Connect with us

Spread & Containment

Asia Growth Slows on Commodities, Covid and Rising Interest Rates

By Anne-Marie Gulde-Wolf, Sanjaya Panth, and Shanaka J. Peiris Region’s policymakers face difficult policy trade-offs and should protect the most vulnerable…

Published

2 months ago

on

By Anne-Marie Gulde-Wolf, Sanjaya Panth, and Shanaka J. Peiris

Region’s policymakers face difficult policy trade-offs and should protect the most vulnerable from rising fuel and food costs while enacting economic reforms to boost long-term growth.

Economic growth in Asia and the Pacific is poised to slow more than previously estimated this year amid headwinds from the war in Ukraine, a resurgent pandemic, and tightening global financial conditions.
 
Regional gross domestic product will expand by 4.9 percent, 0.5 percentage points less than we forecast in January and slower than last year’s 6.5 percent growth rate, according to our latest projections. We also estimate that inflation will rise faster in many countries, though from relatively low levels.
 
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.
 
Russia’s invasion of Ukraine will pose the biggest challenge for economic growth, with the region’s advanced economies hurt most by reduced demand from Europe and emerging markets feeling the effects of higher global commodity prices, according to our latest projections.
 

Our latest World Economic Outlook lowered the 2022 global growth estimate by 0.8 percentage point to 3.6 percent. It reflects a 1.1 percentage point cut for the euro area, now seen expanding 2.8 percent. Because Asia’s advanced economies have strong ties with Europe, the continent’s weaker growth will weigh on external demand and ultimately growth for major regional trade partners like Japan and Korea.
 
Most of Asia’s emerging and developing economies are net importers of oil, gas, and metals, making them particularly vulnerable to rising global commodity prices. That means that a deterioration in their terms of trade—a measure of prices for a country’s exports relative to its imports—will likely reduce growth, weaken currencies, and worsen current-account balances. High food and fuel costs also add to inflation pressures, especially in lower-income countries where they make up a large share of consumer spending.
 
Coronavirus infections in most of Asia have retreated from their peaks during the rapid spread of the omicron variant, with mobility indicators approaching pre-pandemic levels. China is the most notable exception to this, as lockdowns in Shanghai and elsewhere idle a wide range of activity and threaten to cause further disruptions to regional and global supply chains. These lockdowns are one reason that we project growth in China to slow to 4.4 percent this year, which will affect Asia’s emerging economies through reduced trade and demand.
 
Tightening and inflation
 
Tightening global financial conditions will weigh on economic growth. Government bond yields in major Asian economies have begun rising as the Federal Reserve starts to lift US interest rates. Our forecasts are predicated on the expectation that continued tightening abroad and rising inflation at home will lead many Asian central banks to hike rates themselves, placing a drag on investment.
 
Risks to the economic outlook include an intensification of the aforementioned three main headwinds.
 
An escalation of the war in Ukraine would further increase food and energy prices, adding to stresses for vulnerable households and potentially causing social unrest to spread to more countries.
 
A tightening of US monetary policy that is materially faster or larger than currently expected by markets—or both—would have large spillovers to Asia. If disruptive capital outflows occur as a result, central banks in affected countries could respond through the judicious use of all their policy levers in an integrated fashion. The downside risk of capital outflows is mitigated in countries that have built up strong buffers, but is amplified where high debt conspires with other vulnerabilities.
 
Finally, a greater slowdown in China’s economy due to broader virus lockdowns or other risk factors such as the continued weakness in the real estate sector, would also have large implications for the region, given trade linkages within Asia.
 
More broadly, a potential fragmentation of supply chains and added geopolitical tensions will remain risks for the longer term for a region that has flourished in recent decades from rising wealth and other economic gains from globalization.
 
Strong responses needed
 
Addressing pressures on growth and managing the difficult short-term trade-offs requires strong and coordinated policy responses that are tailored to country-specific circumstances. Authorities in the region should:
  • Protect the most vulnerable from rising fuel and food costs. Social unrest has already flared where these pressures exacerbate vulnerabilities, such as Sri Lanka. Promising regional examples of targeted and temporary protections include a Philippine cash-transfer program and New Zealand’s reduction in public transport fares.
  • Anchor medium-term fiscal policy frameworks to ensure debt sustainability. With output gaps still large in many countries, the withdrawal of fiscal stimulus must be well calibrated to support the pandemic recovery. Some countries with the space to do so, including China and Japan, responded to recent headwinds with fiscal measures to support recovery this year. But countries most vulnerable to debt distress will need consolidation sooner, and some may benefit from debt treatment under the Common Framework.
  • Tighten monetary policy where inflation is rising faster, such as Singapore, or above central-bank targets, as in Korea. Macroprudential policies should limit financial stability risks amid high household debt levels, including to address significant increases in housing prices in some countries.
  • Enact economic reforms to boost long-term growth. This is particularly important in Asia’s emerging economies because they may see the most scarring from the pandemic. Overhauls are needed in several areas to boost productivity, such as non-tariff barriers and product and labor markets. Education reforms are essential to address the long-term effects of school closures, which were substantial in South Asia and low-income and developing countries.

 

 

We want to hear from you!

Click here for a 3-question survey on IMFBlog.

 

Read More

Related Topics:
Continue Reading

Government

Cruise Line Drops Pre-Cruise Covid Testing Rule

The major cruise lines walk a delicate line. They need to take the actual steps required to keep their passengers safe and they also need to be aware of…

Published

41 mins ago

on

July 3, 2022

By

The major cruise lines walk a delicate line. They need to take the actual steps required to keep their passengers safe and they also need to be aware of how things look to the outside public. It's a mix of practical covid policy balanced with covid theater.

You have to do the right thing -- and Royal Caribbean International (RCL) - Get Royal Caribbean Group Report, Carnival Cruise Lines (CCL) - Get Carnival Corporation Report, and Norwegian Cruise Lines (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report have been doing that with very meticulous protocols-- but you also have to show the general public you're taking the pandemic seriously. The cruise industry has been under the microscope of both public perception and the Centers for Disease Control (CDC) since covid first appeared.

That's not because you're likely to get infected on a cruise ship than at a concert, sporting event, theme park, restaurant, or any other crowded space. It's because when you get sick at one of those locations nobody can pinpoint the source of your infection

Cruises last from 3 days to 7 days or even longer and that means that some people will get covid onboard and that will be blamed on the cruise industry. To mitigate that Carnival, Royal Caribbean, and Norwegian have rigid protocols in place that require passengers 12 and over to be vaccinated as well as pre-cruise covid tests taken no more than two days before your cruise leaves.

Once cruise line has dropped that testing requirement (at least on a few sailings) and that could lead Royal Caribbean, Carnival, and Norwegian to follow. 

Sina Schuldt/picture alliance via Getty

Holland America Drops Some Covid Testing

As the largest cruise lines sailing from the U.S., Royal Caribbean, Carnival, and Norwegian don't want to be the first to make major covid policy changes. They acted more or less in tandem when it came to loosening, then dropping mask rules and have generally followed the lead of the CDC, even when that agency's rules became optional.

Now, Holland America cruise line has dropped pre-cruise covid testing on a handful of cruises. It's a minor move, but it does provide cover and precedent for Royal Caribbean, Carnival, and Norwegian to eventually do the same.

"Holland America Line becomes the first US-based cruise line to remove testing for select cruises. Unfortunately for those taking a cruise from the United States, the new protocols are only in place for certain cruises onboard the company’s latest ship, the Rotterdam, in Europe," Cruisehive reported.

The current CDC guidelines do recommend pre-cruise testing, but the cruise lines into following those rules. By picking cruises sailing out of Europe, Holland America avoids picking a fight with the federal agency just yet, but it will be able to gather data as to whether the pre-cruise testing actually helps.

Holland America has not changed its vaccination requirements for those cruises which mirror the 12-and-up rule used by Royal Caribbean, Carnival, and Norwegian.

Some guests have called for the end of the testing requirement because they believe it's more theater than precaution because people can test and then contract covid while traveling to their cruise.

The Current Cruise Protocols Work

Royal Caribbean President Michael Bayley does expect changes to come in his cruise line's covid protocols, and he talked about them during Royal Caribbean's recent President's Cruise, the Royal Caribbean Blog reported.

"I think pre cruise testing is going to be around for another couple of months," Bayley told passengers during a question and answer session. "We obviously want it to go back to normal, but we're incredibly cognizant of our responsibilities to keep our crew, the communities and our guests safe."

People do still get covid onboard despite the crew being 100% vaccinated and all passengers 12 and over being vaccinated, but the protocols have worked well when it comes to preventing serious illness.

Bayley said that the CDC shared some information with him in a call.

"The cruise industry sailing out of the US ports over the past 12 months and how many people have been hospitalized with Covid and how many deaths occurred from Covid from people who'd sailed on the industry's ships, which is in the millions," he said, "And the number of people who died from COVID who'd sailed on ships over the past year was two."

That success may be why the major cruise lines are reluctant to make changes. The current rules, even if they're partially for show, have been incredibly effective.

"Two is terrible. But but but against the context of everything we've seen, that's it's truly been a remarkable success." he added.

Read More

Continue Reading

Spread & Containment

Visualizing A Decade Of Population Growth And Decline In US Counties

Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population…

Published

13 hours ago

on

July 2, 2022

By

Visualizing A Decade Of Population Growth And Decline In US Counties

There are a number of factors that determine how much a region’s population changes.

If an area sees a high number of migrants, along with a strong birth rate and low death rate, then its population is bound to increase over time. On the flip side, as Visual Capitalists Nick Routley details below, if more people are leaving the area than coming in, and the region’s birth rate is low, then its population will likely decline.

Which areas in the United States are seeing the most growth, and which places are seeing their populations dwindle?

This map, using data from the U.S. Census Bureau, shows a decade of population movement across U.S. counties, painting a detailed picture of U.S. population growth between 2010 and 2020.

Counties With The Biggest Population Growth from 2010-2020

To calculate population estimates for each county, the U.S. Census Bureau does the following calculations:

      A county’s base population → plus births → minus deaths → plus migration = new population estimate

From 2010 to 2020, Maricopa County in Arizona saw the highest increase in its population estimate. Over a decade, the county gained 753,898 residents. Below are the counties that saw the biggest increases in population:

Phoenix and surrounding areas grew faster than any other major city in the country. The region’s sunny climate and amenities are popular with retirees, but another draw is housing affordability. Families from more expensive markets—California in particular—are moving to the city in droves. This is a trend that spilled over into the pandemic era as more people moved into remote and hybrid work situations.

Texas counties saw a lot of growth as well, with five of the top 10 gainers located in the state of Texas. A big draw for Texas is its relatively affordable housing market. In 2021, average home prices in the state stood at $172,500—$53,310 below the national average.

Counties With The Biggest Population Drops from 2010-2020

On the opposite end of the spectrum, here’s a look at the top 10 counties that saw the biggest declines in their populations over the decade:

The largest drops happened in counties along the Great Lakes, including Cook County (which includes the city of Chicago) and Wayne County (which includes the city of Detroit).

For many of these counties, particularly those in America’s “Rust Belt”, population drops over this period were a continuation of decades-long trends. Wayne County is an extreme example of this trend. From 1970 to 2020, the area lost one-third of its population.

U.S. Population Growth in Percentage Terms (2010-2020)

While the map above is great at showing where the greatest number of Americans migrated, it downplays big changes in counties with smaller populations.

For example, McKenzie County in North Dakota, with a 2020 population of just 15,242, was the fastest-growing U.S. county over the past decade. The county’s 138% increase was driven primarily by the Bakken oil boom in the area. High-growth counties in Texas also grew as new sources of energy were extracted in rural areas.

The nation’s counties are evenly divided between population increase and decline, and clear patterns emerge.

Pandemic Population Changes

More recent population changes reflect longer-term trends. During the COVID-19 pandemic, many of the counties that saw the strongest population increases were located in high-growth states like Florida and Texas.

Below are the 20 counties that grew the most from 2020 to 2021.

Many of these counties are located next to large cities, reflecting a shift to the suburbs and larger living spaces. However, as COVID-19 restrictions ease, and the pandemic housing boom tapers off due to rising interest rates, it remains to be seen whether the suburban shift will continue, or if people begin to migrate back to city centers.

Tyler Durden Sat, 07/02/2022 - 21:00

Read More

Continue Reading

Spread & Containment

Tesla EV deliveries fall nearly 18% in second quarter following China factory shutdown

Tesla delivered 254,695 electric vehicles globally in the second quarter, a nearly 18% drop from the previous period as supply chain constraints, China’s…

Published

21 hours ago

on

July 2, 2022

By

Tesla delivered 254,695 electric vehicles globally in the second quarter, a nearly 18% drop from the previous period as supply chain constraints, China’s extended COVID-19 lockdown and challenges around opening factories in Berlin and Austin took their toll on the company.

This is the first time in two years that Tesla deliveries, which were 310,048 in the first period this year, have fallen quarter over quarter. Tesla deliveries were up 26.5% from the second quarter last year.

The quarter-over-quarter reduction is in line with a broader supply chain problem in the industry. It also illustrates the importance of Tesla’s Shanghai factory to its business. Tesla shuttered its Shanghai factory multiple times in March due to rising COVID-19 cases that prompted a government shutdown.

Image Credits: Tesla/screenshot

The company said Saturday it produced 258,580 EVs, a 15% reduction from the previous quarter when it made 305,407 vehicles.

Like in other quarters over the past two years, most of the produced and delivered vehicles were Model 3 and Model Ys. Only 16,411 of the produced vehicles were the older Model S and Model X vehicles.

Tesla said in its released that June 2022 was the highest vehicle production month in Tesla’s history. Despite that milestone, the EV maker as well as other companies in the industry, have struggled to keep apace with demand as supply chain problems persist.

Read More

Continue Reading

Trending