate system.

This report (PDF) pulls together the IMF’s work on globalisation and includes links to key articles, documents, and background information.

Emerging Markets: A macro view perspective

Published on August 1, 2009 in Emerging Markets. 0 Comments Tags: .

emerging_marketsEmerging market countries are facing increasing difficulties around the world because of the spreading global economic crisis, with demand falling for their exports, investment slumping, and cross-border lending drying up.

As the crisis becomes more prolonged, a growing number of emerging economies will find room for policy manoeuvre becoming increasingly limited, and large-scale official support is likely to be needed from bilateral and multilateral sources.

Overall, risks are largest for emerging economies that rely on cross-border flows to finance current account deficits or to fund the activities of their financial or corporate sectors. Countries with pegged exchange rate regimes may have little scope for interest rate cuts to the extent that the crisis has put sustained pressure on their exchange rates.

Foreign direct investment is set to slow significantly, given the fall in private equity assets, the lack of credit available to finance acquisitions, and sharply deteriorating growth prospects in emerging markets.

This report (PDF) highlights the main policy issues facing emerging market economies, and IMF action to support its emerging market members.

The Surprising Strength of Southeast Asia

Published on June 21, 2009 in Emerging Markets. 0 Comments Tags: , .

aseanDespite continuing concerns about corruption, red tape, and political instability, it’s suffering far less from the financial crisis than other parts of the world. Some companies operating in the region continue to do well, as demand for everything from computers to discount airline tickets remains strong.

Southeast Asia’s strength is an encouraging sign that the region is still a player. Though it may have been half-forgotten by many investors since the crisis, its educated workers, natural resources, and—in some countries, at least—first-class infrastructure make it worth paying attention to. ASEAN has a total population of 560 million, and its combined gross domestic product of $1.3 trillion is greater than India’s.

Indonesia, Thailand, Malaysia, the Philippines, Vietnam, and Singapore—which account for about 95% of the region’s economy—attracted nearly $50 billion in foreign direct investment last year, vs. China’s $92 billion [source].