Category: Economy

The US economy is facing the greatest threat since the Great Depression, as inflation jumped at its fastest pace in nearly four decades last month. A 7% spike from one year earlier that’s increasing household expenses, eating into wage gains, and putting pressure on President Joe Biden and the Federal Reserve.

2021 saw a sharp rise in gas, cars, food, and furniture for rapid recovery from the pandemic recession. To help spur the demand for goods, the government provided vast infusion aid and ultra-low interest rates. The fast pace vaccination rate provided residents the confidence to dine out and travel.

On Wednesday, the Labor Department reported that a measure of inflation excluding volatile food and gas jumped 5.5% in December and is considered highest in decades. From November, overall inflation rose to 0.5% from 0.8% in the previous month.

Chief international economist at the financial services company ING, James Knightley said, “U.S. inflation pressures show no sign of easing. It hasn’t been this high since the days of Thatcher and Reagan. We could be close to the peak, but the risk is that inflation stays higher for longer”.

According to the world bank report, the new emerging COVID-19 variants lead to rising inflation, debt, and income inequality and cause a drop in overall GDP to 4.1% in 2022 from 5.5% in 2021. Global Economic Prospects report suggests after a strong rebound in 2021, the new COVID variant can threaten the global economy and might face a slowdown.

World Bank Group President David Malpass said, “The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with the government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful to develop countries”. He further added that it will also require concerted international action along with some thorough national policy measures to put the global economy in its original state of growth path.

On Tuesday, according to the global economic report, the World Bank retained its forecast for India’s GDP growth for the current year at 8.3%. This was followed by the government’s estimate that India’s GDP will grow at 9.2% in the current financial year ending March 2022.

In addition to its economic growth forecasts for the United States, European nations, and China, the global agency warned that rising income inequality, high debt levels, and new Covid-19 variants could threaten recovery in developing economies.

French economist Pierre-Olivier Gourinchas has been named as the next chief economist for The International Monetary Fund (IMF). He will succeed Gita Gopinath by joining as the First Deputy Managing Director with the IMF management team.

Gourinchas said on Twitter, “I am deeply honored to be appointed as the IMF’s new Economic Counselor and Director of Research. I look forward very much to working with the new IMF colleagues”. He is due to take over his role as the Fund’s chief economist on January 24. As soon as he finishes his teaching obligations, he will begin serving as chief economist of the Fund part-time until April 1 when he will assume full responsibility.

Gourinchas holds a Ph.D. from the Massachusetts Institute of Technology and in 2007 won the Bernacer Prize for the Best European economist under 40. He also received the prize in 2008 for working in macroeconomics and finance for best French Economist under 40. Currently, he is at Haas School of Business at the University of California Berkeley,  the S.K. and Angela Chan Professor of Global Management. Consumption precautionary savings, fiscal federalism, lending booms, labor markets along exchange rates are a few areas of his interest.

On Tuesday, the United Nations launched its biggest appeal ever for $5 billion. This appeal is made to aid 22 million Afghans by preventing them from ‘catastrophe’. The nation is currently on the brink of a humanitarian crisis along with economic collapse.

Martin Griffiths, UN humanitarian chief calls this “the largest ever appeal”. It said that it was “encouraging” as there is a high degree of consensus for the increasingly desperate needs of the people of Afghan.

The United Nations has announced a pledge conference to follow the appeal. There were indications that other mostly Western nations will provide funding, including another $308 million from the United States and $500,000 from Israel.

During the meeting, Nasir Ahmad Andisha, Afghanistan’s ambassador to Geneva who represents the former government and still holds U.N. recognition, stated that “Afghanistan is experiencing the most severe humanitarian crisis in its modern history, perhaps the worst in the world.” He accused the Taliban of target killing, enforced disappearance, and other rights abuses.

Approximately there are 5.7 million residents take shelter in five neighboring countries as refugees. Initially, the Taliban has promised tolerance and inclusiveness to women along with ethnic minorities. However, their actions towards renewed restriction on women and the all-men government have met dismay by the international community.

On Jan 8, during a telephonic conversation between Indian Foreign Minister S Jaishankar and his counterpart Iran’s Amir-Abdollahian, a partnership offer was made. Both nations agreed to supply humanitarian aid to Afghanistan that will include wheat, the COVID vaccines, and medicines.

Various bilateral regional and international concerns were discussed by Abdollahian and Jaishankar including Afghanistan’s current situation. The importance of forming an inclusive administration in Afghanistan was emphasized during the call. Iran’s Chabahar port usage was also discussed where India operates a major terminal.

India wishes to supply aid to Afghanistan through Iran’s Chabahar port that is located in the Sistan-Balochistan province on Iran’s southern coast. After the Taliban’s takeover of Afghanistan, non-humanitarian financing was frozen by the major donors. This caused a severe economic crisis which exacerbated the humanitarian disaster.

Pakistan has created obstacles for the Indian government to transport 50,000 tonnes of wheat to Afghanistan which is currently experiencing a severe humanitarian crisis. On Dec 11, India donated 1.6 tonnes of medications to Kabul through the special charter plane. On Jan 7, two tonnes of life-saving medicines were also transported by India via Dubai.

Currently having no direct flights between India and Afghanistan, on January 1, the Indian government provided 50,000 doses of the Covid-19 vaccine via Tehran.

On Sunday, Sri Lankan President Gotabaya Rajapaksa request the Chinese government to help South Asian countries weather a worsening financial crisis to help restructure debt repayments. During a meeting with the Chinese Foreign Minister Wang Yi, Rajapaksa made the request in Colombo.

According to reports by analysts, despite benefiting from billions of dollars in soft loans for China, the island nation is facing a foreign exchange crisis. It is currently placing the nation on the verge of default. Behind international financial markets and Asian Development Bank (ABD and Japan, China is the fourth biggest lender to Sri Lanka.

China has lent more than $5billion over the last decade to Sri Lanka for building ports, highways, a coal power plant, and an airport. According to the critics, the funds were used for white elephant projects with low returns. However, China has denied such allegations.

In the official statement, Rajapaksa said, “the president pointed out that it would be a great relief to the country if attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the COVID-19 pandemic”. To which Beijing’s foreign ministry spokesman Wang Wenbin said, “China has always helped Sri Lanka develop its economy as best as we can and we will continue to do so in future”.

Sri Lanka has been struggling with its economy since the outbreak of the Covid-19 pandemic. Presently, it is on the brink of bankruptcy and is going through a major financial and humanitarian crisis. The high inflation, increase in food prices, and unemployment, is soared up with the increasing number of Covid-19 cases across the globe. 

According to a British newspaper ‘Guardian’, the country is on a heavy debt of $7.3 billion loan both domestic and foreign which it has to repay within 12 months. A $500 million international sovereign bond repayment is due in January itself. As far as the current economic status is confirmed, they certainly do not have enough to cover their debts as in November, their available foreign exchange currency reserves were just $1.6 billion. The loss of tourism and increase in unemployment in the tourism sector which accounted for 10 percent of the GDP of the country suffered heavily due to the Covid-19 pandemic which halted major operations all over the globe. 

The President of Sri Lanka Gotabaya Rajapaksha in his New Year’s address speech expressed some hope in reviving the cash-strapped economy, but he did not mention how the government would tackle the mounting foreign debts and foreign exchange crisis.   

Singapore’s economy outdid itself in 2021 by showing the highest economic growth in more than a decade. It has shown the steadiest growth despite the recessions followed by the COVID-19 pandemic that hard-hit country’s economy in the previous year. The recession that it faced a year before was the worst one of its entire lifetime, but it grew out of it most efficiently with showing almost 7.9% growth in its economy in 2021.

The Ministry of Trade and Industry said that the country witnessed a sharp rise of 7.2% in its economy in 2021, which is the highest since 2010 and even higher than earlier estimates. In the fourth quarter of 2022, the economy of Singapore inflated by 5.9 percent on a year-to-year basis which moderated from a 7.1 percent growth in the previous quarter which increased due to the low base comparison.

The manufacturing sector witnessed the largest growth in the last quarter of 2021 with a profit of 14 percent year on year, almost double the profit of 7.9 percent witnessed in the previous quarter. The Prime Minister of Singapore Lee Hsien Loong, in his New Year’s address speech, also announced that the economy of Singapore is expected to further grow by 3 percent to 5 percent in 2022.        

India on Wednesday welcomed Egypt’s entry as the fourth new member of the New Development Bank (NDB) that was established by the BRICS countries six years ago.

The NDB admitted Bangladesh, United Arab Emirates (UAE) and Uruguay as its new members in September. External Affairs Ministry Spokesperson Arindam Bagchi said that expansion of the membership by the NDB will help it position as a premier development institution for emerging economies.

The BRICS (Brazil-Russia-India-China-South Africa) set up the bank with an aim to mobilise resources for infrastructure and sustainable development projects in emerging economies.

Marcos Troyjo, President of NDB said that they are delighted to welcome Egypt into NDB’s family. Egypt is one of the world’s fastest-growing countries, a major economy in the African continent and the Middle East region as well as a key player in development finance institutions. NDB looks forward to supporting its investment needs in infrastructure and sustainable development, he added.

Mohamed Maait, Minister of Finance of Egypt said that Egypt fully embraces the decision to join the NDB family and looks forward to building a strong partnership and engagement with the bank over the coming years.

India’s Foreign Secretary Harsh Vardhan Shringla has confirmed that India and Russia signed 28 investment pacts on Monday, which includes agreements on steel, shipbuilding, coal and energy. India has also begun to receive S-400 missiles from Russia this month.

Shringla described the summit talks between Prime Minister Narendra Modi and Russian President Vladimir Putin as “highly productive”. He said 28 agreements were concluded which includes increased mutual cooperation to combat threats like terrorism.

Asked if India raised the issue of the eastern Ladakh standoff with Russia, Mr. Shringla, without giving a specific answer, said that all concerns relating to India’s security were discussed.

The Russian President said that they perceive India as a great power, a friendly nation, and a time-tested friend. Mr. Putin further said that the relations between the two nations are growing, and that they cooperate in the military sphere like no other country.

Mr. Putin arrived in India on Monday and this is his only second work trip outside Russia since the outbreak of Covid19. This was the first in-person meeting between the Indian and Russian Prime Minister after their meeting on the sidelines of the BRICS summit in Brazil in November 2019.