Emerging Markets Monitor - July 27
Emerging Markets Monitor - July 27
IMF Slashes Growth Forecasts, Biden-Xi Talks, Europe Facing Winter Gas Shortage, India Recovery Hit By Oil Prices, Green Hydrogen and Saudi CP Visit to Greece
The Top 5 Stories Shaping Emerging Markets from Global Media - July 27
IMF Slashes Global Growth Forecasts, Raises Inflation Projections
Channel News Asia
“The International Monetary Fund cut global growth forecasts again on Tuesday (Jul 26), warning that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.”
“Global real GDP growth will slow to 3.2 per cent in 2022 from a forecast of 3.6 per cent issued in April, the IMF said in an update of its World Economic Outlook. It added that world GDP actually contracted in the second quarter due to downturns in China and Russia.”
“The Fund cut its 2023 growth forecast to 2.9 per cent from the April estimate of 3.6 per cent, citing the impact of tighter monetary policy. World growth had rebounded in 2021 to 6.1 per cent after the COVID-19 pandemic crushed global output in 2020 with a 3.1 per cent contraction.”
"‘The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one,’ IMF Chief Economist Pierre-Olivier Gourinchas said in a statement.”
“The Fund said its latest forecasts were ‘extraordinarily uncertain’ and subject to downside risks from Russia's war in Ukraine spiking energy and food prices higher. This would exacerbate inflation and embed longer-term inflationary expectations that would prompt further monetary policy tightening.”
“Under a ‘plausible’ alternative scenario that includes a complete cut-off of Russian gas supplies to Europe by year-end and a further 30 per cent drop in Russian oil exports, the IMF said global growth would slow to 2.6 per cent in 2022 and 2 per cent in 2023, with growth virtually zero in Europe and the United States next year.” Channel News Asia reports.
Biden To Speak With Xi on Thursday as US-China Ties Worsen
(File Photo)
Bloomberg
“President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan, according to people familiar with the matter.”
“The first conversation between the two presidents since March will take place at a particularly difficult juncture for US-China ties: House Speaker Nancy Pelosi’s staff and security officials aren’t ruling out plans for her to visit Taiwan in early August.”
“…US Ambassador to China Nicholas Burns said in June that relations with China have deteriorated to probably ‘the lowest moment’ since diplomatic relations resumed in 1972….No final decision has been made about stopping in Taiwan during Pelosi’s trip to Asia next month, according to a person familiar with the details. Pelosi would be the first sitting speaker since Newt Gingrich to visit the island.”
“Beijing immediately vowed to take ‘resolute and strong’ measures in response and warned of a ‘grave impact’ on bilateral relations should Pelosi go ahead with the trip. China also privately warned the Biden administration of a possible military response, the Financial Times reported.”
“…Still, lawmakers in both parties encouraging Pelosi to make the trip, saying not doing so following China’s protestations would amount to caving to Beijing. ‘If we can allow the Chinese to dictate who can visit Taiwan and who cannot, then we have already ceded Taiwan to the Chinese,’ said Senate Foreign Relations Chair Bob Menendez, a New Jersey Democrat, who made his own trip to Taiwan in April.” Bloomberg reports.
Europe Facing Winter Gas Shortages as Russian Flows Slow
bne IntelliNews
“Gazprom’s announcement that it was cutting gas flows in the Nord Stream 1 pipeline to 20% of capacity on July 25 means the EU will miss its deadline to fill storage tanks to 80% full by October 1.”
“German Vice-Chancellor Robert Habeck said the same day that rationing of energy during the winter has become more likely and that Germany needs to reduce its consumption of gas by 15%-20% to be sure of getting through the winter. A 15% reduction is equivalent to about 45bn cubic metres during the heating season and 60 bcm for the whole year, or about a third of all the gas Russia usually sends to the EU.”
“Brussels proposed EU members unilaterally cut gas consumption by 15% to conserve gas for the winter on July 21, in what proved to be an unpopular move. The southern European countries of Greece, Spain and Portugal rebelled and have refused to make the cuts, saying they are not to blame for Germany’s mistake in becoming so dependent on Russian gas and don’t see why they should suffer to bail Germany out.”
“Gas storage tanks in Europe were 66.7% full as of July 25 and Germany’s tanks 66.4%. A few countries are already close to the 80% goal or have already reached it, including: Portugal (100%), Poland (98.5%), Sweden (90.8%), Denmark (85.6%) and France (75.5%). However, the key markets of Czechia (77.7%), Slovakia (68.3%), Italy (70.5%) and Hungary (49.2%) that are most exposed to Russian gas supplies still have some way to go.” Ben Aris reports.
India’s Roaring Post-Pandemic Recovery at Risk from Inflation
Financial Times
“At an end-of-season sale at Lulu Mall in the southern Indian city of Cochin, huge crowds threatened to create a human crush as stores offered up to a 50 per cent discount.”
“The frantic scenes captured on social media this month came as India bounced back from the coronavirus pandemic, which depressed output and exacted a severe humanitarian and commercial toll on Asia’s third-largest economy. But this recovery is facing growing risks, most notably from rising prices stoked largely by India’s reliance on imported oil.”
“Any slowdown in India — a consumer market and manufacturing hub of growing global importance — would be one more piece of bad news for the world economy as the US veers towards recession and momentum in China slows sharply, warned analysts.”
“A Financial Times analysis of India’s exposure to the fuel price shock, trade figures and other data underline the growing challenges. ‘I think the growth momentum is pretty strong, and that is visible in many indicators,’ said Bidisha Ganguly, chief economist with the Confederation of Indian Industry. ‘But there are threats, with the oil price being the main one.’”
“In a country that has traditionally maintained close ties with Moscow, Narendra Modi’s government has been buying Russian oil at a discount despite US and European sanctions over Vladimir Putin’s invasion of Ukraine. This has not been enough, however, to cushion the energy shock.” The FT reports.
Green Hydrogen Gets a Push During Saudi Crown Prince Visit to Greece
Arab News
“Saudi Arabia and Greece signed an agreement to deepen ties in the area of green hydrogen and clean energy on the sidelines of the official visit of Crown Prince Mohammed bin Salman ahead of the Saudi-Greek Investment Forum.”
“The Crown Prince will also discuss helping the European country establish an electrical interconnection network. Calling the relationship between both the countries ‘historical,’ the Crown Prince said there are further opportunities that can be finalized during his two-day visit, including linking the electricity grid to south-west Europe, through Greece, to provide the continent with cheaper renewable energy.”
“‘Also, we are working (on)...hydrogen and how to turn Greece as a hub for Europe to hydrogen. That’s a game changer for both of us. Also, we are working (on)...linking the telecommunication grid,’ the Crown Prince said in a statement issued by the Greek prime minister's office.”
“The Crown Prince said he has a lot on the agenda for the talks, citing investment, trade, economic, political, and security issues. He promised he had not come ‘empty-handed’ and his plans would be a ‘game changer for both countries and also for the whole region.’ He also mentioned a ‘big item that we cannot announce today’ as he talked up the relations between Saudi Arabia and Greece.” Arab News reports.
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