Global economy

Nagpur branch of Reserve Bank of India. I took...

The storm clouds are gathering once again. After a brief reprieve, the global picture is again starting to look nervous reminding us that the ghost of the 2008 financial crisis is still with us. Crucial elections this past weekend in Greece and France have pushed Europe back into uncertain times. A highly fractured mandate in Greece has thrown the nation into turmoil and a shift of power in France has raised questions over the fate of the European fiscal austerity pact.

 

The result has been a sharp rise in risk aversion across global markets this week. On Tuesday, the benchmark equity index in Greece tumbled to the lowest levels in 20 years. Greece was not the only market to tumble. France, Germany, Italy all saw a sell-off in equities reflecting the nervousness that has once again gripped equity investors who seem to be shunning risk assets. For India, this does not bode well. Global investors, rightly or wrongly, tend to bunch risk assets together. And so a risk-averse environment is unlikely to leave India untouched.

 

The return of risk aversion is evident in the bond markets as well. As investors sought safety, money returned to US treasuries and German bunds which are now seen among the safest assets available. German bund yields, which move inversely to prices, have dipped this week. At the same time, US managed to sell 3-year treasuries at the lowest yield in 3 months – a reflection of strong demand for these “safe assets”. This is bad news for capital flows coming into India through portfolio investment. Investors may not pullout money from Indian equity markets but they may not bring in any fresh money either.

 

The currency markets are seeing a ripple effect as well. As talk of a possible Greece exit picked up once again, the Euro tumbled. The Euro fell below 1.30/$ – a level that the single currency has held on to since January. The fall in the Euro has a direct bearing on all emerging market currencies including the Rupee. As the Dollar strengthens, all currencies adjust to the strength in the Dollar. And so the Rupee has fallen back towards 53.50/$ despite strong intervention from the Reserve Bank of India just last Friday. In the light of the Euro fall, it seems futile for the Reserve Bank of India to try and defend the currency especially at a time when forex reserves are anything but abundant. Yet the markets do expect the RBI to continue supporting the Rupee to some extent.

 

In all of this, the silver lining may lie in the decline in commodity prices. As concerns around the global economy rise, commodity prices have fallen as well. So crude oil prices have slipped to their lowest levels in 6 months. This comes as a relief to a country like India which is grappling with a wide current account deficit. A large chunk of our import bill is on account of oil imports and even a marginal decrease in oil prices is positive for India. Unfortunately some of the benefits of lower oil prices are taken away by the weaker currency. Still lower commodity prices are perhaps the only silver lining in an otherwise worrying global scenario.

 

All eyes are now on Europe but also on economic data from the US. Will the political turmoil is Greece die down? How well will France’s new leadership work with the German leadership? And will economic data suggest a moderation in the US economy? Will the appetite for risk assets among global investors return? All questions that will remain crucial for India and indian investors in the days ahead.

via Global economy: What gloom means for India, Sensex, rupee.

That is why you need to acquire one of our Offshore Companies to trade successfully with Africa, Europe and the rest of the world. Please see our menu links above.

 

Enhanced by Zemanta

Lekki Free Trade Zone to generate 1m jobs

The president of Nigeria, Goodluck Jonathan, a...

The hope of generating more jobs through Foreign Direct Investment (FDI) will soon become a reality once the Lekki Free Trade Zone (LFTZ)  begins operation. It is expected to generate about one million jobs. This is the view of many stakeholders who shed more light on the advantage of the project.

Consistent with the strategic intent to make the LFTZ a major growth driver and  catalyst for socio-economic development, the Federal Government has pledged its unflinching support to the Lagos State Government, the consortium of Chinese investors and other stakeholders to ensure the take-off of the LFTZ in earnest.

Also, LFTZ management has recorded some significant developments, thus reinforcing the viability of the project as a kickstarter  for economic transformation.

The Executive Secretary, Africa Free Zones Authority (AFZA),  Chris Ndibe, said if properly managed, the project is capable of generating about one million jobs annually, which is in keeping with the transformation agenda of President Goodluck Jonathan.

Minister for Trade and Investment Olusegun Aganga said this is in line with the Federal Government’s agenda to create jobs for Nigerians, especially, the youth.

via The Nation – ‘Lekki Free Trade Zone to generate 1m jobs’

Economy of Czechoslovakia

James Albert Bonsack's cigarette rolling machi...

After WWII, the economy was centrally planned, with command links controlled by the communist party, similarly to the Soviet Union. The large metallurgical industry was dependent on imports of iron and non-ferrous ores.

Industry: Extractive industry and manufacturing dominated the sector, including machinery, chemicals, food processing, metallurgy, and textiles. The sector was wasteful in its use of energy, materials, and labor and was slow to upgrade technology, but the country was a major supplier of high-quality machinery, instruments, electronics, aircraft, airplane engines and arms to other communist countries.

Agriculture: Agriculture was a minor sector, but collectivized farms of large acreage and relatively efficient mode of production enabled the country to be relatively self-sufficient in food supply. The country depended on imports of grains (mainly for livestock feed) in years of adverse weather. Meat production was constrained by shortage of feed, but the country still recorded high per capita consumption of meat.

Foreign trade: Exports were estimated at US$17.8 billion in 1985. Exports were machinery (55%), fuel and materials (14%), and manufactured consumer goods (16%). Imports stood at estimated US$17.9 billion in 1985, including fuel and materials (41%), machinery (33%), and agricultural and forestry products (12%). In 1986, about 80% of foreign trade was with other communist countries.

via Czechoslovakia – Wikipedia, the free encyclopedia

Zuma urges opening up of world economy

CAPE TOWN/SOUTH AFRICA, 12JUN2009 - Jacob Zuma...

Johannesburg – World markets must open up to the least developed countries that had become “innocent bystanders” of the global financial crisis, President Jacob Zuma said on Thursday.

“We feel strongly about the need to open up the world markets in order to stimulate the recovery of the global economy,” he told a business meeting in France.

“The participation of low-income countries in global trade is crucial for their growth and poverty reduction endeavours,” Zuma said.

The meeting took place on the sidelines of the G20 Summit in Cannes.

Zuma said change was inevitable in order to curtail the effects of the crisis and “realistically” attain a higher and more equitable growth.

“We believe that this current crisis should lead to a realisation that change is inevitable. Balanced growth is just as important as strong and sustainable growth.”

Addressing growth was not possible without first dealing with the root causes of imbalances in the global economy.

“To this end, we need stronger commitments from large deficit and surplus countries to do a number of things.”

These included strengthening the fiscal policy environment, maintaining appropriate monetary policies and refraining from protectionism.

Zuma said surplus countries should support investment in developing and low income countries.

This would contribute enormously to promoting development, poverty reduction and decent work.

“Populations in emerging economies and least developed countries will continue to be subjected to harmful and excessive economic volatility and risks until agreement on these often divisive issues is reached within the G20,” Zuma said.

via Zuma urges opening up of world economy: Fin24: Economy