Emerging Markets Daily - March 13
India GDP Forecast Cut, World Food Supplies Under Stress, Iran Fires Missiles into Irbil in Iraq, Africa Vulnerable to Ukraine Crisis: IMF, China-US Row and Stock De-Listings
The Top 5 Stories Shaping Emerging Markets from Global Media - March 13
India GDP Growth Forecast Cut to 7.9% - Morgan Stanley
Times of India
“As higher oil prices torpedo economic recovery worldwide, Morgan Stanley has cut India's GDP forecast for the fiscal year beginning April 1 by 50 basis points to 7.9 per cent, raised retail inflation projection to 6 per cent and expects current account deficit to widen to 3 per cent of GDP.”
‘Even as we expect the cyclical recovery trend to continue, we expect it to be softer than we previously projected,’ it said in a report. ‘We believe that the ongoing geopolitical tensions exacerbate external risks and impart a stagflationary impulse to the economy.’”
“India is affected through three key channels- higher prices for oil and other commodities; trade, and tighter financial conditions, influencing business/investment sentiment.”
“‘Building in higher oil prices, we trim our F23 GDP growth forecast 50bps, to 7.9 per cent, lift our CPI inflation forecast to 6 per cent, and expect the current account deficit to widen to 10-year high of 3 per cent of GDP,’ it said.” The Times of India reports.
World Food Supplies Imperiled by Russia Invasion
Financial Times
“Consumers around the world will feel the ‘enormous impact’ of Russia’s war on Ukraine through sharply higher food prices and significant disruption to agricultural supply chains, according to industry executives and leading European officials.”
“John Rich, executive chair of Ukraine’s leading food supplier MHP, said he feared for the vital spring planting season, which is critical not only for domestic supplies in Ukraine but also the huge quantities of grains and vegetable oil that the country exports around the globe.”
“The success of the planting season would be decided by ‘military action in the next week or two’, he added, warning that it would be jeopardised if Russia’s army moved into the west of the country, which has remained relatively unscathed.”
“Together with Russia, Ukraine is a leading grain and sunflower oil supplier to world markets, accounting for just under a tenth of global wheat exports, about 13 per cent of corn and more than half the sunflower oil market, according to UN Comtrade.”
“Prices of the commodities soared after Russia’s invasion, with wheat at one point hitting an all-time high. Rich warned of ‘spiralling inflation’ in the cost of wheat, corn and other commodities — prices of which were rising before the hostilities because of droughts and high demand as economies emerged from the pandemic. ‘It’s a pretty toxic mix,’ he said.” The FT reports.
Iran Claims Responsibility for Missile Strike Near US Consulate in Irbil, Iraq
Associated Press
“Iran has claimed responsibility for a missile barrage that struck early Sunday near a sprawling U.S. consulate complex in the northern Iraqi city of Irbil, saying it was retaliation for an Israeli strike in Syria that killed two members of its Revolutionary Guard.”
“No injuries were reported in the attack, which marked a significant escalation between the U.S. and Iran. Hostility between the longtime foes has often played out in Iraq, whose government is allied with both countries.”
“Iran’s powerful Revolutionary Guard said on its website that it launched the attack against an Israeli ‘strategic center of conspiracy’ in Irbil. It did not elaborate, but in a statement said Israel had itself been on the offensive, citing the recent strike that killed two Revolutionary Guards.”
“Earlier, a U.S. defense official and Iraqi security officials said the strike was launched from neighboring Iran…The U.S. defense official said it was still uncertain exactly how many missiles were fired and exactly where they landed. A second U.S. official said there was no damage at any U.S. government facility and that there was no indication the target was the consulate building, which is new and currently unoccupied.”
“…The attack came several days after Iran said it would retaliate for an Israeli strike near Damascus, Syria, that killed two members of its Revolutionary Guard. On Sunday, Iran’s state-run IRNA news agency quoted Iraqi media acknowledging the attacks in Irbil, without saying where they originated.”
“The U.S. presence in Iraq has long been a flash point for Tehran, but tensions spiked after a January 2020 U.S. drone strike near the Baghdad airport killed a top Iranian general. In retaliation, Iran launched a barrage of missiles at al-Asad airbase, where U.S. troops were stationed. More than 100 service members suffered traumatic brain injuries in the blasts.”
“More recently, Iranian proxies are believed responsible for an assassination attempt late last year on Iraq’s Prime Minister Mustafa al-Kadhimi.” AP reports.
Africa Particularly Vulnerable to Russia Invasion Fall-Out, IMF Says
African Business
“Africa is particularly vulnerable to the impact of the Ukraine war but the International Monetary Fund (IMF) stands ready to help African countries address its repercussions, said IMF managing director Kristalina Georgieva on 10 March.”
“Her statement came at the end of a meeting in Washington with African ministers of finance, African central bank governors and representatives of the UN Economic Commission for Africa to discuss the impact of the crisis in Ukraine.”
“‘Africa is particularly vulnerable to impacts from the Ukraine war through four main channels – increased food prices, higher fuel prices, lower tourism revenues, and potentially more difficulty accessing international capital markets,’ she said.”
“‘At this difficult moment, the Fund stands ready to help African countries address the repercussions of the war, and to help design and implement reforms through our policy advice, capacity development, and lending.’”
“The statement has been interpreted by analysts as indicating that the Fund will be more lenient in terms of the reforms it expects African countries to implement as part of the structural reform programmes tied to its loans.” Charles Dietz reports.
Leading China Banker Says Chinese Tech Sell-Off in US Markets ‘Irrational’
South China Morning Post and Bloomberg
“China and US should be able to strike a deal on the auditing dispute that threatens the listings of key Chinese firms on American stock exchanges, according to a senior executive at China’s top investment bank.”
“Regulators of the two countries are believed to be having ‘earnest’ discussions with an aim to resolve the issue, Wang Sheng, head of the investment banking division at China International Capital Corp, said in an opinion piece published by the Economic Daily on Sunday. The newspaper is affiliated with the State Council, China’s cabinet.”
“…The US Securities and Exchange Commission last week identified five Chinese firms under the Holding Foreign Companies Accountable Act, which it says the Public Company Accounting Oversight Board (PCAOB) was unable to inspect.”
“The five could be subject to delisting from US exchanges if they fail to comply with the HFCAA’s auditing requirements for three consecutive years. The news triggered a 10 per cent slump of Chinese stocks listed in the US, the steepest since the 2008 global financial crisis. Traders also sold Chinese tech shares traded in Hong Kong. The sell-off in the US was ‘somewhat irrational,’ Wang said. It’s ‘too early’ to conclude they will be delisted, he added.” SCMP/Bloomberg report.