Emerging Markets Monitor - May 25
Hungary Declares 'State of Emergency,' Lebanon Inflation Hits 206%, Food Crisis Fuels Protectionism, Soros in Stark Warning on Russia War, Tourists Flock to Turkey
The Top 5 Stories Shaping Emerging Markets from Global Media - May 25
Hungary’s Orban Declares State of Emergency in Response to ‘Economic Crisis’
Financial Times
“Viktor Orbán has declared a state of emergency, giving his government rights to rule by decree in response to an ‘economic crisis’ caused by war in neighbouring Ukraine and sanctions against Russia.”
“Hungary’s prime minister will set out measures to be adopted on Wednesday, after parliament — which is dominated by Orbán’s Fidesz party following his sweeping victory in last month’s election — approved an amendment to the constitution on Tuesday.”
“‘We see the war and the sanctions from Brussels have led to a huge economic upheaval and drastic inflation,’ Orbán said in a video posted on Facebook. ‘The world faces an economic crisis. Hungary must stay out of this war . . . we need manoeuvring room and freedom to act.’”
“Hungary has opposed sanctions against Russia over its war against Ukraine, saying that the measures penalise Europe more than they debilitate President Vladimir Putin. Orbán has so far refused to sign off on EU plans for an embargo on importing Russian oil, saying that Hungary’s economy depends on supplies from Moscow.”
“Orbán introduced similar emergency powers during the coronavirus pandemic, when critics in Hungary and abroad said they feared a dramatic erosion of democratic rights and civil liberties, which Orbán has challenged during his 12 years in power.” The FT reports.
Hyperinflation Hovers in Lebanon at 206%
The National
“Hyperinflation in Lebanon continued in April as the country emerges from parliamentary elections that require the future government to put in place various reforms approved by the outgoing Cabinet, in order to secure $3 billion from the International Monetary Fund that will help resuscitate its economy.”
“Inflation in the country, which faces its worst economic crisis since its independence in 1943, reached 206 per cent last month, compared to the same period a year earlier. This is the 22nd consecutive triple-digit increase of the Central Administration of Statistics' Consumer Price Index since July 2020. The index increased 7.1 per cent from March 2022.”
“‘The inability of the authorities to monitor and contain retail prices … the deterioration of the Lebanese pound's exchange rate on the parallel market and the gradual lifting of subsidies on hydrocarbons … have encouraged opportunistic wholesalers and retailers to raise the prices of consumer goods disproportionately,’ Byblos Bank said in a note on Tuesday.”
“In addition, the smuggling of subsidised imported goods has resulted in shortages … which contributed to the rise in prices. The emergence of an active black market for gasoline last summer has put upward pressure on prices and on inflation.”
“Transportation costs increased 492 per cent in April 2022, compared to the same month last year, followed by the health segment, which surged 431 per cent. Water, electricity, gas and other fuels soared 409 per cent, while food and non-alcoholic beverages rose 375 per cent.”
“Though elevated, inflation is far from the peak of 741 per cent reached at the end of 1987 during the country's 1975-1990 civil war. Lebanon's economy collapsed after it defaulted on about $31bn of eurobonds in March 2020, with its currency sinking more than 90 per cent against the dollar on the black market.” Massoud A Derhally reports.
Food Crisis Fuels Fears of Protectionism Compounding Shortages
Channel News Asia
“A growing world food crisis is precipitating protectionist moves by countries which are likely to compound the problem and could lead to a wider trade war, business leaders and policymakers at the World Economic Forum said.”
“In a sign of the escalating squeeze on food supplies and rising prices, a government source told Reuters that India could restrict sugar exports for the first time in six years to prevent a surge in domestic prices.”
“Meanwhile Indonesia, the world's biggest palm oil exporter, will remove a subsidy on bulk cooking oil and replace it with a price cap on the raw materials for local refiners. ‘It is a major issue, and frankly I think the problem is even bigger ahead of us than it is behind us,’ Gita Gopinath, first deputy managing director of the International Monetary Fund, told Reuters of rising food security concerns.”
“Protectionism is looming large at Davos, prompting calls for urgent negotiations to avoid a full-blown trade war. ‘It's very important for the leaders of the world to sit at the table with calm and talk about how we will manage trade and food and investment,’ Jay Collins, vice chairman of banking, capital markets and advisory at Citigroup told the Reuters Global Markets Forum in Davos.”
“For residents in countries in Sub-Saharan Africa, for instance, 40 per cent of their consumption is spent on food, Gopinath said. As well as a ‘huge hit to the cost of living’, price rises have given rise to hoarding by governments.” Channel News Asia reports.
Soros Says ‘Civilization May Not Survive’ Russia’s War on Ukraine
Bloomberg
“Billionaire George Soros warned that Russia’s invasion of Ukraine has rattled Europe and could be the start of another world war.”
“‘Other issues that concern all of humanity -- fighting pandemics and climate change, avoiding nuclear war, maintaining global institutions -- have had to take a back seat to that struggle,’ Soros, 91, said Tuesday at the World Economic Forum in Davos, Switzerland. ‘That’s why I say our civilization may not survive.’”
“Soros, a Hungarian-born Holocaust survivor, focused his speech on the rise of the ‘repressive regimes’ of Russian President Vladimir Putin and Chinese President Xi Jinping, calling the two countries the ‘greatest threat to open society.’ His philanthropic organization of that name, Open Society Foundations, funds groups promoting justice, democracy, human rights and progressive politics.”
“The two leaders have made ‘mind-boggling mistakes,’ Soros said. ‘Putin expected to be welcomed in Ukraine as a liberator; Xi Jinping is sticking to a Zero Covid policy that can’t possibly be sustained.’”
“The persistent lockdowns in China will disrupt supply chains, which could keep inflation around the world elevated and create a global depression, he said. He added that Xi’s errors may have cost him a third term.”
“Soros has previously used the WEF stage to unleash blistering critiques. At the last meeting, in January 2020, he suggested without evidence that Facebook Inc. might be conspiring to help re-elect Donald Trump, who lost the US presidency later that year. In 2019, the former hedge fund manager warned of the ‘mortal danger’ of China’s use of artificial intelligence to repress its citizens, a theme he hit again in his speech Tuesday.”
Tourists are Flocking Back to Turkey
Hurriyet Daily News
“Since the start of the year, foreign tourist arrivals have recorded three-digit increases on an annual basis. In January, foreign tourist visits rose by 151 percent, while in February and March, they grew by 187 percent and 130 percent, respectively.”
“In April, 395,000 Germans vacationed in Turkey, making up the largest group of international tourists, followed by Bulgarians, 271,000 people or 10.5 percent of total arrivals, data from the Culture and Tourism Ministry showed on May 23.”
“The number of British tourists grew from only 15,000 from a year ago to 225,000 people, while Iranians claimed the fourth spot at 152,4000, up by a robust 268 percent. Last month, Turkey also welcomed 130,000 Russian tourists, down 16.6 percent from a year ago. The number of visitors from Ukraine also plunged 44 percent to 44,000 people.”
“In the first four months of 2022, 7.48 million foreign tourists came to Turkey, marking a 173 percent increase from the same period of 2021, the ministry data showed.” Hurriyet Daily News reports.
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