Category: Economy

The New Development Bank (NDB), established by the BRICS group of emerging economies, is projected to allocate approximately $5 billion in loans this year. The company’s vice president, Zhou Qiangwu, made this claim in his remarks on Tuesday.

Qiangwu highlighted that, despite some setbacks during the pandemic, the bank’s operations are now returning to normalcy, signalling a positive future for its activities.

However, he refrained from providing specific details on the nature of the setbacks. Still, he mentioned that China and India have received slightly more investment from the bank than other member countries—this emphasises China and India’s significance as two economic powerhouses within the BRICS alliance.

Qiangwu’s remarks also touched upon the economic outlook for China, with an anticipated growth rate of around 5% for the year, aligning with the government’s target.

With a combined population of almost 40% and a quarter of the world economy, the BRICS group seeks to establish a new international financial market separate from Western dominance. This goal is part of a larger geopolitical plan by developing nations to establish their power and alter the structure of the world financial system.

Two small solar manufacturers, Heliene in Canada, which operates in Minnesota, and Suniva in Georgia, are working together to create panels that qualify for a new federal incentive for clean energy equipment built in the United States. The Biden administration has praised this alliance as evidence of the Inflation Reduction Act’s (IRA) achievement in creating a local solar manufacturing sector that can compete with China.

Janet Yellen, the Treasury Secretary, applauded the initiative and brought up the difficulties that American solar entrepreneurs had in the past. Suniva has signed a $400 million, three-year contract with Heliene to supply cells for panel assembly, reviving an idle factory. The partnership plans to produce enough panels to power roughly 350,000 households.

According to Treasury Department regulations unveiled a year ago, developers utilising panels with American-made cells are eligible for a 10% tax credit as part of the 2022 IRA. Several manufacturers are pushing for stronger domestic content regulations to combat Chinese market dominance.

Cristiano Amoruso, CEO of Suniva, praised the effectiveness of the Treasury’s domestic content guidelines and the IRA. An additional 30% IRA tax credit for renewable energy plants is provided via the domestic content credit.

Sri Lanka’s central bank unexpectedly reduced interest rates by 50 basis points to spur growth amid its worst financial crisis in decades. The Standing Deposit Facility Rate now stands at 8.50%, and the Standing Lending Facility Rate at 9.50%. This move surprised markets, with most economists anticipating no change.

The total interest rate cuts since last year amount to 700 basis points, aiming to steer the economy out of its crisis. The bank stated that, despite potential near-term inflation risks, the medium-term inflation outlook remains stable due to subdued economic activity. Lowering rates will aid in maintaining inflation at the targeted 5% over the medium term while facilitating economic growth.

The recent decision follows a pause in January to counter a spike in inflation resulting from a sales tax increase. Market interest rates need to continue downward as demand remains subdued. This rate reduction aims to boost growth further, leveraging recent policy changes. Though it enhances positive sentiment, it may not impact ongoing debt restructuring talks.

Sri Lanka seeks to restructure $12 billion of debt after defaulting in 2022. A recent IMF agreement offers confidence, paving the way for economic recovery after a 2.3% contraction in 2023 and 4.5% growth in the fourth quarter.

On Monday, Britain’s International Investment (BII) pledged $100 million in trade finance to the Eastern and Southern African Trade and Development Bank (TDB) to boost agriculture and food security.

The funding aims to assist trade, which is crucial given the economic difficulties that African countries face, which are made worse by climate change. Research from the African Development Bank (AFDB) highlights the urgent need for more trade financing since there is a $120 billion yearly shortfall as a result of dwindling support from foreign lenders.

By giving local businesses access to essential resources, the TDB investment will improve economic resilience, productivity, cross-border trade, food security, and job development. Andrew Mitchell, the United Kingdom’s Minister for Development and Africa, reaffirms the government’s commitment to the advancement of agriculture and economics in Africa.

By 2026, BII, which has investments in more than 1,470 companies in 65 countries, intends to dedicate 30% of its fresh pledges to climate finance. Admassu Tadesse, President of TDB Group, highlights the organisation’s responsibility for securing vital commodity supplies, especially in the fields of healthcare and agriculture.

In February, UK inflation eased to 3.4%, proving a little relief for Prime Minister Rishi Sunak ahead of the election. This development aligns with forecasts, positioning the Bank of England (BoE) to consider rate cuts later in 2024.

Despite rising motor fuel prices, food and restaurant prices declined subsequently. As a result, core inflation dropped to 4.5%, with service inflation dropping to 6.1%. Despite this moderation, the UK still maintains the highest inflation rate among the G7 nations.

Finance Minister Jeremy Hunt sees scope for abolishing social security taxes as inflation approaches the 2% target. It is anticipated that the Monetary Policy Committee of the Bank of England will hold interest rates steady for the time being but has hinted at possible reductions in the future.

Despite the reprieve from inflation, Sunak’s political party continues to face obstacles. Hunt refers to potential tax reform opportunities as inflation approaches target levels.

Sunak maintains a positive outlook on the economy’s recovery and advises voters to support the Conservatives so that his agenda can be implemented. However, Labour emphasises the enduring fiscal burden that was encountered during the Conservative regime.

South Korea plans to invest $313 billion in green financing to support carbon offset projects, aiming to slash greenhouse gas emissions by 40% from 2018 levels by 2030.

The Financial Services Commission (FSC) announced this decision, involving a future energy fund worth $8 billion initiated by the banking sector. By 2030, state-run financial institutions will invest $313 billion in low-carbon facilities, eco-friendly products, and technology support, marking a 67% increase from the last five years.

These measures are expected to reduce 85.97 million metric tonnes of greenhouse gases by 2030, fulfilling nearly 30% of the government’s emission reduction target. Additionally, private sector involvement includes a $9 billion investment in renewable energy facilities, with the Korea Development Bank contributing $1.8 billion and five major banks adding $7.2 billion.

The FSC highlighted the challenge of funding renewable energy projects due to lengthy loan processes, thus emphasising the role of the future energy fund in providing strategic capital financing. This initiative aims to boost the share of renewable energy in the power generation mix from 9.2% to 21.6% by 2030.

Moreover, the government and banking industry plan to invest $9 billion by 2030 in climate technologies, including carbon capture.

On Monday, Abu Dhabi surged ahead of other Gulf stock markets as investor confidence was strengthened by strong Chinese economic data and an increase in crude prices. China’s factory output and retail sales for January–February surpassed expectations, signalling a strong start to 2024.

Abu Dhabi’s main stock index, .FTFADGI, soared by 6.2%, marking its highest intraday surge in almost four years. First Abu Dhabi BankFAB.AD, led the charge with a 1.4% increase, while E7 E7.AD and National Marine Dredging NMDC.AD rose by 4.6% and 1.5%, respectively.

Mazen Salhab, BDSwiss’s chief market strategist for MENA, attributed ADX’s growth to gains in commodities and also emphasised Abu Dhabi’s appeal to affluent and permanent-residence investors.

In Qatar, the benchmark index .QSI rose by 0.3%, supported by Qatar Gas Transport QGTS.QA climbing 2% and Industries Qatar IQCD.QA gaining 0.5%. Oil prices, crucial for Gulf markets, rose, with Brent LCOc1 reaching $85.8 a barrel by 0740 GMT.

However, SA’s benchmark index .TASI dipped by 0.2%, dragged down by Saudi Arabian Mining 1211.SE and Riyad Bank 1010.SE. Meanwhile, Dubai’s main index .DFMGI fell by 0.4%, with Salik Company SALIK.DU dropped 3.2%, and Emirates NBD ENBD.DU slipping by 0.6%.

On Monday, the European Union (EU) committed to 7.7 billion euros (US$8.39 billion) in humanitarian aid in 2024. This initial investment marks a decrease from the previous year’s total.

Despite escalating needs in places like Gaza, the initial investment fell short of last year’s 8.4 billion euros. The EU’s humanitarian aid and crisis management chief, Janez Lenarcic, expressed some satisfaction with the amount but expects betterment.

Meanwhile, the reasons for the reduction were not specified. The United Nations reports a record 300 million people requiring humanitarian assistance, primarily due to conflicts and climate change, with a funding gap of nearly US$50 billion worldwide.

Josep Borrell, the head of foreign policy for the European Union, condemned the dangerous situation in Gaza, claiming that it is close to famine and that Israel is using starvation as a strategic tool. Since Israel conflicted with Hamas in retaliation for an October att ack, aid delivery into Gaza has been restricted. The ongoing two-day conference in Brussels focuses on facilitating aid delivery to Gaza.

EU foreign ministers will discuss initiatives to increase aid access to Gaza, whether by land, sea, or air. Israel denies obstructing aid, attributing delays to aid agencies, and accusing Hamas of diverting assistance.

The UK Prime Minister, Rishi Sunak, is preparing a strategy to avert a Conservative Party defeat in the upcoming election. His strategy calls for the announcement of an additional tax-cutting budget proposal in September, followed by elections in October or November.

However, implementing this strategy could present difficulties. Sunak’s political advisors anticipate this difficulty, especially after he definitively ruled out a snap election on May 2, ending weeks of speculation. Although the exact date of the election is still uncertain, the Prime Minister’s team is confident that they can leverage the anticipated reductions in interest rates, declining inflation, and available fiscal space to implement additional pre-election incentives.

Despite Britain’s strained finances, advisors have proposed significant income tax reductions, cuts to property stamp duty aimed at first-time buyers, and potentially revolutionary changes to council tax.

The goal is to corner the opposition Labour Party by proposing tax cuts to a degree where Labour would have to oppose them, creating a point of contention in the campaign.

Jeremy Hunt, the Chancellor of the Exchequer, reduced the national insurance payroll tax by two percentage points in two fiscal statements. Labour had pledged to do the same, although it has reservations about further reductions due to concerns about the deterioration of the public service.

EU leaders are set to announce a €7.4 billion funding package in Cairo to strengthen ties with Egypt, aiming to address migrant flows across the Mediterranean. This agreement elevates the EU-Egypt relationship to a “strategic partnership,” focusing on renewable energy, trade, and security cooperation.

There will be €5 billion in macro-financial assistance, €1.8 billion in investments, and €600 million in grants over the next three years. Immediate emergency funding of €1 billion will be provided, with the remaining €4 billion subject to European Parliament approval.

The initiative, developed closely with the IMF, aims to alleviate Egypt’s economic challenges, exacerbated by high inflation and financial strain. Conflicts in neighbouring Sudan and Gaza highlight Egypt’s strategic importance. A delegation of prime ministers from Italy, Greece, Austria, Belgium, and Cyprus is led by European Commission President Ursula von der Leyen.

Egypt has secured $20 billion in multilateral support and has largely curbed irregular migration since 2016. However, there’s a rise in Egyptians attempting to cross via Libya, prompting EU funding to address migration. Critics question Western support for President Abdel Fattah al-Sisi, citing human rights concerns and mass incarcerations. The Human Rights Watch organization criticises the plan for being flawed and neglectful of abuses.