United States president on Sunday boasted about his 10-month administration, citing progress in the economy, reports said.&nbsp;

Trump tweeted on Sunday, in light of investigations into ties between his campaign and Russia meddling in the&nbsp;2016 US elections.&nbsp;

&quot;Since the first day I took office, all you hear is the phony Democrat excuse for losing the election, Russia, Russia, Russia. Despite this I have the economy booming and have possibly done more than any 10 months President. MAKE AMERICA GREAT AGAIN!&quot; Trump tweeted.

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Since the first day I took office, all you hear is the phony Democrat excuse for losing the election, Russia, Russia,Russia. Despite this I have the economy booming and have possibly done more than any 10 month President. MAKE AMERICA GREAT AGAIN!
&mdash; Donald J. Trump (@realDonaldTrump) <a href="https://twitter.com/realDonaldTrump/status/934896989539586054?ref_src=twsrc%5Etfw">November 26, 2017</a></blockquote>
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Trump has spent the weekend golfing and tweeting, with a number of them being of the self-congratulatory nature.&nbsp;

The president has proposed an idea of campaigning for Roy Moore, who faces off against Democrat Jones in the December 12 Alabama special election to fill the seat previously held by Attorney General Jeff Sessions, media reports said. The president said he will make a decision about it sometime this week. &nbsp;

Trump will also be visiting Capitol Hill on Tuesday, ahead of a possible vote on tax reform this week.&nbsp;

Donald Trump also said he had 'the economy booming'

United States president on Sunday boasted about his 10-month administration, citing progress in the economy, reports said. Trump tweeted on Sunday, in light of investigations into ties between his campaign and Russia meddling in the 2016 US elections. "Since the first day I took office, all you hear is the phony Democrat excuse for losing the election, Russia, Russia, Russia. Despite this I have the economy booming and have possibly done more than any 10 months President. MAKE AMERICA GREAT AGAIN!" Trump tweeted. Since the first day I took office, all you hear is the phony Democrat excuse for losing the election, Russia, Russia,Russia. Despite this I have the economy booming and have possibly done more than any 10 month President. MAKE AMERICA GREAT AGAIN! — Donald J. Trump (@realDonaldTrump) November 26, 2017 × Trump has spent the weekend golfing and tweeting, with a number of them being of the self-congratulatory nature. The president has proposed an idea of campaigning for Roy Moore, who faces off against Democrat Jones in the December 12 Alabama special election to fill the seat previously held by Attorney General Jeff Sessions, media reports said. The president said he will make a decision about it sometime this week. Trump will also be visiting Capitol Hill on Tuesday, ahead of a possible vote on tax reform this week.

Possibly done more than any 10-month President: Trump

Afghanistan&rsquo;s economy is expected to grow 2.6 per cent this year, up slightly from the previous year despite deteriorating security, the World Bank said in a report on Tuesday.

While the figure is up from 2.2 per cent last year, it does not keep up with the country&rsquo;s population growth of roughly 3 per cent, meaning that gross domestic product per capita continues to decline.

&ldquo;In the next three to four years, there are things that can be done to boost growth to between 4 and 5 per cent,&rdquo; said Shubham Chaudhuri, the World&rsquo;s Bank&rsquo;s Country Director for Afghanistan.

Chaudhuri, presenting a report on Afghanistan&rsquo;s economy at the World Bank&rsquo;s fortified headquarters in Kabul, said that agriculture, mineral attraction, and the country&rsquo;s youth were its biggest assets, as well as its geography as a regional land bridge.

The improved growth outlook will be welcomed by President Ashraf Ghani, whose technocrat government is seen as unstable but appears to be making the reforms that international donors - who provide more than half of Afghanistan&rsquo;s funding - have been seeking.

Parliamentary elections are due to be held next year, with a presidential vote expected in 2019.

Business sentiment is also on the rise, the World Bank said, though it is still lower than in 2014 when most foreign troops withdrew from Afghanistan.

Growth is significantly below the &ldquo;war economy&rdquo; figures of the late 2000s, which saw annual rises averaging nearly 10 per cent, but the World Bank believes it will continue to rise.

The organisation projects 3.2 per cent growth next year, though that assumes no deterioration in the country&rsquo;s security. This appears unlikely given a recent increase in attacks by various militant groups.

One of the major tests for Afghanistan&rsquo;s stability after a U.S.-led invasion ousted the Taliban government a decade and a half ago is its ability to collect taxes.

Tax revenue in the first eight months of the year was 13 per cent higher than the same period last year, the World Bank said.

The country has long been plagued by corruption and tax evasion.

Inflation remains in the single-digits, with consumer prices up 3.8 per cent in the 12 months to September.

While the figure is up from 2.2% last year, it does not keep up with the country?s population growth of roughly 3%, meaning that gross domestic product per capita continues to decline

Afghanistan’s economy is expected to grow 2.6 per cent this year, up slightly from the previous year despite deteriorating security, the World Bank said in a report on Tuesday. While the figure is up from 2.2 per cent last year, it does not keep up with the country’s population growth of roughly 3 per cent, meaning that gross domestic product per capita continues to decline. “In the next three to four years, there are things that can be done to boost growth to between 4 and 5 per cent,” said Shubham Chaudhuri, the World’s Bank’s Country Director for Afghanistan. Chaudhuri, presenting a report on Afghanistan’s economy at the World Bank’s fortified headquarters in Kabul, said that agriculture, mineral attraction, and the country’s youth were its biggest assets, as well as its geography as a regional land bridge. The improved growth outlook will be welcomed by President Ashraf Ghani, whose technocrat government is seen as unstable but appears to be making the reforms that international donors - who provide more than half of Afghanistan’s funding - have been seeking. Parliamentary elections are due to be held next year, with a presidential vote expected in 2019. Business sentiment is also on the rise, the World Bank said, though it is still lower than in 2014 when most foreign troops withdrew from Afghanistan. Growth is significantly below the “war economy” figures of the late 2000s, which saw annual rises averaging nearly 10 per cent, but the World Bank believes it will continue to rise. The organisation projects 3.2 per cent growth next year, though that assumes no deterioration in the country’s security. This appears unlikely given a recent increase in attacks by various militant groups. One of the major tests for Afghanistan’s stability after a U.S.-led invasion ousted the Taliban government a decade and a half ago is its ability to collect taxes. Tax revenue in the first eight months of the year was 13 per cent higher than the same period last year, the World Bank said. The country has long been plagued by corruption and tax evasion. Inflation remains in the single-digits, with consumer prices up 3.8 per cent in the 12 months to September.

Afghanistan's economy on slow rise, to grow 2.6% this year: World Bank

Lower taxes and higher public expenditure could widen budget deficit in 2017-18, but steps taken by the government to broaden the tax base and improve spending efficiency would help in narrowing it going forward, US-based rating agency Moody&#39;s said.

In an interview to PTI, Moody&#39;s Investors Service V-P (Sovereign Risk Group) William Foster said the agency believes that the government&#39;s commitment to fiscal consolidation remains and sustained growth would help it reduce the debt burden.

Moody&#39;s had last week raised India&#39;s sovereign rating for the first time in over 13 years, saying growth prospects have improved with continued progress on economic and institutional reforms. The rating was upgraded to Baa2 from Baa3 and rating outlook was changed to stable from positive.

Foster said the upgrade reflects the expectation that continued progress on economic and institutional reforms will enhance India&#39;s high growth potential and its large and stable financing base for government debt and will likely contribute to a gradual decline in the general government debt burden over the medium term.

India&#39;s debt-to-GDP ratio stood at 68.6 per cent and a government-appointed panel has recommended lowering it to 60 per cent by 2023.

&quot;We forecast the general government budget deficit at 6.5 per cent of GDP this fiscal year, similar to the last two fiscal years. Lower government revenues than planned in the Budget and somewhat higher government spending could lead to a deficit somewhat wider than targeted.

&quot;However, over time, measures aimed at broadening the tax base and improving the efficiency of government spending will contribute to a gradual narrowing of the deficit. Together with robust and sustained nominal GDP growth, this would be conducive to a gradual decline in the government debt burden,&quot; Foster said.

Foster, however, added that a material deterioration in fiscal metrics and the outlook for general government fiscal consolidation would put negative pressure on the rating.

General budget deficit includes expenditure incurred and revenue earned by both the Centre and states. &quot;The rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply,&quot; he added.

The central government, in Budget 2017-18, had set a target of 3.2 per cent for fiscal deficit, which is the difference between the Centre&#39;s revenue and expenditure, for this fiscal. It would be brought down to 3 per cent next fiscal.

The finance ministry is scheduled to review the deficit target for the current financial year next month as it reassesses revenue mop-up from the recently launched Goods and Services Tax (GST) and PSU disinvestment programme.

The deficit has already touched 91.3 per cent of the target in the first half of the fiscal.

Projecting GDP growth to moderate to 6.7 per cent in the current fiscal, from 7.1 per cent last year, Moody&#39;s said while GST and demonetisation have undermined growth over the near term, growth will rise to 7.5 per cent in 2018-19 as the disruption fades.

According to Foster, the stable outlook denotes that Moody&#39;s does not expect a rating change in the foreseeable future. &quot;There are both positive and negative risks to the economy and India&#39;s credit profile,&quot; Foster added.

His assessment is a material strengthening in fiscal metrics, combined with a strong and durable recovery of the investment cycle, probably supported by significant economic and institutional reforms would be credit positive.

&quot;In particular, greater expectation of a sizeable and sustained reduction in the general government debt burden, through increased government revenues combined with a reduction in expenditures, would put positive pressure on the rating. Implementation of key pending reforms, including land and labour reforms, could put additional upward pressure on the rating,&quot; Foster said.&nbsp;

Moody's had last week raised India's sovereign rating for the first time in over 13 years, saying growth prospects have improved with continued progress on economic and institutional reforms

Lower taxes and higher public expenditure could widen budget deficit in 2017-18, but steps taken by the government to broaden the tax base and improve spending efficiency would help in narrowing it going forward, US-based rating agency Moody's said. In an interview to PTI, Moody's Investors Service V-P (Sovereign Risk Group) William Foster said the agency believes that the government's commitment to fiscal consolidation remains and sustained growth would help it reduce the debt burden. Moody's had last week raised India's sovereign rating for the first time in over 13 years, saying growth prospects have improved with continued progress on economic and institutional reforms. The rating was upgraded to Baa2 from Baa3 and rating outlook was changed to stable from positive. Foster said the upgrade reflects the expectation that continued progress on economic and institutional reforms will enhance India's high growth potential and its large and stable financing base for government debt and will likely contribute to a gradual decline in the general government debt burden over the medium term. India's debt-to-GDP ratio stood at 68.6 per cent and a government-appointed panel has recommended lowering it to 60 per cent by 2023. "We forecast the general government budget deficit at 6.5 per cent of GDP this fiscal year, similar to the last two fiscal years. Lower government revenues than planned in the Budget and somewhat higher government spending could lead to a deficit somewhat wider than targeted. "However, over time, measures aimed at broadening the tax base and improving the efficiency of government spending will contribute to a gradual narrowing of the deficit. Together with robust and sustained nominal GDP growth, this would be conducive to a gradual decline in the government debt burden," Foster said. Foster, however, added that a material deterioration in fiscal metrics and the outlook for general government fiscal consolidation would put negative pressure on the rating. General budget deficit includes expenditure incurred and revenue earned by both the Centre and states. "The rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply," he added. The central government, in Budget 2017-18, had set a target of 3.2 per cent for fiscal deficit, which is the difference between the Centre's revenue and expenditure, for this fiscal. It would be brought down to 3 per cent next fiscal. The finance ministry is scheduled to review the deficit target for the current financial year next month as it reassesses revenue mop-up from the recently launched Goods and Services Tax (GST) and PSU disinvestment programme. The deficit has already touched 91.3 per cent of the target in the first half of the fiscal. Projecting GDP growth to moderate to 6.7 per cent in the current fiscal, from 7.1 per cent last year, Moody's said while GST and demonetisation have undermined growth over the near term, growth will rise to 7.5 per cent in 2018-19 as the disruption fades. According to Foster, the stable outlook denotes that Moody's does not expect a rating change in the foreseeable future. "There are both positive and negative risks to the economy and India's credit profile," Foster added. His assessment is a material strengthening in fiscal metrics, combined with a strong and durable recovery of the investment cycle, probably supported by significant economic and institutional reforms would be credit positive. "In particular, greater expectation of a sizeable and sustained reduction in the general government debt burden, through increased government revenues combined with a reduction in expenditures, would put positive pressure on the rating. Implementation of key pending reforms, including land and labour reforms, could put additional upward pressure on the rating," Foster said.

India's budget deficit may rise in FY18, but will improve in years ahead: Moody's

Japan&rsquo;s economy grew faster than expected in the third quarter due to strong exports, posting the longest period of uninterrupted growth in more than a decade.

The economy expanded at a 1.4 per cent annualized rate in July-September, slightly above the median estimate for annualized growth of 1.3 per cent, Cabinet Office data showed on Wednesday.

That followed the revised annualized growth of 2.6 per cent in April-June.

Consumer spending fell for the first time in seven quarters but this is expected to be temporary because the economy is near full employment, which should bolster domestic consumption in the future. Rising capital expenditure and exports are also expected to keep the economy growing, which should ease some concerns about sluggish inflation.

&ldquo;Japan&rsquo;s potential growth rate is around 1 per cent, so the results for the third quarter show the actual rate of growth is quite high,&rdquo; said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

&ldquo;The jobs market is doing so well that consumer spending is sure to pick up in the future. Capital expenditure still looks healthy. The economy is doing well.&rdquo;

Gross domestic product (GDP) grew 0.3 per cent compared to the previous quarter, which matched the median estimate and followed a 0.6 per cent quarter-on-quarter expansion in April-June, Cabinet Office data showed on Wednesday.

The results show that Japan&rsquo;s economy has grown for the seventh straight quarter, the longest period of expansion since an eight-quarter run from April-June 1999 to January-March 2001.

External demand - or exports minus imports - was the biggest reason for expansion, adding 0.5 percent to growth.Shipments of cars and electronic parts to the United States and Asia were strong in the third quarter, reflecting improving global demand, a Cabinet Office official told reporters.

In comparison, negative external demand subtracted a revised 0.2 percentage point from GDP growth in April-June.

Private consumption, which accounts for about two-thirds of GDP, fell 0.5 per cent from the previous quarter, more than the median estimate of a 0.3 per cent contraction to mark the first decline since October-December 2015.

The decline was driven by lower spending at restaurants and hotels, as well as reduced spending on cars and mobile phones, the official said. Bad weather during the quarter may have hurt spending, the official said.

&ldquo;There&rsquo;s no change to our view the economy is recovering moderately as a trend,&rdquo; Japanese Economy Minister Toshimitsu Motegi told reporters.

&ldquo;We need to make the recovery a durable one, so we&rsquo;ll proceed with reforms to boost Japan&rsquo;s productivity.&rdquo;

Capital expenditure rose 0.2 per cent in July-September from the previous quarter, less than the median estimate for a 0.3 per cent increase but still up for the fourth straight quarter.

Capital Economics&rsquo; Senior Japan Economist Marcel Thielant said available data suggested that economic activity continued to expand in the current quarter, noting household incomes maintained solid growth and external demand was holding up.

&ldquo;However, the economy is running into capacity constraints which suggests that growth will start to slow next year. We reiterate our forecast that growth will moderate from 1.5 percent this year to 1 percent in 2019,&rdquo; he said.

Japan&rsquo;s government is due to announce a package of economic measures by year-end aimed at increasing investment in skills training and raising productivity.

This long run of growth should encourage the Bank of Japan to stick with the current monetary easing framework, given its argument that inflationary pressure will percolate through the economy as long as growth is on track.

The economy expanded at a 1.4 percent annualized rate in July-September, slightly above the median estimate for annualized growth of 1.3 percent, Cabinet Office data showed on Wednesday

Japan’s economy grew faster than expected in the third quarter due to strong exports, posting the longest period of uninterrupted growth in more than a decade. The economy expanded at a 1.4 per cent annualized rate in July-September, slightly above the median estimate for annualized growth of 1.3 per cent, Cabinet Office data showed on Wednesday. That followed the revised annualized growth of 2.6 per cent in April-June. Consumer spending fell for the first time in seven quarters but this is expected to be temporary because the economy is near full employment, which should bolster domestic consumption in the future. Rising capital expenditure and exports are also expected to keep the economy growing, which should ease some concerns about sluggish inflation. “Japan’s potential growth rate is around 1 per cent, so the results for the third quarter show the actual rate of growth is quite high,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “The jobs market is doing so well that consumer spending is sure to pick up in the future. Capital expenditure still looks healthy. The economy is doing well.” Gross domestic product (GDP) grew 0.3 per cent compared to the previous quarter, which matched the median estimate and followed a 0.6 per cent quarter-on-quarter expansion in April-June, Cabinet Office data showed on Wednesday. The results show that Japan’s economy has grown for the seventh straight quarter, the longest period of expansion since an eight-quarter run from April-June 1999 to January-March 2001. External demand - or exports minus imports - was the biggest reason for expansion, adding 0.5 percent to growth.Shipments of cars and electronic parts to the United States and Asia were strong in the third quarter, reflecting improving global demand, a Cabinet Office official told reporters. In comparison, negative external demand subtracted a revised 0.2 percentage point from GDP growth in April-June. Private consumption, which accounts for about two-thirds of GDP, fell 0.5 per cent from the previous quarter, more than the median estimate of a 0.3 per cent contraction to mark the first decline since October-December 2015. The decline was driven by lower spending at restaurants and hotels, as well as reduced spending on cars and mobile phones, the official said. Bad weather during the quarter may have hurt spending, the official said. “There’s no change to our view the economy is recovering moderately as a trend,” Japanese Economy Minister Toshimitsu Motegi told reporters. “We need to make the recovery a durable one, so we’ll proceed with reforms to boost Japan’s productivity.” Capital expenditure rose 0.2 per cent in July-September from the previous quarter, less than the median estimate for a 0.3 per cent increase but still up for the fourth straight quarter. Capital Economics’ Senior Japan Economist Marcel Thielant said available data suggested that economic activity continued to expand in the current quarter, noting household incomes maintained solid growth and external demand was holding up. “However, the economy is running into capacity constraints which suggests that growth will start to slow next year. We reiterate our forecast that growth will moderate from 1.5 percent this year to 1 percent in 2019,” he said. Japan’s government is due to announce a package of economic measures by year-end aimed at increasing investment in skills training and raising productivity. This long run of growth should encourage the Bank of Japan to stick with the current monetary easing framework, given its argument that inflationary pressure will percolate through the economy as long as growth is on track.

Japan's GDP grows for seven straight quarters

Zimbabwe&rsquo;s financial system increasingly resembles a house of cards. Were one card to give way &ndash; for instance, if South Africa&rsquo;s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pays for the electricity that it&rsquo;s supplying the country &ndash; the entire edifice would collapse.

To put it another way, the government is a bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there&rsquo;s an election looming in 2018, Zimbabwe&rsquo;s ruling party, ZANU-PF doesn&rsquo;t want to cut-back. Far from it, it wants to carry on spending, as fast as it can.

The rot goes back to the early 2000&rsquo;s. ZANU-PF profligacy had been fuelled by a&nbsp;continuous cycle of simply printing more money and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies.

Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar.

&ldquo;Dollarisation&rdquo; allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time, it returned to its familiar policy mix of profligacy, corruption and populist economics.

Yet ZANU-PF faced major problems. Above all, &ldquo;dollarisation&rdquo; meant that the cost of Zimbabwe&rsquo;s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country&rsquo;s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less.

Meanwhile, government insistence that mines should be 51 per cent&nbsp;Zimbabwean owned has done nothing to entice inward investment or boost exports.

In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90 per cent.

President Robert Mugabe&rsquo;s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure&rsquo;s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform.

The bond notes

Faced with a looming crisis, the ZANU-PF government has resorted to three key strategies.

One has been the issue of &ldquo;bond notes&rdquo; (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they&rsquo;re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation.

ZANU-PF&rsquo;s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the number of dollars individuals could withdraw.

People are reluctant to use the bond notes. But they&rsquo;re still sometimes forced to accept them because of the sheer shortage of &ldquo;real&rdquo; money. As a result, when they can, they rush off to the local bus station where they can sell them for dollars to currency traders &ndash; albeit illegally.

The second strategy has been the rapid expansion of country&rsquo;s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up &ldquo;real&rdquo; dollars.

Accordingly, government employees are now largely paid electronically. Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically.

And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash &ndash; unless they make use of the currency traders in illegal transactions.

Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to &ldquo;save&rdquo;. After all, if times get hard, you won&rsquo;t be able to get rid of your bond notes, but you may be able to sell your fridge.

Fanciful financial system

But it&rsquo;s the third strategy which the government has pursued which is really fuelling a fanciful financial system.

Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes.

But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information.

What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe&rsquo;s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high.

The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on the issue.

In other words, the spending will continue. Zimbabwe&rsquo;s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to &ldquo;eat&rdquo;.

This article was originally published in <a href="http://theconversation.com" rel="nofollow" target="blank">The Conversation</a>. Read the <a href="https://theconversation.com/zimbabwes-financial-system-is-living-on-borrowed-time-and-borrowed-money-86159" rel="nofollow" target="blank">original article</a>.

<a href="http://www.wionews.com/world/grace-mugabe-flees-zimbabwe-after-army-takes-over-reports-24301">Also read:&nbsp;Grace Mugabe flees Zimbabwe after army takes over: Reports</a>

<a href="http://www.wionews.com/world/zimbabwes-robert-mugabe-liberation-hero-turned-despot-24292">Also </a><a href="http://www.wionews.com/world/zimbabwes-robert-mugabe-liberation-hero-turned-despot-24292">read:</a><a href="http://www.wionews.com/world/zimbabwes-robert-mugabe-liberation-hero-turned-despot-24292">&nbsp;Zimbabwe&#39;s Robert Mugabe: Liberation hero turned despot</a>

<a href="http://www.wionews.com/world/main-zimbabwe-newspaper-completely-misses-news-of-coup-24321">Also read:&nbsp;Main Zimbabwe newspaper completely misses news of coup</a>

<a href="http://www.wionews.com/world/targeting-criminals-not-a-military-takeover-of-government-zimbabwe-military-24236">Also read:&nbsp;Targeting criminals, not a military takeover of government: Zimbabwe military</a>

<a href="http://www.wionews.com/world/army-takes-control-in-zimbabwe-president-mugabe-detained-report-24283">Also </a><a href="http://www.wionews.com/world/army-takes-control-in-zimbabwe-president-mugabe-detained-report-24283">read:</a><a href="http://www.wionews.com/world/army-takes-control-in-zimbabwe-president-mugabe-detained-report-24283"> Zimbabwe: President Mugabe under house arrest, army denies coup</a> 
&nbsp;

Years of political instability and economic mismanagement under the rule of ZANU-PF have left Zimbabwe?s financial system in chaos. The country is living on borrowed time and borrowed money.

Zimbabwe’s financial system increasingly resembles a house of cards. Were one card to give way – for instance, if South Africa’s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pays for the electricity that it’s supplying the country – the entire edifice would collapse. To put it another way, the government is a bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there’s an election looming in 2018, Zimbabwe’s ruling party, ZANU-PF doesn’t want to cut-back. Far from it, it wants to carry on spending, as fast as it can. The rot goes back to the early 2000’s. ZANU-PF profligacy had been fuelled by a continuous cycle of simply printing more money and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies. Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar. “Dollarisation” allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time, it returned to its familiar policy mix of profligacy, corruption and populist economics. Yet ZANU-PF faced major problems. Above all, “dollarisation” meant that the cost of Zimbabwe’s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country’s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less. Meanwhile, government insistence that mines should be 51 per cent Zimbabwean owned has done nothing to entice inward investment or boost exports. In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90 per cent. President Robert Mugabe’s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure’s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform. The bond notes Faced with a looming crisis, the ZANU-PF government has resorted to three key strategies. One has been the issue of “bond notes” (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they’re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation. ZANU-PF’s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the number of dollars individuals could withdraw. People are reluctant to use the bond notes. But they’re still sometimes forced to accept them because of the sheer shortage of “real” money. As a result, when they can, they rush off to the local bus station where they can sell them for dollars to currency traders – albeit illegally. The second strategy has been the rapid expansion of country’s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up “real” dollars. Accordingly, government employees are now largely paid electronically. Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically. And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash – unless they make use of the currency traders in illegal transactions. Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to “save”. After all, if times get hard, you won’t be able to get rid of your bond notes, but you may be able to sell your fridge. Fanciful financial system But it’s the third strategy which the government has pursued which is really fuelling a fanciful financial system. Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes. But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information. What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe’s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high. The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on the issue. In other words, the spending will continue. Zimbabwe’s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to “eat”. This article was originally published in The Conversation. Read the original article. Also read: Grace Mugabe flees Zimbabwe after army takes over: Reports Also read: Zimbabwe's Robert Mugabe: Liberation hero turned despot Also read: Main Zimbabwe newspaper completely misses news of coup Also read: Targeting criminals, not a military takeover of government: Zimbabwe military Also read: Zimbabwe: President Mugabe under house arrest, army denies coup

Robert Mugabe's Zimbabwe is in deep mess

Like many other universities in Istanbul, Sabanci University (where I teach) also admits a sizable proportion of students who come from various erstwhile republics of the Soviet Union. Most of these students read, speak and write in fluent Turkish. Since several of these post-Soviet states were once ruled by the Ottoman Empire, the students are expected to have a certain degree of familiarity with the Turkish culture. Additionally, as an academic requirement, at least, the undergraduate students have to go through some basic training in the Turkish language. Yet, almost every Azeri, Georgian or Moldovan student whom I taught has told me that this fluency in the Turkish language has nothing to do with either historical advantage or academic necessity.

Instead, there are economic reasons which force them to spend substantial effort and time in mastering a foreign language. Not learning Turkish has a huge opportunity cost for them, since without a good knowledge of Turkish it is almost impossible for an undergraduate student to get a job in Istanbul. And although Sabanci University has quite a reputation in the Caucasus or in Eastern Europe, the brand value is still not that high which may help the students in fetching jobs in the EU.

Naturally, one may wonder why going back to their homelands is not an option after all. Is it the economic aspiration? Every year millions of young and bright minds across the emerging economies are emigrating to the developed economies - are their stories much different from the stories of these students of the post-soviet states?

Simple anecdotes suggest that the stories are indeed different. And then as we look at the facts and the figures, a much bigger tragedy unravels.

None of my Moldovan students wants to be an academic.

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<h5>Moldovans took to the streets to raise their voices against massive corruption, protests broke out in Azerbaijan demanding an end to the government-backed oligarchy.</h5>
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On average they are intelligent, hardworking and sincere, and they certainly have high regards for their professors. Yet, they have an almost inseparable resentment towards the education sector. A 2011 study conducted by Transparency International shows that in Moldova, the education sector is as corrupt as police or judiciary. School teachers who cannot supplement their meagre income with subsistence farming or extra payments from the parents of their students (in kind, typically with food or labor) openly ask for a price for the passing grade. Many of the academic institutions are also engaged in the business of fraudulent degree-granting, so much so that the in 2012 alone twenty-two heads of the higher academic institutions were legally prosecuted in the court.

While Moldovans took to the streets to raise their voices against massive corruption, protests broke out in Azerbaijan demanding an end to the government-backed oligarchy. In fact, most of the Azeri Oligarchs are directly in control of the provincial and federal governments. As oligarchy still reigns supreme in the country, young Azeris, such as my students from Sabanci University will rarely get a chance to be successful entrepreneurs. Last year when the global oil price went into a nosedive, the currency of Azerbaijan almost collapsed. As a result, the grip of the Azeri oligarchs tightened even more.

Oligarchy is a major problem in Georgia too. As a few elite businesspeople control bulk of the national wealth, the country suffers from severe economic anxiety. Almost half of the entire population of Georgia face either unemployment or long-term underemployment. World Bank data from 2013 suggests that the income inequality in Georgia is the worst among all the post-Soviet states.

During a recent trip to Georgia, I met locals who still believe that Georgia had its heyday under Stalin&rsquo;s regime. Stalin, in spite of being a Georgian, considered Russia as the &lsquo;first among equals&rsquo; and didn&rsquo;t make any special provision for his homeland. Georgia with a largely agrarian economy still performed better than the other republics during the Soviet time.

Such sentiments, however, are not exclusive to the Georgians. Over the years, I personally met many people from the &lsquo;Stans&rsquo; of Central Asia, and even from the Eastern bloc who largely believed that the quality of life was much better during the Soviet era. Uzbek chef, Romanian taxi driver, Bulgarian tourist, people with very different personalities and somewhat different worldviews rooted for a foregone dream which was conceived a hundred years ago.&nbsp; 
Or was the dream conceived after all?

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<h5>A hundred years after the Bolshevik revolution the post-soviet states suffer from the familiar woes which plagued these countries even in the beginning of the twentieth century.</h5>
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A hundred years after the Bolshevik revolution the post-soviet states suffer from the familiar woes which plagued these countries even in the beginning of the twentieth century. A few corrupt elites are still in control of the national wealth, millions of working-class proletariats are even now struggling for survival, and the autocratic governments are still in the power. Yet, another Bolshevik revolution seems like a remote possibility, if not impossible at all. Despite the same institutional flaws and structural economic problems, the political aspirations of the current generations cannot be different anymore. Some historical perspectives may help us to understand this puzzle.

To start with, almost all of these countries were invaded by the Russian red army. The underlying intentions of Russia were not very different from that of the other contemporary European colonial powers. After Azerbaijan was incorporated in the Soviet Republic, Lenin wrote &ldquo;we all know that our industries stood idle because of the lack of fuel. However, today, the proletariat of Baku has toppled the Azerbaijani government and is in charge of running the government. This means that now we own a basic economy that is capable of supporting our industries&rsquo;&rsquo;.

Instead of a proletariat revolution what actually happened in Azerbaijan was a direct conflict between the Russian red army and the Azerbaijani military; several thousands of Azeri soldiers died on the battlefields. The Caspian oil fields were too important to lose, and Lenin underscored that fact many a time. The other republics also have similar histories. Some memories of the revolution are certainly painful, bringing back the buried emotions.

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<h5>The Soviet ideologists assumed the existence of new Soviet men who would lose any nationalist sentiment and adhere to communist intellectualism.</h5>
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Emotions are easily triggered when there is a deprivation of liberty. Many of the first generation Homo Sovieticus was forcefully converted to a new anti-religion. The Soviet ideologists assumed the existence of new Soviet men who would lose any nationalist sentiment and adhere to communist intellectualism. In retrospect, it seems that the ideology was more of a theoretical possibility, and that too was a flawed one. The high-handedness of Soviet intellectuals ignored a thousand years of nonlinear history. As a result, most of the post-Soviet republics are now dogmatically religious.

If a Rip Van Winkle from one of these countries suddenly wakes up after a hundred years, he may find that the religious presuppositions have not been changed after all. Nationalist sentiments too, instead of being extinct, are at an all-time high. In fact right after the collapse of the Soviet Union, as soon as the new republics were established violent ethnic conflicts broke out. So, what legacy did the new Soviet men leave for their future generations?

In her noteworthy book &lsquo;Secondhand time: the last of the Soviets&rsquo;, Nobel laureate Svetlana Alexievich has chronicled and examined some of the failed legacies of USSR. An ex-employee of a Soviet archive tells her &ldquo;Paper lies more than people do&rdquo;; a lady from Abkhazia laments &ldquo;We took the bus together, went to the same school, learned the same language&hellip; (and then war broke out) suddenly they were all killing each other. Neighbor killing neighbor, classmates killing classmates, brother killing sisters&rdquo;; a soldier confesses &ldquo;A soldier&rsquo;s not a person. He&rsquo;s an object&hellip;a tool&hellip;a killing machine&hellip;I wanted to kill myself about five times&rdquo;.

Svetlana&rsquo;s subjects might be strangers to us, but once they start narrating their stories it would be impossible to not be overwhelmed with emotions. In pages after pages, they describe how the leaders betrayed a once in a lifetime ideology, how the authorities showed a complete lack of compassion for the fellow human beings, how deception became the self-fulfilling tool to justify every wrong policy action.

But more than anything else, it seems that there was a tremendous disregard for the past which made the leaders believe in quick fixes for every sociopolitical trouble that emerged within the territories of USSR but outside the territories of Russia. And this too had a long legacy.

When the first congress of the people of the East took place in Baku in 1920, Lenin advised the communists of &lsquo;backward&rsquo; Asia to forge alliances with bourgeois nationalists, a policy which would have never even been proposed in Russia. One of the first leaders to oppose such idea was the Indian revolutionary Manabendra Nath Roy, who had a strong suspicion that the bourgeois nationalists would have a rather close connection with the feudal order of the Asian republics. Manabendra Nath was indeed a visionary, Lenin&rsquo;s preferred course of alliances with the bourgeois nationalists took its toll.

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<h5>Capitalism in its current form cannot alleviate the problems of the post-Soviet states, but a possible reincarnation of the tried and tested socialist failures make the younger generations more worried.</h5>
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The socialist movement in the Caucasian and Asian republics of USSR went haywire, and as soon as the command and control economy had collapsed the old feudal order, now known as Oligarchs, took over the control of the post-Soviet states.&nbsp;

Capitalism in its current form cannot alleviate the problems of the post-Soviet states, but a possible reincarnation of the tried and tested socialist failures make the younger generations more worried. The post-Soviet states are now in dire need of their own maverick thinkers who can perhaps establish a new economic order. Since an awfully long lull is still in effect, I hope the storm is not that far away.

The post-Soviet states are now in dire need to establish a new economic order

Like many other universities in Istanbul, Sabanci University (where I teach) also admits a sizable proportion of students who come from various erstwhile republics of the Soviet Union. Most of these students read, speak and write in fluent Turkish. Since several of these post-Soviet states were once ruled by the Ottoman Empire, the students are expected to have a certain degree of familiarity with the Turkish culture. Additionally, as an academic requirement, at least, the undergraduate students have to go through some basic training in the Turkish language. Yet, almost every Azeri, Georgian or Moldovan student whom I taught has told me that this fluency in the Turkish language has nothing to do with either historical advantage or academic necessity. Instead, there are economic reasons which force them to spend substantial effort and time in mastering a foreign language. Not learning Turkish has a huge opportunity cost for them, since without a good knowledge of Turkish it is almost impossible for an undergraduate student to get a job in Istanbul. And although Sabanci University has quite a reputation in the Caucasus or in Eastern Europe, the brand value is still not that high which may help the students in fetching jobs in the EU. Naturally, one may wonder why going back to their homelands is not an option after all. Is it the economic aspiration? Every year millions of young and bright minds across the emerging economies are emigrating to the developed economies - are their stories much different from the stories of these students of the post-soviet states? Simple anecdotes suggest that the stories are indeed different. And then as we look at the facts and the figures, a much bigger tragedy unravels. None of my Moldovan students wants to be an academic. Moldovans took to the streets to raise their voices against massive corruption, protests broke out in Azerbaijan demanding an end to the government-backed oligarchy. × On average they are intelligent, hardworking and sincere, and they certainly have high regards for their professors. Yet, they have an almost inseparable resentment towards the education sector. A 2011 study conducted by Transparency International shows that in Moldova, the education sector is as corrupt as police or judiciary. School teachers who cannot supplement their meagre income with subsistence farming or extra payments from the parents of their students (in kind, typically with food or labor) openly ask for a price for the passing grade. Many of the academic institutions are also engaged in the business of fraudulent degree-granting, so much so that the in 2012 alone twenty-two heads of the higher academic institutions were legally prosecuted in the court. While Moldovans took to the streets to raise their voices against massive corruption, protests broke out in Azerbaijan demanding an end to the government-backed oligarchy. In fact, most of the Azeri Oligarchs are directly in control of the provincial and federal governments. As oligarchy still reigns supreme in the country, young Azeris, such as my students from Sabanci University will rarely get a chance to be successful entrepreneurs. Last year when the global oil price went into a nosedive, the currency of Azerbaijan almost collapsed. As a result, the grip of the Azeri oligarchs tightened even more. Oligarchy is a major problem in Georgia too. As a few elite businesspeople control bulk of the national wealth, the country suffers from severe economic anxiety. Almost half of the entire population of Georgia face either unemployment or long-term underemployment. World Bank data from 2013 suggests that the income inequality in Georgia is the worst among all the post-Soviet states. During a recent trip to Georgia, I met locals who still believe that Georgia had its heyday under Stalin’s regime. Stalin, in spite of being a Georgian, considered Russia as the ‘first among equals’ and didn’t make any special provision for his homeland. Georgia with a largely agrarian economy still performed better than the other republics during the Soviet time. Such sentiments, however, are not exclusive to the Georgians. Over the years, I personally met many people from the ‘Stans’ of Central Asia, and even from the Eastern bloc who largely believed that the quality of life was much better during the Soviet era. Uzbek chef, Romanian taxi driver, Bulgarian tourist, people with very different personalities and somewhat different worldviews rooted for a foregone dream which was conceived a hundred years ago. Or was the dream conceived after all? A hundred years after the Bolshevik revolution the post-soviet states suffer from the familiar woes which plagued these countries even in the beginning of the twentieth century. × A hundred years after the Bolshevik revolution the post-soviet states suffer from the familiar woes which plagued these countries even in the beginning of the twentieth century. A few corrupt elites are still in control of the national wealth, millions of working-class proletariats are even now struggling for survival, and the autocratic governments are still in the power. Yet, another Bolshevik revolution seems like a remote possibility, if not impossible at all. Despite the same institutional flaws and structural economic problems, the political aspirations of the current generations cannot be different anymore. Some historical perspectives may help us to understand this puzzle. To start with, almost all of these countries were invaded by the Russian red army. The underlying intentions of Russia were not very different from that of the other contemporary European colonial powers. After Azerbaijan was incorporated in the Soviet Republic, Lenin wrote “we all know that our industries stood idle because of the lack of fuel. However, today, the proletariat of Baku has toppled the Azerbaijani government and is in charge of running the government. This means that now we own a basic economy that is capable of supporting our industries’’. Instead of a proletariat revolution what actually happened in Azerbaijan was a direct conflict between the Russian red army and the Azerbaijani military; several thousands of Azeri soldiers died on the battlefields. The Caspian oil fields were too important to lose, and Lenin underscored that fact many a time. The other republics also have similar histories. Some memories of the revolution are certainly painful, bringing back the buried emotions. The Soviet ideologists assumed the existence of new Soviet men who would lose any nationalist sentiment and adhere to communist intellectualism. × Emotions are easily triggered when there is a deprivation of liberty. Many of the first generation Homo Sovieticus was forcefully converted to a new anti-religion. The Soviet ideologists assumed the existence of new Soviet men who would lose any nationalist sentiment and adhere to communist intellectualism. In retrospect, it seems that the ideology was more of a theoretical possibility, and that too was a flawed one. The high-handedness of Soviet intellectuals ignored a thousand years of nonlinear history. As a result, most of the post-Soviet republics are now dogmatically religious. If a Rip Van Winkle from one of these countries suddenly wakes up after a hundred years, he may find that the religious presuppositions have not been changed after all. Nationalist sentiments too, instead of being extinct, are at an all-time high. In fact right after the collapse of the Soviet Union, as soon as the new republics were established violent ethnic conflicts broke out. So, what legacy did the new Soviet men leave for their future generations? In her noteworthy book ‘Secondhand time: the last of the Soviets’, Nobel laureate Svetlana Alexievich has chronicled and examined some of the failed legacies of USSR. An ex-employee of a Soviet archive tells her “Paper lies more than people do”; a lady from Abkhazia laments “We took the bus together, went to the same school, learned the same language… (and then war broke out) suddenly they were all killing each other. Neighbor killing neighbor, classmates killing classmates, brother killing sisters”; a soldier confesses “A soldier’s not a person. He’s an object…a tool…a killing machine…I wanted to kill myself about five times”. Svetlana’s subjects might be strangers to us, but once they start narrating their stories it would be impossible to not be overwhelmed with emotions. In pages after pages, they describe how the leaders betrayed a once in a lifetime ideology, how the authorities showed a complete lack of compassion for the fellow human beings, how deception became the self-fulfilling tool to justify every wrong policy action. But more than anything else, it seems that there was a tremendous disregard for the past which made the leaders believe in quick fixes for every sociopolitical trouble that emerged within the territories of USSR but outside the territories of Russia. And this too had a long legacy. When the first congress of the people of the East took place in Baku in 1920, Lenin advised the communists of ‘backward’ Asia to forge alliances with bourgeois nationalists, a policy which would have never even been proposed in Russia. One of the first leaders to oppose such idea was the Indian revolutionary Manabendra Nath Roy, who had a strong suspicion that the bourgeois nationalists would have a rather close connection with the feudal order of the Asian republics. Manabendra Nath was indeed a visionary, Lenin’s preferred course of alliances with the bourgeois nationalists took its toll. Capitalism in its current form cannot alleviate the problems of the post-Soviet states, but a possible reincarnation of the tried and tested socialist failures make the younger generations more worried. × The socialist movement in the Caucasian and Asian republics of USSR went haywire, and as soon as the command and control economy had collapsed the old feudal order, now known as Oligarchs, took over the control of the post-Soviet states. Capitalism in its current form cannot alleviate the problems of the post-Soviet states, but a possible reincarnation of the tried and tested socialist failures make the younger generations more worried. The post-Soviet states are now in dire need of their own maverick thinkers who can perhaps establish a new economic order. Since an awfully long lull is still in effect, I hope the storm is not that far away.

Russian revolution: Life in post-Soviet states 100 years later

Saudi Arabia&rsquo;s Crown Prince Mohammed bin Salman, popularly known as MBS in a recent Future Investment Summit, held on 24th October in Saudi Arabia&rsquo;s capital, Riyadh, launched independent $500bn megacity - with &quot;separate regulation&quot; - along with the Red Sea coastline. It will be run entirely on alternative energy and be an innovation hub for the future.

This Future Investment Summit is an international event to attract investors into the kingdom. He issued a statement, &ldquo;Saudi Arabia would return&nbsp;to a moderate Islam that is open to all religions and to the world&quot;. He further said, &quot;We will end extremism very soon&quot;. These statements issued by MBS has a lot of repercussions.

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<h5>Saudi has made moves to change its global image like allowing women to drive. The government has also revoked restrictions on the use of Skype and Whatsapp.</h5>
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First, this statement is a reflection of his vision and Saudi&#39;s vision 2030 - a plan for social and economic reform as the kingdom prepares for a post-oil era. This is part of its attempt to shift from an oil-based economy to a modern one. It will reassure investors that Crown Prince Mohammed bin Salman&#39;s push to diversify its economy beyond oil is on track. In the recent months, Saudi has made moves to change its global image like allowing women to drive. The government has also revoked restrictions on the use of Skype and Whatsapp.

Secondly, these statements also show that the failure of the monarchy as it is trying to divert the citizens focus from diminishing resources of the kingdom. The end of these resources would be devastating for Saudi Arabia&rsquo;s economy. 
&nbsp; 
Third, these statements are a clear challenge to the religious establishment of the regime. This shows the breaking of the alliance between House of Saud and the clergy, which maintains a stronghold in the Saudi system. The political system of Saudi is based on religious establishment.

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<h5>Saudi Arabia&rsquo;s Crown Prince is promoting modernisation plans to attract foreign investment and expand the economy beyond oil.</h5>
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Fourth, MBS talking of new age and change looks difficult without a cultural transformation in Saudi. Saudi Arabia&rsquo;s state religion is fundamentalist form of Sunni Islam, Wahhabism, where the Islamic Sharia law is practiced strictly. Infidelity and drug trafficking are punishable with beheading, and women still need to be accompanied by a male guardian. Saudi Arabia is the last country in the world to grant women driving rights.

His plans guarantee brighter future for Saudi&rsquo;s, as he is promoting modernisation plans to attract foreign investment and expand the economy beyond oil. He has announced unique social and economic reforms after coming to power. His projects provide a forward-looking image which is a game changer for the image of Saudi globally. His statement is very bold for a conservative country like Saudi Arabia where other religious practices are not allowed. Like, for example, churches are banned.

It would be great if he could change the guardianship system&nbsp;where women cannot marry, work, study, open bank account, apply for passport, travel or seek healthcare without the consent of their male guardians. A Saudi woman can never pass on her nationality to her children, who need a visa to enter the kingdom. Then only half of the population of Saudi Arabia can participate in the development of economy freely. Also, his cultural revolution will be successful.

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<h5>The prince is moving rather too quickly with reforms which might not go too well with the religious establishment within Saudi.</h5>
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However, the success of these changes requires stability and security in the region. It will be comfortable in investing only if, there is&nbsp;stability and security in the region. This is only possible if the crisis in Yemen ends and the relations with Qatar resumes. Also, the prince is moving rather too quickly with reforms which might not go too well with the religious establishment within Saudi.

Democracy and citizen rights is a distant dream in this Gulf monarchy. Gender segregation is practiced in many places and women are marginalised in jobs. Monitors, including Amnesty International, says Saudi Arabia has in parallel stepped up its repression of peaceful rights activists. Saudi authorities last month arrested more than 20 activists, including two popular Muslim preachers, without disclosing any charges against them.

In such an environment, new age looks difficult. Changes in Saudi economy must be accompanied by cultural changes. The founding precepts of the country are not working anymore, as Saudi has a young population, maximum under the age of thirty.

Though a lot has changed under MBS and that is giving a modern, liberal image to Saudi Arabia internationally.

Modernisation in Saudi Arabia seems impossible without cultural transformation

Saudi Arabia’s Crown Prince Mohammed bin Salman, popularly known as MBS in a recent Future Investment Summit, held on 24th October in Saudi Arabia’s capital, Riyadh, launched independent $500bn megacity - with "separate regulation" - along with the Red Sea coastline. It will be run entirely on alternative energy and be an innovation hub for the future. This Future Investment Summit is an international event to attract investors into the kingdom. He issued a statement, “Saudi Arabia would return to a moderate Islam that is open to all religions and to the world". He further said, "We will end extremism very soon". These statements issued by MBS has a lot of repercussions. Saudi has made moves to change its global image like allowing women to drive. The government has also revoked restrictions on the use of Skype and Whatsapp. × First, this statement is a reflection of his vision and Saudi's vision 2030 - a plan for social and economic reform as the kingdom prepares for a post-oil era. This is part of its attempt to shift from an oil-based economy to a modern one. It will reassure investors that Crown Prince Mohammed bin Salman's push to diversify its economy beyond oil is on track. In the recent months, Saudi has made moves to change its global image like allowing women to drive. The government has also revoked restrictions on the use of Skype and Whatsapp. Secondly, these statements also show that the failure of the monarchy as it is trying to divert the citizens focus from diminishing resources of the kingdom. The end of these resources would be devastating for Saudi Arabia’s economy. Third, these statements are a clear challenge to the religious establishment of the regime. This shows the breaking of the alliance between House of Saud and the clergy, which maintains a stronghold in the Saudi system. The political system of Saudi is based on religious establishment. Saudi Arabia’s Crown Prince is promoting modernisation plans to attract foreign investment and expand the economy beyond oil. × Fourth, MBS talking of new age and change looks difficult without a cultural transformation in Saudi. Saudi Arabia’s state religion is fundamentalist form of Sunni Islam, Wahhabism, where the Islamic Sharia law is practiced strictly. Infidelity and drug trafficking are punishable with beheading, and women still need to be accompanied by a male guardian. Saudi Arabia is the last country in the world to grant women driving rights. His plans guarantee brighter future for Saudi’s, as he is promoting modernisation plans to attract foreign investment and expand the economy beyond oil. He has announced unique social and economic reforms after coming to power. His projects provide a forward-looking image which is a game changer for the image of Saudi globally. His statement is very bold for a conservative country like Saudi Arabia where other religious practices are not allowed. Like, for example, churches are banned. It would be great if he could change the guardianship system where women cannot marry, work, study, open bank account, apply for passport, travel or seek healthcare without the consent of their male guardians. A Saudi woman can never pass on her nationality to her children, who need a visa to enter the kingdom. Then only half of the population of Saudi Arabia can participate in the development of economy freely. Also, his cultural revolution will be successful. The prince is moving rather too quickly with reforms which might not go too well with the religious establishment within Saudi. × However, the success of these changes requires stability and security in the region. It will be comfortable in investing only if, there is stability and security in the region. This is only possible if the crisis in Yemen ends and the relations with Qatar resumes. Also, the prince is moving rather too quickly with reforms which might not go too well with the religious establishment within Saudi. Democracy and citizen rights is a distant dream in this Gulf monarchy. Gender segregation is practiced in many places and women are marginalised in jobs. Monitors, including Amnesty International, says Saudi Arabia has in parallel stepped up its repression of peaceful rights activists. Saudi authorities last month arrested more than 20 activists, including two popular Muslim preachers, without disclosing any charges against them. In such an environment, new age looks difficult. Changes in Saudi economy must be accompanied by cultural changes. The founding precepts of the country are not working anymore, as Saudi has a young population, maximum under the age of thirty. Though a lot has changed under MBS and that is giving a modern, liberal image to Saudi Arabia internationally.

Seeking foreign investment Saudi Arabia may modernise

British household spending grew at its&nbsp;weakest pace since late 2014 in the three months to June as the effect of a&nbsp;weaker&nbsp;pound&nbsp;since last year&#39;s Brexit vote weighed on Britons&#39; spending power, official statistics showed on Thursday.

Year-on-year spending growth dropped to 2.0 percent from 2.6 percent after expanding just 0.1 percent in the second quarter, the Office for National Statistics said.

Overall growth in gross domestic product was unrevised from an earlier estimate at 0.3 percent on a quarterly basis and 1.7 percent annually, the ONS added - representing the&nbsp;weakest start to any year since 2012.

&quot;GDP growth has slowed markedly in the first half of the year,&quot; ONS statistician Darren Morgan said. &quot;Household spending grew&nbsp;weakly, with the lower-value&nbsp;pound&nbsp;hitting household budgets,&quot; he added.

Sterling has fallen by around 15 percent on a trade-weighted since June 2016&#39;s vote to leave the European Union, pushing consumer price inflation to its highest in nearly four years in May, and added to its losses after the latest data.

Thursday&#39;s figures also showed that year-on-year business investment growth slowed to zero from 0.7 percent in the first quarter, while net trade dragged down the annual growth rate by 0.5 percent.

Britain&#39;s economy grew 1.8 percent last year, one of the fastest rates among the world&#39;s seven largest advanced economies, capped by the growth of 0.7 percent in the last three months of the year.

But that growth relied heavily on robust consumer spending, which this year has come under increased pressure from rising inflation as stores push up prices in response to Sterling&#39;s sharp fall after the Brexit vote.

The Bank of England said earlier this month that it expected the economy to grow 1.6 percent this year - slower than it had previously forecast but in line with the average expectation of economists polled by Reuters.

While it expects growth in household consumption to slow to 1.75 percent this year as inflation approaches 3 percent, it forecast export volumes would rise by 3.5 percent and business investment would rise by 1 percent.

Few economists expect the BoE to raise interest rates before 2019 as inflation is forecast to fall next year once the impact of sterling&#39;s&nbsp;weakness fades, while uncertainty during two years of Brexit talks is predicted to drag on growth.

Overall growth in gross domestic product was unrevised from an earlier estimate at 0.3 percent on a quarterly basis and 1.7 percent annually, the ONS said

British household spending grew at its weakest pace since late 2014 in the three months to June as the effect of a weaker pound since last year's Brexit vote weighed on Britons' spending power, official statistics showed on Thursday. Year-on-year spending growth dropped to 2.0 percent from 2.6 percent after expanding just 0.1 percent in the second quarter, the Office for National Statistics said. Overall growth in gross domestic product was unrevised from an earlier estimate at 0.3 percent on a quarterly basis and 1.7 percent annually, the ONS added - representing the weakest start to any year since 2012. "GDP growth has slowed markedly in the first half of the year," ONS statistician Darren Morgan said. "Household spending grew weakly, with the lower-value pound hitting household budgets," he added. Sterling has fallen by around 15 percent on a trade-weighted since June 2016's vote to leave the European Union, pushing consumer price inflation to its highest in nearly four years in May, and added to its losses after the latest data. Thursday's figures also showed that year-on-year business investment growth slowed to zero from 0.7 percent in the first quarter, while net trade dragged down the annual growth rate by 0.5 percent. Britain's economy grew 1.8 percent last year, one of the fastest rates among the world's seven largest advanced economies, capped by the growth of 0.7 percent in the last three months of the year. But that growth relied heavily on robust consumer spending, which this year has come under increased pressure from rising inflation as stores push up prices in response to Sterling's sharp fall after the Brexit vote. The Bank of England said earlier this month that it expected the economy to grow 1.6 percent this year - slower than it had previously forecast but in line with the average expectation of economists polled by Reuters. While it expects growth in household consumption to slow to 1.75 percent this year as inflation approaches 3 percent, it forecast export volumes would rise by 3.5 percent and business investment would rise by 1 percent. Few economists expect the BoE to raise interest rates before 2019 as inflation is forecast to fall next year once the impact of sterling's weakness fades, while uncertainty during two years of Brexit talks is predicted to drag on growth.

Weaker Pound takes toll on British household spending

Stocks around the world fell sharply on Thursday and investors moved into the yen, gold and other safe-haven assets amid more aggressive talk between the United States and North Korea.

MSCI&#39;s gauge of stocks across the globe shed 0.77 per cent, on track for its third straight day of declines as it pulled further back from all-time highs.

The Japanese yen hit an eight-week high against the US&nbsp;dollar, while spot gold also reached a two-month high.

North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the US Pacific island territory of Guam in an unusually detailed threat that further heightened tensions with the United States.

The rise in geopolitical tensions this week, which heightened after US President Donald Trump on Tuesday warned North Korea that it would face &quot;fire and fury&quot; if it threatened the United States, has drawn investor attention away from second-quarter corporate earnings season, which is winding down.

&quot;The story today is North Korea and there was nothing in the earnings that was bullish enough to pull people away from focusing on North Korea,&quot; said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

The Dow Jones Industrial Average fell 94.55 points, or 0.43 per cent, to 21,954.15, the S&amp;P 500 lost 19.51 points, or 0.79 per cent, to 2,454.51 and the Nasdaq Composite dropped 76.39 points, or 1.2 per cent, to 6,275.94.

Shares of US department stores Kohl&#39;s and Macy&#39;s were weak after their results.

The pan-European FTSEurofirst 300 index lost 1.19 per cent.

Shares of staffing firm Adecco slumped 6.4 per cent after its results.

In currencies, the yen strengthened 0.64 per cent versus the greenback at 109.37 per dollar.

&quot;The yen is the big story really. Risk aversion is still very much a concern for markets,&quot; said Shaun Osborne, chief currency strategist, at Scotiabank in Toronto.

The dollar index, which measures against a basket of currencies, fell 0.05 per cent.

The dollar weakened after news that US producer prices unexpectedly fell in July, recording their biggest drop in nearly a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

US Treasury long-dated yields dropped to six-week lows, pressured by US-North Korea tensions and the weak data that further reduced expectations of an interest rate hike in December.

Benchmark 10-year notes last rose 5/32 in price to yield 2.2255 per cent, from 2.242 per cent late on Wednesday.

The 30-year bond last rose 5/32 in price to yield 2.8107 per cent, from 2.818 per cent late on Wednesday.

In commodities, US. crude fell 0.67 per cent to $49.23 per barrel and Brent was last at $52.58, down 0.23 per cent on the day.

Spot gold added 0.7 per cent to $1,285.70 an ounce.

&quot;For now, the uptrend is very much intact in gold, reacting to external geopolitical events,&quot; said Jonathan Butler, commodities analyst at Mitsubishi in London.

The Japanese yen hit an eight-week high against the US?dollar, while spot gold also reached a two-month high

Stocks around the world fell sharply on Thursday and investors moved into the yen, gold and other safe-haven assets amid more aggressive talk between the United States and North Korea. MSCI's gauge of stocks across the globe shed 0.77 per cent, on track for its third straight day of declines as it pulled further back from all-time highs. The Japanese yen hit an eight-week high against the US dollar, while spot gold also reached a two-month high. North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the US Pacific island territory of Guam in an unusually detailed threat that further heightened tensions with the United States. The rise in geopolitical tensions this week, which heightened after US President Donald Trump on Tuesday warned North Korea that it would face "fire and fury" if it threatened the United States, has drawn investor attention away from second-quarter corporate earnings season, which is winding down. "The story today is North Korea and there was nothing in the earnings that was bullish enough to pull people away from focusing on North Korea," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. The Dow Jones Industrial Average fell 94.55 points, or 0.43 per cent, to 21,954.15, the S&P 500 lost 19.51 points, or 0.79 per cent, to 2,454.51 and the Nasdaq Composite dropped 76.39 points, or 1.2 per cent, to 6,275.94. Shares of US department stores Kohl's and Macy's were weak after their results. The pan-European FTSEurofirst 300 index lost 1.19 per cent. Shares of staffing firm Adecco slumped 6.4 per cent after its results. In currencies, the yen strengthened 0.64 per cent versus the greenback at 109.37 per dollar. "The yen is the big story really. Risk aversion is still very much a concern for markets," said Shaun Osborne, chief currency strategist, at Scotiabank in Toronto. The dollar index, which measures against a basket of currencies, fell 0.05 per cent. The dollar weakened after news that US producer prices unexpectedly fell in July, recording their biggest drop in nearly a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase. US Treasury long-dated yields dropped to six-week lows, pressured by US-North Korea tensions and the weak data that further reduced expectations of an interest rate hike in December. Benchmark 10-year notes last rose 5/32 in price to yield 2.2255 per cent, from 2.242 per cent late on Wednesday. The 30-year bond last rose 5/32 in price to yield 2.8107 per cent, from 2.818 per cent late on Wednesday. In commodities, US. crude fell 0.67 per cent to $49.23 per barrel and Brent was last at $52.58, down 0.23 per cent on the day. Spot gold added 0.7 per cent to $1,285.70 an ounce. "For now, the uptrend is very much intact in gold, reacting to external geopolitical events," said Jonathan Butler, commodities analyst at Mitsubishi in London.

As North Korea rattle drags down stocks, value of gold and yen rise

Oil prices edged up on Tuesday, lifted by statements that Saudi Arabia was making significant supply cuts, although rising U S output meant that markets remain well supplied.

Brent crude futures LCOc1 were at $48.52 per barrel at 0510 GMT, up 23 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $46.27 per barrel, up 19 cents, or 0.4 percent.

Saudi Arabia, the world&#39;s top oil exporter, is leading an effort by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by almost 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 in order to prop up prices. Other countries, including top producer Russia, are also participating.

During the first half of the year, there were doubts over OPEC&#39;s compliance with its own pledges, as supplies remained high.

Saudi officials now say they are making real cuts, including 300,000 bpd to Asia for July, although several Asian refiners said they were still receiving their full allocations.

&quot;Oil attempted to rally... as Saudi Arabia announced cuts to shipments to the United States and Asia,&quot; said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

OPEC&#39;s exports have been falling since the start of the cuts in January, although some members such as Libya and Nigeria are exempt from the cuts and there have been doubts over the compliance of others, including Iraq.

Trade data shows that OPEC shipments to customers averaged around 26 million bpd in the last six months of 2016, while they are set to average around 25.3 million bpd in the first half of this year.

Threatening to undermine OPEC&#39;s efforts is rising U.S. drilling activity RIG-OL-USA-BHI, which has driven up output C-OUT-T-EIA in the United States by more than 10 percent since mid-2016, to over 9.3 million bpd.

The U.S. Energy Information Administration says production will rise above 10 million next year, challenging top exporter Saudi Arabia. 
&nbsp; 
Overall, oil markets remain well supplied.

Reflecting the perception that global oil supplies are ample, the Brent forward curve &lt;0#LCO:&gt; remains in a shape known as contango, with crude for delivery in half a year&#39;s time about $1.50 per barrel more expensive than that for immediate delivery, making it attractive for traders to store oil for a later sale.

&quot;Where oil prices go will be determined by the flow of inventory data,&quot; said Greg McKenna, chief market strategist at Australian futures brokerage AxiTrader.

While prices were up on Tuesday, crude has lost 10 percent of its value since late May when OPEC announced it would extend its production cuts.

(Reuters)

Oil attempted to rally... as Saudi Arabia announced cuts to shipments to the United States and Asia,"

Oil prices edged up on Tuesday, lifted by statements that Saudi Arabia was making significant supply cuts, although rising U S output meant that markets remain well supplied. Brent crude futures LCOc1 were at $48.52 per barrel at 0510 GMT, up 23 cents, or 0.5 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $46.27 per barrel, up 19 cents, or 0.4 percent. Saudi Arabia, the world's top oil exporter, is leading an effort by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by almost 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 in order to prop up prices. Other countries, including top producer Russia, are also participating. During the first half of the year, there were doubts over OPEC's compliance with its own pledges, as supplies remained high. Saudi officials now say they are making real cuts, including 300,000 bpd to Asia for July, although several Asian refiners said they were still receiving their full allocations. "Oil attempted to rally... as Saudi Arabia announced cuts to shipments to the United States and Asia," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore. OPEC's exports have been falling since the start of the cuts in January, although some members such as Libya and Nigeria are exempt from the cuts and there have been doubts over the compliance of others, including Iraq. Trade data shows that OPEC shipments to customers averaged around 26 million bpd in the last six months of 2016, while they are set to average around 25.3 million bpd in the first half of this year. Threatening to undermine OPEC's efforts is rising U.S. drilling activity RIG-OL-USA-BHI, which has driven up output C-OUT-T-EIA in the United States by more than 10 percent since mid-2016, to over 9.3 million bpd. The U.S. Energy Information Administration says production will rise above 10 million next year, challenging top exporter Saudi Arabia. Overall, oil markets remain well supplied. Reflecting the perception that global oil supplies are ample, the Brent forward curve <0#LCO:> remains in a shape known as contango, with crude for delivery in half a year's time about $1.50 per barrel more expensive than that for immediate delivery, making it attractive for traders to store oil for a later sale. "Where oil prices go will be determined by the flow of inventory data," said Greg McKenna, chief market strategist at Australian futures brokerage AxiTrader. While prices were up on Tuesday, crude has lost 10 percent of its value since late May when OPEC announced it would extend its production cuts. (Reuters)

Oil prices edged up, Saudi Arabia to cut supplies from Asia and United States

The term &ldquo;jobless growth&rdquo;, much in the news these days, is used to describe the phenomenon of GDP growth without a commensurate increase in (formal) employment. How can GDP grow without job creation? The increasing use of machines in production is one crucial reason.&nbsp;

Annual Survey of Industries data, which reports on organised or formal sector firms, shows that the capital to labour ratio has steadily risen in most industries over the past few decades. In a country like India, where labour is abundant and cheap, why are firms choosing to substitute capital (machines) for labour? Several explanations have been offered, none of them exclusive of the others.

One story, popular among some economists as well as policy-makers is that India&rsquo;s labour laws are too restrictive. Faced with an excessive regulation of hiring and firing, firms prefer to substitute machines for workers. A vigorous debate has raged over this issue. Although a consensus of sorts seems to be forming in the policy circles that labour laws are a big constraint on job creation, and several steps have already been taken at the centre and state level to dilute these laws, two things are worth noting. First, firm owners often do not list labour laws among the top two or three constraints that they face in expanding their business. Rather inadequate infrastructure, government procedures, and weak demand top the list.&nbsp;

To put it another way, if strong demand were assured and infrastructure streamlined, then labour laws would be unlikely to get in the way of firm expansion. Second, if firms really wanted to expand while avoiding being subject to labour laws, we should observe a large number of firms employing workers up to just below the threshold where labour laws kick in. But we observe no such &ldquo;clumping.&rdquo;

Of course, it is possible that firms do not face this constraint simply because they hire informal (off the books) workers via contractors. This way expansion is assured without being subject to labour laws. Indeed, the data clearly show an increasing presence of informal workers within formal sector firms. But the solution to this proliferation of precarious jobs is actually to make sure these jobs get formalised and come under the ambit of regulation. And not to remove regulation on existing formal jobs. What is needed is an intelligent approach that strengthens those regulations that will improve job security, working conditions, and rights to bargain collectively, while allowing firms the flexibility to shed labour after meeting due obligations and safeguards.

The second explanation for increasing mechanisation draws on the fact that in recent decades, the Indian economy has become increasingly more integrated into the global economy. Trade liberalisation makes the import of capital and intermediate goods easier. Imported capital goods are relatively cheaper and this reduces the relative price of capital vis-a-vis labour, inducing firms to substitute capital for labour. Trade liberalisation also forced domestic firms to compete with foreign firms in the domestic market. Since foreign firms bring in products produced with much more capital-intensive technology and lower unit costs (because they often operate in capital-rich, labour-scarce economies), domestic firms also have to adopt that technology to stay competitive. And finally, trade liberalisation allows Indian firms to access foreign markets, where again they have to compete with firms producing with capital-intensive technology.

A third explanation is that growth in the post-reform period has benefited a narrow class of Indians, thereby, increasing inequality. Hence expenditure by the elite has become an important source of demand for domestic manufacturers. This elite demand is skewed towards products, such as automobiles, electronics, white goods, higher-end services etc. which are produced by capital-intensive and not labour-intensive technology as it is done in sectors producing food and clothing etc. So a growth in elite demand, raises GDP but does not create jobs.

All this has serious implications for the &ldquo;normal&rdquo; way in which other countries historically managed to create employment, through increasing manufacturing activities. It is not available anymore because countries that are expanding their industrial and manufacturing base today have to compete with much more advanced countries in the same market. As a result, in many developing countries, manufacturing share of employment is declining instead of growing. Workers are moving directly from agriculture into services. This has been called &ldquo;premature deindustrialization.&rdquo;

Finally, at the ideological level, governments in countries like India have willingly constrained themselves. They have not adopted strategic trade and industrial policies for fear of being labeled &ldquo;protectionist,&rdquo; &ldquo;anti-market&rdquo;, &ldquo;anti-investor&rdquo;, anti-globalisation&rdquo; etc. In fact, a large economy like India should have significant leeway in policy-making to suit its own priorities. After all the true test of a well-functioning economy is whether it makes life better for all its citizens, not whether it is open and global.

Increasing uses of informal workers, rising demands of elites and a globalised economy are keeping Indians jobless.

The term “jobless growth”, much in the news these days, is used to describe the phenomenon of GDP growth without a commensurate increase in (formal) employment. How can GDP grow without job creation? The increasing use of machines in production is one crucial reason. Annual Survey of Industries data, which reports on organised or formal sector firms, shows that the capital to labour ratio has steadily risen in most industries over the past few decades. In a country like India, where labour is abundant and cheap, why are firms choosing to substitute capital (machines) for labour? Several explanations have been offered, none of them exclusive of the others. One story, popular among some economists as well as policy-makers is that India’s labour laws are too restrictive. Faced with an excessive regulation of hiring and firing, firms prefer to substitute machines for workers. A vigorous debate has raged over this issue. Although a consensus of sorts seems to be forming in the policy circles that labour laws are a big constraint on job creation, and several steps have already been taken at the centre and state level to dilute these laws, two things are worth noting. First, firm owners often do not list labour laws among the top two or three constraints that they face in expanding their business. Rather inadequate infrastructure, government procedures, and weak demand top the list. To put it another way, if strong demand were assured and infrastructure streamlined, then labour laws would be unlikely to get in the way of firm expansion. Second, if firms really wanted to expand while avoiding being subject to labour laws, we should observe a large number of firms employing workers up to just below the threshold where labour laws kick in. But we observe no such “clumping.” Of course, it is possible that firms do not face this constraint simply because they hire informal (off the books) workers via contractors. This way expansion is assured without being subject to labour laws. Indeed, the data clearly show an increasing presence of informal workers within formal sector firms. But the solution to this proliferation of precarious jobs is actually to make sure these jobs get formalised and come under the ambit of regulation. And not to remove regulation on existing formal jobs. What is needed is an intelligent approach that strengthens those regulations that will improve job security, working conditions, and rights to bargain collectively, while allowing firms the flexibility to shed labour after meeting due obligations and safeguards. The second explanation for increasing mechanisation draws on the fact that in recent decades, the Indian economy has become increasingly more integrated into the global economy. Trade liberalisation makes the import of capital and intermediate goods easier. Imported capital goods are relatively cheaper and this reduces the relative price of capital vis-a-vis labour, inducing firms to substitute capital for labour. Trade liberalisation also forced domestic firms to compete with foreign firms in the domestic market. Since foreign firms bring in products produced with much more capital-intensive technology and lower unit costs (because they often operate in capital-rich, labour-scarce economies), domestic firms also have to adopt that technology to stay competitive. And finally, trade liberalisation allows Indian firms to access foreign markets, where again they have to compete with firms producing with capital-intensive technology. A third explanation is that growth in the post-reform period has benefited a narrow class of Indians, thereby, increasing inequality. Hence expenditure by the elite has become an important source of demand for domestic manufacturers. This elite demand is skewed towards products, such as automobiles, electronics, white goods, higher-end services etc. which are produced by capital-intensive and not labour-intensive technology as it is done in sectors producing food and clothing etc. So a growth in elite demand, raises GDP but does not create jobs. All this has serious implications for the “normal” way in which other countries historically managed to create employment, through increasing manufacturing activities. It is not available anymore because countries that are expanding their industrial and manufacturing base today have to compete with much more advanced countries in the same market. As a result, in many developing countries, manufacturing share of employment is declining instead of growing. Workers are moving directly from agriculture into services. This has been called “premature deindustrialization.” Finally, at the ideological level, governments in countries like India have willingly constrained themselves. They have not adopted strategic trade and industrial policies for fear of being labeled “protectionist,” “anti-market”, “anti-investor”, anti-globalisation” etc. In fact, a large economy like India should have significant leeway in policy-making to suit its own priorities. After all the true test of a well-functioning economy is whether it makes life better for all its citizens, not whether it is open and global.

Why is India's growth not creating more jobs?

Indian shares ended lower on Friday, after jumping to record highs twice this week, as investors turned cautious ahead of inflation data and booked profits in recent outperformers.

The broader NSE Nifty closed down 0.23 per cent at 9,400.90, but was up 1.24 per cent for the week.

The benchmark BSE Sensex ended 0.21 per cent lower at 30,188.15, but was up 1.10 per cent for the week.

Both indexes snapped four straight sessions of gains.

Eicher Motors snapped five consecutive sessions of gains to end 1.1 per cent lower, while Ashok Leyland fell 1.2 per cent after a two-day rally.

(Reuters)

Sensex snaps four days of gains; inflation data awaited

Indian shares ended lower on Friday, after jumping to record highs twice this week, as investors turned cautious ahead of inflation data and booked profits in recent outperformers. The broader NSE Nifty closed down 0.23 per cent at 9,400.90, but was up 1.24 per cent for the week. The benchmark BSE Sensex ended 0.21 per cent lower at 30,188.15, but was up 1.10 per cent for the week. Both indexes snapped four straight sessions of gains. Eicher Motors snapped five consecutive sessions of gains to end 1.1 per cent lower, while Ashok Leyland fell 1.2 per cent after a two-day rally. (Reuters)

Sensex slips after record gains, inflation data awaited

A flurry of data in coming weeks is expected to show China posted solid economic growth in February, even as the government trimmed its growth target for the year to focus on containing the risks from a rapid build-up in debt.

Export and import growth is expected to hit multi-year highs, according to Reuters polls, adding to views that the global economy are shifting into higher gear and giving China&#39;s policymakers more confidence to press ahead on oft-delayed structural reforms.

China&#39;s first-quarter economic growth could accelerate to 7 per cent year-on-year, from 6.8 per cent in the last quarter, economists at OCBC wrote in a note on Monday, while adding the pace may ease beginning in spring.

Reflecting continued strength in its manufacturing sector, and particularly heavy industry, China&#39;s producer price index (PPI) likely rose 7.7 per cent from a year earlier, the sharpest gain in nearly 9 years.

China&#39;s iron ore and steel prices have been rallying for a year, fueled by a construction boom, though worries are growing over rising inventories. The country&#39;s insatiable demand for resources has helped spur an inflationary pulse in commodities worldwide.

While factory surveys show manufacturers have been able to pass on some of the higher production costs by raising prices of their goods, there has been scant evidence of it flowing through to consumer inflation yet.

Consumer prices likely rose 1.7 percent in February, easing from a 2.5 percent increase in January as food prices normalized following Lunar New Year celebrations. Beijing is targeting consumer inflation at 3 percent this year, unchanged from 2016.

China&#39;s foreign exchange reserves likely fell for an eighth straight month, though the decline was seen to be marginal as a weaker US dollar and tighter restrictions on taking money out of the country dampened pressure from capital outflows.

FX reserves likely dipped to $2.973 trillion, from $2.998 trillion in January, when reserves fell below the closely watched $3 trillion level for the first time in nearly 6 years.

While that level is not seen as a firm &quot;line in the sand&quot; for Beijing, doubts are growing over how much longer authorities can afford to defend both the currency and its reserves if the U.S. dollar resumes its upward trend.

China announces foreign exchange reserves on Tuesday, followed by trade and inflation data on Wednesday and Thursday, respectively, while loan and money data is expected anytime from March 10-15.

China will release activity data on March 14 for industrial output, retail sales and fixed asset investment. The data will combine January and February in a bid to smooth out seasonal factors caused by the timing of the long Lunar New Year holidays, which began in late January this year but fell in February last year.

Industrial output is expected to have risen 6.2 per cent for Jan-Feb, picking up from 6 per cent in December, while fixed asset investment is likely to grow 8.2 per cent, edging up from 8.1 per cent in December.

Retail sales growth is expected to have cooled to 10.5 per cent for Jan-Feb, from 10.9 percent in December.

Car sales have been hit particularly hard as a tax cut was rolled back. General Motors (GM.N) reported on Monday that sales in the first two months fell 14.8 per cent on-year.

Booming Exports, Imports

Trade data is expected to show a further improvement in demand at home and abroad.

Driven largely by purchases of coal, iron ore and crude oil, imports likely rose 20 per cent on-year, the highest since January 2013, and accelerating from 16.7 per cent growth in January, though the February readings may have been distorted by the long holiday, which impacts production and port handling.

Shipments from the world&#39;s largest exporter are seen rising 12.3 per cent in February, the highest since September 2014. Exports rose 7.9 per cent in January.

China&#39;s trade surplus is forecast to have dropped to $25.75 billion in February, versus January&#39;s $51.35 billion. The surplus, long an irritant with some of its major trading partners, has come under fresh scrutiny amid fears of rising US trade protectionism under new President Donald Trump.

Lending seen slowing

While China&#39;s trade data often steals the headlines, loan and money supply figures may come under the closest scrutiny by investors after Premier Li Keqiang said on Sunday that the economic growth target would be cut to 6.5 per cent this year to give policymakers more room to focus on reforms and erect a &quot;firewall&quot; against financial risks.

Authorities had made similar pledges to tackle debt risks last year, even as banks extended a record amount of credit.

Still, new bank lending likely eased sharply to 920 billion yuan ($133.40 billion) in February from January&#39;s 2.03 trillion, which was the second-highest monthly tally on record.

Chinese banks usually &quot;front load&quot; loans early in the year after the government renews their credit quotas, competing fiercely to maintain market share and to lock in higher-quality borrowers as soon as possible.

Growth in outstanding loans likely inched up to 12.7 per cent on-year in February, while M2 money supply likely rose 11.4 per cent, from 11.3 per cent in January.

Beijing has the target for broad money supply growth this year to around 12 per cent from about 13 per cent for 2016.

With the economy on more stable footing, China&#39;s central bank has moved cautiously to a tightening policy bias in recent months to contain capital outflows and rein in debt risks.

It raised short-term interest rates modestly in January and February and is expected to do so again in coming months, but is seen keeping its benchmark policy lending rate steady through at least mid-2018, according to a separate Reuters poll.

(Reuters)

Export and import growth is expected to hit multi-year highs, giving China's policymakers confidence to effect structural reforms

A flurry of data in coming weeks is expected to show China posted solid economic growth in February, even as the government trimmed its growth target for the year to focus on containing the risks from a rapid build-up in debt. Export and import growth is expected to hit multi-year highs, according to Reuters polls, adding to views that the global economy are shifting into higher gear and giving China's policymakers more confidence to press ahead on oft-delayed structural reforms. China's first-quarter economic growth could accelerate to 7 per cent year-on-year, from 6.8 per cent in the last quarter, economists at OCBC wrote in a note on Monday, while adding the pace may ease beginning in spring. Reflecting continued strength in its manufacturing sector, and particularly heavy industry, China's producer price index (PPI) likely rose 7.7 per cent from a year earlier, the sharpest gain in nearly 9 years. China's iron ore and steel prices have been rallying for a year, fueled by a construction boom, though worries are growing over rising inventories. The country's insatiable demand for resources has helped spur an inflationary pulse in commodities worldwide. While factory surveys show manufacturers have been able to pass on some of the higher production costs by raising prices of their goods, there has been scant evidence of it flowing through to consumer inflation yet. Consumer prices likely rose 1.7 percent in February, easing from a 2.5 percent increase in January as food prices normalized following Lunar New Year celebrations. Beijing is targeting consumer inflation at 3 percent this year, unchanged from 2016. China's foreign exchange reserves likely fell for an eighth straight month, though the decline was seen to be marginal as a weaker US dollar and tighter restrictions on taking money out of the country dampened pressure from capital outflows. FX reserves likely dipped to $2.973 trillion, from $2.998 trillion in January, when reserves fell below the closely watched $3 trillion level for the first time in nearly 6 years. While that level is not seen as a firm "line in the sand" for Beijing, doubts are growing over how much longer authorities can afford to defend both the currency and its reserves if the U.S. dollar resumes its upward trend. China announces foreign exchange reserves on Tuesday, followed by trade and inflation data on Wednesday and Thursday, respectively, while loan and money data is expected anytime from March 10-15. China will release activity data on March 14 for industrial output, retail sales and fixed asset investment. The data will combine January and February in a bid to smooth out seasonal factors caused by the timing of the long Lunar New Year holidays, which began in late January this year but fell in February last year. Industrial output is expected to have risen 6.2 per cent for Jan-Feb, picking up from 6 per cent in December, while fixed asset investment is likely to grow 8.2 per cent, edging up from 8.1 per cent in December. Retail sales growth is expected to have cooled to 10.5 per cent for Jan-Feb, from 10.9 percent in December. Car sales have been hit particularly hard as a tax cut was rolled back. General Motors (GM.N) reported on Monday that sales in the first two months fell 14.8 per cent on-year. Booming Exports, Imports Trade data is expected to show a further improvement in demand at home and abroad. Driven largely by purchases of coal, iron ore and crude oil, imports likely rose 20 per cent on-year, the highest since January 2013, and accelerating from 16.7 per cent growth in January, though the February readings may have been distorted by the long holiday, which impacts production and port handling. Shipments from the world's largest exporter are seen rising 12.3 per cent in February, the highest since September 2014. Exports rose 7.9 per cent in January. China's trade surplus is forecast to have dropped to $25.75 billion in February, versus January's $51.35 billion. The surplus, long an irritant with some of its major trading partners, has come under fresh scrutiny amid fears of rising US trade protectionism under new President Donald Trump. Lending seen slowing While China's trade data often steals the headlines, loan and money supply figures may come under the closest scrutiny by investors after Premier Li Keqiang said on Sunday that the economic growth target would be cut to 6.5 per cent this year to give policymakers more room to focus on reforms and erect a "firewall" against financial risks. Authorities had made similar pledges to tackle debt risks last year, even as banks extended a record amount of credit. Still, new bank lending likely eased sharply to 920 billion yuan ($133.40 billion) in February from January's 2.03 trillion, which was the second-highest monthly tally on record. Chinese banks usually "front load" loans early in the year after the government renews their credit quotas, competing fiercely to maintain market share and to lock in higher-quality borrowers as soon as possible. Growth in outstanding loans likely inched up to 12.7 per cent on-year in February, while M2 money supply likely rose 11.4 per cent, from 11.3 per cent in January. Beijing has the target for broad money supply growth this year to around 12 per cent from about 13 per cent for 2016. With the economy on more stable footing, China's central bank has moved cautiously to a tightening policy bias in recent months to contain capital outflows and rein in debt risks. It raised short-term interest rates modestly in January and February and is expected to do so again in coming months, but is seen keeping its benchmark policy lending rate steady through at least mid-2018, according to a separate Reuters poll. (Reuters)

China: February data expected to show robust growth even as debt worry looms

India features among top six for global executives when it comes to overall growth prospects over the next 12 months, but enthusiasm for investing in the country has dropped from three years ago, finds out a survey.

According to the annual global CEO survey of consultancy giant PwC, released at the WEF annual meeting, the top two markets from the growth point of view are the US, as voted by 43 per cent of respondents, followed by China which received&nbsp;33 per cent votes.

Others in the pecking order are Germany (17 per cent), UK (15 per cent), Japan (8 per cent) and India (7 per cent).

Last year, India was among the top five most promising markets globally.

&quot;Over time, CEOs have become less enthusiastic about India perhaps because structural reforms have been slow to come (and there have been recent short-term difficulties with its rupee conversion programme),&quot; the survey noted.

It further said &quot;nevertheless, it still stands out for its robust growth and monetary and fiscal reforms&quot;.

As per the findings, the changeability of markets, exacerbated by currency volatility, has caused CEOs to turn to a greater mix of countries. This year&#39;s study shows that the US, Germany and the UK have become bigger priorities while willingness to invest in Brazil, India, Russia and Argentina has lessened from three years ago.

CEOs around the world feel they have plenty to worry about in the year ahead. Their confidence in companies&#39; growth prospects and the&nbsp;outlook for the global economy are back on the rise.&nbsp;Globally, 38 per cent of CEOs are very confident about their companies&#39; growth prospects in the next 12 months while 29 per cent believe that global economic growth will pick up in 2017.

While business leaders are more positive in their outlook, their levels of concern about economic uncertainty, over-regulation and availability of key skills remain very high.&nbsp;Also, worries about protectionism are growing, with 59 per cent of CEOs concerned about protectionism, whereas the figure stands at 64 per cent in the United States and Mexico.

&quot;Despite a tumultuous 2016, CEO confidence is moving back up - albeit slowly and still a long way from the levels we saw back in 2007. But there are signs of optimism right across the globe, including in the UK and US, where despite predictions of a Trump slump and a Brexit exit, CEOs&#39; confidence in their company&#39;s growth are up from 2016,&quot; said Bob Moritz, Global Chairman, PwC.

A significant 71 per cent of India&#39;s CEOs are very confident of their companies&#39; growth in the next 12 months, a 7-point increase over last year&#39;s and 33 points above this year&#39;s global average (38 per cent).

&quot;Confidence in the Indian economy is reflected in the optimism of Indian CEOs in their company&#39;s growth. It re-instates India&#39;s growth story, backed by the government&#39;s reform agenda. Availability of key skills and disruption caused by technology continues to be a concern,&quot; PwC India Chairman Shyamal Mukherjee said.&nbsp;

(PTI)&nbsp;

According to a survey, the top two markets from the growth point of view are the US followed by China

India features among top six for global executives when it comes to overall growth prospects over the next 12 months, but enthusiasm for investing in the country has dropped from three years ago, finds out a survey. According to the annual global CEO survey of consultancy giant PwC, released at the WEF annual meeting, the top two markets from the growth point of view are the US, as voted by 43 per cent of respondents, followed by China which received 33 per cent votes. Others in the pecking order are Germany (17 per cent), UK (15 per cent), Japan (8 per cent) and India (7 per cent). Last year, India was among the top five most promising markets globally. "Over time, CEOs have become less enthusiastic about India perhaps because structural reforms have been slow to come (and there have been recent short-term difficulties with its rupee conversion programme)," the survey noted. It further said "nevertheless, it still stands out for its robust growth and monetary and fiscal reforms". As per the findings, the changeability of markets, exacerbated by currency volatility, has caused CEOs to turn to a greater mix of countries. This year's study shows that the US, Germany and the UK have become bigger priorities while willingness to invest in Brazil, India, Russia and Argentina has lessened from three years ago. CEOs around the world feel they have plenty to worry about in the year ahead. Their confidence in companies' growth prospects and the outlook for the global economy are back on the rise. Globally, 38 per cent of CEOs are very confident about their companies' growth prospects in the next 12 months while 29 per cent believe that global economic growth will pick up in 2017. While business leaders are more positive in their outlook, their levels of concern about economic uncertainty, over-regulation and availability of key skills remain very high. Also, worries about protectionism are growing, with 59 per cent of CEOs concerned about protectionism, whereas the figure stands at 64 per cent in the United States and Mexico. "Despite a tumultuous 2016, CEO confidence is moving back up - albeit slowly and still a long way from the levels we saw back in 2007. But there are signs of optimism right across the globe, including in the UK and US, where despite predictions of a Trump slump and a Brexit exit, CEOs' confidence in their company's growth are up from 2016," said Bob Moritz, Global Chairman, PwC. A significant 71 per cent of India's CEOs are very confident of their companies' growth in the next 12 months, a 7-point increase over last year's and 33 points above this year's global average (38 per cent). "Confidence in the Indian economy is reflected in the optimism of Indian CEOs in their company's growth. It re-instates India's growth story, backed by the government's reform agenda. Availability of key skills and disruption caused by technology continues to be a concern," PwC India Chairman Shyamal Mukherjee said. (PTI)

Investment in India has dropped in the past three years: Survey

December 30 marks the end of the 50-day period Prime Minister Narendra Modi had sought to ease the initial pain of demonetisation. It also marks the end of the deadline to deposit the old Rs 500 and Rs 1000 notes or to exchange them at the banks for legal tenders.

However, people will still be allowed to deposit the old bank notes at the Reserve Bank of India (RBI).

The ordinance on demonetised currency does not propose a jail term for those holding more than 10 junked notes after the final March 31, 2017, deadline, but imposes a minimum fine of Rs 10,000.

The draft ordinance, which will be sent to President Pranab Mukherjee for his assent, will come into force from December 31.

There was a proposal for prescribing a four-year jail term, but the draft ordinance does not contain any such provision.

Those keeping the junked notes for &quot;study, research or numismatics&quot; purposes would be exempt from penalty provided they hold not more than 25 number of such notes irrespective of the denomination.

Besides, people authorised by RBI or its agencies or those holding junked notes under directions of a court would also not be penalised, as per Section 5 of the draft ordinance.

It provides for making holding of old Rs 1,000 and 500 notes after March 31 a criminal offence that will attract a fine of Rs 10,000 or five times the cash held, whichever is higher.

According to Section 6 of the &#39;Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016&#39;, whoever knowingly and wilfully makes any false declarations regarding junked notes would be liable for a fine &quot;which may extend to Rs 50,000 or five times the amount of the face value of specified bank notes tendered, whichever is higher&quot;.

The ordinance also provides for amending the Reserve Bank of India (RBI) Act, 1934 to provide legislative support for extinguishing the central bank and government&#39;s liability on the demonetised banknotes that are not returned.

While the deadline for the deposit of old currency in bank or post office accounts expires on Friday, there is time till March 31 for depositing them at select RBI counters with stiff conditions.

Sources said a proposal for a four-year jail term for anyone possessing large number of demonetised currency after March 31, 2017 was not approved by the Cabinet.

As per the draft ordinance, citizens who were abroad between November 9 and December 30 are entitled to deposit the junked notes till March 31 with RBI.

The government would also bring out a separate notification for &quot;such class of persons and for such reasons as may be specified&quot; to ensure that people are not harassed and those with genuine reasons can deposit the cancelled notes.

At the time of announcing demonetisation of old Rs 500 and Rs 1,000 notes on November 8, the government had allowed holders to either exchange them or deposit in bank and post office accounts.

According to the government, the main reason for bringing out the ordinance is to &quot;have clarity and finality to the liabilities of the Reserve Bank of India (RBI) and the central government&quot; arising from the demonetisation of high value currency notes.

In case of companies found holding more than 10 junked notes, action would be taken against the officials concerned.

Proceedings could be initiated against &quot;any director, manager, secretary, or other officer or employee&quot; of the particular company.

The ordinance also provides safeguard for the government and the central bank from facing any legal proceedings.

&quot;No suit, prosecution or other legal proceeding shall lie against government, RBI or any of their officers for anything or intended to be done in good faith under this ordinance,&quot; it noted.

In 1978, a similar Ordinance was issued to end the government&#39;s liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Morarji Desai-led government.

Sources said the legal amendments are needed every time the government decides to scrap any legal tender to put an end to its promissory note.

Of the Rs 15.4 lakh crore worth of currency that was scrapped, about Rs 14 lakh crore has been deposited in banks or exchanged.

&nbsp;

(PTI)

December 30 is the last day to deposit old Rs 500 and Rs 1,000 notes

December 30 marks the end of the 50-day period Prime Minister Narendra Modi had sought to ease the initial pain of demonetisation. It also marks the end of the deadline to deposit the old Rs 500 and Rs 1000 notes or to exchange them at the banks for legal tenders. However, people will still be allowed to deposit the old bank notes at the Reserve Bank of India (RBI). The ordinance on demonetised currency does not propose a jail term for those holding more than 10 junked notes after the final March 31, 2017, deadline, but imposes a minimum fine of Rs 10,000. The draft ordinance, which will be sent to President Pranab Mukherjee for his assent, will come into force from December 31. There was a proposal for prescribing a four-year jail term, but the draft ordinance does not contain any such provision. Those keeping the junked notes for "study, research or numismatics" purposes would be exempt from penalty provided they hold not more than 25 number of such notes irrespective of the denomination. Besides, people authorised by RBI or its agencies or those holding junked notes under directions of a court would also not be penalised, as per Section 5 of the draft ordinance. It provides for making holding of old Rs 1,000 and 500 notes after March 31 a criminal offence that will attract a fine of Rs 10,000 or five times the cash held, whichever is higher. According to Section 6 of the 'Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016', whoever knowingly and wilfully makes any false declarations regarding junked notes would be liable for a fine "which may extend to Rs 50,000 or five times the amount of the face value of specified bank notes tendered, whichever is higher". The ordinance also provides for amending the Reserve Bank of India (RBI) Act, 1934 to provide legislative support for extinguishing the central bank and government's liability on the demonetised banknotes that are not returned. While the deadline for the deposit of old currency in bank or post office accounts expires on Friday, there is time till March 31 for depositing them at select RBI counters with stiff conditions. Sources said a proposal for a four-year jail term for anyone possessing large number of demonetised currency after March 31, 2017 was not approved by the Cabinet. As per the draft ordinance, citizens who were abroad between November 9 and December 30 are entitled to deposit the junked notes till March 31 with RBI. The government would also bring out a separate notification for "such class of persons and for such reasons as may be specified" to ensure that people are not harassed and those with genuine reasons can deposit the cancelled notes. At the time of announcing demonetisation of old Rs 500 and Rs 1,000 notes on November 8, the government had allowed holders to either exchange them or deposit in bank and post office accounts. According to the government, the main reason for bringing out the ordinance is to "have clarity and finality to the liabilities of the Reserve Bank of India (RBI) and the central government" arising from the demonetisation of high value currency notes. In case of companies found holding more than 10 junked notes, action would be taken against the officials concerned. Proceedings could be initiated against "any director, manager, secretary, or other officer or employee" of the particular company. The ordinance also provides safeguard for the government and the central bank from facing any legal proceedings. "No suit, prosecution or other legal proceeding shall lie against government, RBI or any of their officers for anything or intended to be done in good faith under this ordinance," it noted. In 1978, a similar Ordinance was issued to end the government's liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Morarji Desai-led government. Sources said the legal amendments are needed every time the government decides to scrap any legal tender to put an end to its promissory note. Of the Rs 15.4 lakh crore worth of currency that was scrapped, about Rs 14 lakh crore has been deposited in banks or exchanged. (PTI)

Demonetisation: Prime Minister Modi's 50-day promise ends today

The US Fed is expected to hike interest rates tonight, with most analysts saying the hike is expected to be between 0.25-0.5%. &nbsp;

The Fed had cut interest rates by 0.25% back when the 2008 crash had taken place, to try and increase spending in the US economy. Since then, the interest rates have remained unchanged.&nbsp;

A lower interest rate is indicative of a fragile economy. The lower rate was capitalised on by emerging markets across Asia, including India; investors saw better potential in emerging markets.&nbsp;

The interest rates in emerging markets were higher than the rates in&nbsp;U.S. economy, resulting in flow of capital to the emerging markets for better returns.&nbsp;

The US economy has since improved, and analysts says a rate hike is likely.&nbsp;

In which case, how will emerging markets -- and India -- be impacted?&nbsp;

With the interest rate hike in U.S., experts say there may be capital outflows from emerging markets, and an increase&nbsp;in debt and equity investments in the US.&nbsp;A tight monetary and loose fiscal policy could enhance government spending, strengthening the US economy.

Here in India, there is a chance the rupee might depreciate, which might give rise to a higher current account deficit and higher inflation as the import prices will increase. But brokerages remain confident the Indian economy will hold fort in the long run and any impact will be restricted to the near term.&nbsp;

While Indian monetary policy kept repo rates unchanged, finance minister Arun Jaitley clarified that was not to brace for the impact of a rate hike by the Fed. But that the repo rate remaining unchanged could prepare India better for a hike, should it come.&nbsp;

(WION)

Street estimates say hike expected to be between 0.25-0.5%

The US Fed is expected to hike interest rates tonight, with most analysts saying the hike is expected to be between 0.25-0.5%. The Fed had cut interest rates by 0.25% back when the 2008 crash had taken place, to try and increase spending in the US economy. Since then, the interest rates have remained unchanged. A lower interest rate is indicative of a fragile economy. The lower rate was capitalised on by emerging markets across Asia, including India; investors saw better potential in emerging markets. The interest rates in emerging markets were higher than the rates in U.S. economy, resulting in flow of capital to the emerging markets for better returns. The US economy has since improved, and analysts says a rate hike is likely. In which case, how will emerging markets -- and India -- be impacted? With the interest rate hike in U.S., experts say there may be capital outflows from emerging markets, and an increase in debt and equity investments in the US. A tight monetary and loose fiscal policy could enhance government spending, strengthening the US economy. Here in India, there is a chance the rupee might depreciate, which might give rise to a higher current account deficit and higher inflation as the import prices will increase. But brokerages remain confident the Indian economy will hold fort in the long run and any impact will be restricted to the near term. While Indian monetary policy kept repo rates unchanged, finance minister Arun Jaitley clarified that was not to brace for the impact of a rate hike by the Fed. But that the repo rate remaining unchanged could prepare India better for a hike, should it come. (WION)

US Fed likely to hike interest rates tonight

European air travel giant Lufthansa has been battling its own pilots over pay and conditions for more than two years.

Tuesday saw a renewed walkout of pilots, bringing the number of passengers affected by strikes over the past week to more than half a million. 
&nbsp; 
What do the pilots want?

Lufthansa&#39;s 5,400 pilots have been called out on strike some 15 times since spring 2014 by union Vereinigung Cockpit.

The dispute was sparked by disagreements over manager&#39;s plans to change costly early retirement provisions for the pilots as they looked for savings in the face of stiff competition from low-cost rivals like Ryanair and Easyjet as well as higher-end competitors from the Gulf.

Cockpit is also concerned about the board&#39;s plans to reform pensions and hire more pilots on lower pay as Lufthansa builds its own low-cost subsidiary Eurowings.

The most recent series of strikes launched last Wednesday is the latest skirmish in the battle over salaries.

Cockpit says pilots have had no salary increase over the past five years, even as Lufthansa has been making billions in profits.

The union wants a pay rise of 3.66 percent per year. But manager&#39;s position remains far removed from Cockpit`s, with the last offer from the board a bonus equivalent to almost two months salary plus a 4.4-percent pay increase spread over two years -- roundly rejected by the pilots.

Lufthansa says that its pilots are among the best-paid in the sector, with co-pilots at the start of their career earning 6,500 euros ($6,890) gross per month, while a late-career captain earns more than 22,000 euros.

Why is the conflict dragging on?&nbsp;

Pilots are not the only group to have hit Lufthansa with work stoppages in recent years.

November 2015 saw the group face its longest-ever strike as cabin crew staged a seven-day walkout at the urging of their own union -- forcing the cancellation of more than 4,600 flights.

Lufthansa has managed to strike deals in several labour disputes, notably with cabin crew and ground crew on its flagship airline.

But other battles are still to be fought -- as a walkout by some cabin crew at Eurowings showed just last week.

An end to the trial of strength with Cockpit appears distant for now.

&quot;The damage is already so great that it`s increasingly difficult for the two sides to reach a compromise without losing face,&quot; said Guido Hoymann, an air travel sector analyst at Metzler bank.

&quot;They should bring in a mediator, the conflict could run on for a long time yet,&quot; he went on.

Cockpit rebuffed Lufthansa`s latest offer of a mediation process, while the group has failed in its attempts to prevent walkouts with legal action.

What does this mean for Lufthansa`s business?&nbsp;

Repeated strikes at Lufthansa have caused &quot;long-term&quot; damage to the group`s reputation, analyst Hoymann said.

&quot;Lufthansa`s reliability has been called into question,&quot; he said, adding that the group could lose customers -- especially from its sizeable business segment.

In purely financial terms, the impact has so far been smaller.

One strike day costs the group between 10 and 15 million euros, Lufthansa says.

In 2015, the group lost around 100 million euros to strikes -- a large figure but one that remained dwarfed by its record profit of 1.7 billion euros.

(IANS) 
&nbsp;

Lufthansa has been battling its own pilots over pay and conditions for more than two years.

European air travel giant Lufthansa has been battling its own pilots over pay and conditions for more than two years. Tuesday saw a renewed walkout of pilots, bringing the number of passengers affected by strikes over the past week to more than half a million. What do the pilots want? Lufthansa's 5,400 pilots have been called out on strike some 15 times since spring 2014 by union Vereinigung Cockpit. The dispute was sparked by disagreements over manager's plans to change costly early retirement provisions for the pilots as they looked for savings in the face of stiff competition from low-cost rivals like Ryanair and Easyjet as well as higher-end competitors from the Gulf. Cockpit is also concerned about the board's plans to reform pensions and hire more pilots on lower pay as Lufthansa builds its own low-cost subsidiary Eurowings. The most recent series of strikes launched last Wednesday is the latest skirmish in the battle over salaries. Cockpit says pilots have had no salary increase over the past five years, even as Lufthansa has been making billions in profits. The union wants a pay rise of 3.66 percent per year. But manager's position remains far removed from Cockpit`s, with the last offer from the board a bonus equivalent to almost two months salary plus a 4.4-percent pay increase spread over two years -- roundly rejected by the pilots. Lufthansa says that its pilots are among the best-paid in the sector, with co-pilots at the start of their career earning 6,500 euros ($6,890) gross per month, while a late-career captain earns more than 22,000 euros. Why is the conflict dragging on? Pilots are not the only group to have hit Lufthansa with work stoppages in recent years. November 2015 saw the group face its longest-ever strike as cabin crew staged a seven-day walkout at the urging of their own union -- forcing the cancellation of more than 4,600 flights. Lufthansa has managed to strike deals in several labour disputes, notably with cabin crew and ground crew on its flagship airline. But other battles are still to be fought -- as a walkout by some cabin crew at Eurowings showed just last week. An end to the trial of strength with Cockpit appears distant for now. "The damage is already so great that it`s increasingly difficult for the two sides to reach a compromise without losing face," said Guido Hoymann, an air travel sector analyst at Metzler bank. "They should bring in a mediator, the conflict could run on for a long time yet," he went on. Cockpit rebuffed Lufthansa`s latest offer of a mediation process, while the group has failed in its attempts to prevent walkouts with legal action. What does this mean for Lufthansa`s business? Repeated strikes at Lufthansa have caused "long-term" damage to the group`s reputation, analyst Hoymann said. "Lufthansa`s reliability has been called into question," he said, adding that the group could lose customers -- especially from its sizeable business segment. In purely financial terms, the impact has so far been smaller. One strike day costs the group between 10 and 15 million euros, Lufthansa says. In 2015, the group lost around 100 million euros to strikes -- a large figure but one that remained dwarfed by its record profit of 1.7 billion euros. (IANS)

Some 1,700 flights cancelled as Lufthansa pilots strike

The Reserve Bank of India (RBI) on Monday late night said that the general public has withdrawn Rs 2.16 lakh crore from their accounts since beginning of demonetisation on November 9, 2016.

RBI further said that deposits in bank accounts during this period, amounted to Rs 8.11 lakh crore. Interestingly, Government had told the Supreme Court earlier this month that it expects around Rs 10-11 lakh crore to be deposited in banks till December 30, 2016 &ndash; the last day of depositing the now illegal tender of Rs 500 and Rs 1000 notes.

However, the long queues and frequent running out of cash has ensured that nearly 50% of this total currency (Rs 14 lakh crore) has already been deposited in banks in two weeks.

Moreover, there has been a sudden surge in deposits with Jan Dhan Accounts.

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<h5>As on November 9, the Government claimed that the 25.5 crore accounts opened under Jan-Dhan Yojana (PMJDY) garnered Rs 45,636.61 crore. The number of accounts now stand at 25.68 crore while deposits have risen to Rs 72,834.72 crore.</h5>
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&nbsp;

PM Modi and Finance Minister Arun Jaitley have been pushing citizens towards a more &#39;less-cash&#39; economy. The Government, on Monday, removed excise duty on &#39;point of sale&#39; machines in order to expedite use of digital currency than hard cash.&nbsp;

However, with over Rs 2 lakh crore withdrawn in two weeks from the Rs 8.11 lakh deposited, it is amply clear that Indians are still not ready to go completely cash-less.&nbsp;

On the evening of November 8, Prime Minister Narendra Modi in a televised address said that nearly 86% of Rs 16 lakh crore that oiled the Indian economy by way of Rs 500 and Rs 1000 notes were illegal tender from midnight.

He said that citizens have&nbsp;50 days to deposit this old currency in banks, exchange it with new or withdraw through ATMs, etc.

The RBI on Monday released data that showed nearly 50% of all demonetised currency in Rs 500 and Rs 1000 notes has been deposited with banks

The Reserve Bank of India (RBI) on Monday late night said that the general public has withdrawn Rs 2.16 lakh crore from their accounts since beginning of demonetisation on November 9, 2016. RBI further said that deposits in bank accounts during this period, amounted to Rs 8.11 lakh crore. Interestingly, Government had told the Supreme Court earlier this month that it expects around Rs 10-11 lakh crore to be deposited in banks till December 30, 2016 – the last day of depositing the now illegal tender of Rs 500 and Rs 1000 notes. However, the long queues and frequent running out of cash has ensured that nearly 50% of this total currency (Rs 14 lakh crore) has already been deposited in banks in two weeks. Moreover, there has been a sudden surge in deposits with Jan Dhan Accounts. As on November 9, the Government claimed that the 25.5 crore accounts opened under Jan-Dhan Yojana (PMJDY) garnered Rs 45,636.61 crore. The number of accounts now stand at 25.68 crore while deposits have risen to Rs 72,834.72 crore. × PM Modi and Finance Minister Arun Jaitley have been pushing citizens towards a more 'less-cash' economy. The Government, on Monday, removed excise duty on 'point of sale' machines in order to expedite use of digital currency than hard cash. However, with over Rs 2 lakh crore withdrawn in two weeks from the Rs 8.11 lakh deposited, it is amply clear that Indians are still not ready to go completely cash-less. On the evening of November 8, Prime Minister Narendra Modi in a televised address said that nearly 86% of Rs 16 lakh crore that oiled the Indian economy by way of Rs 500 and Rs 1000 notes were illegal tender from midnight. He said that citizens have 50 days to deposit this old currency in banks, exchange it with new or withdraw through ATMs, etc.

Demonetisation: Indians withdrew over 2 lakh crore since November 9

China&#39;s retail sales growth rose to 10.0 per cent on-year in October, missing analysts&rsquo; forecasts of 10.7 per cent growth -- the rate sales grew at the previous month. Thus there was a slowdown in retail sales despite the growth.&nbsp;

Industrial output rose 6.1 per cent in October from a year earlier, the National Bureau of Statistics said, again below analysts&rsquo; estimates of 6.2 per cent.

The world&rsquo;s second largest economy has been facing slowing growth of late.&nbsp;

China is predominantly an export-led economy but with global demand falling, the country needs to re-work its growth strategy. The country has been trying to move towards consumption-led growth but the transition has been bumpy.

Recent data points to the fact that China&rsquo;s growth is increasingly dependent on government spending and ballooning debt as private investment hovers around record lows.

Last week, Alibaba&#39;s Singles&rsquo; Day festival posted record sales of $17.73 billion.&nbsp;

While sales were good, the day-long shopping gala saw slow growth as Chinese shoppers searched for heavier discounts and lower price tags. &nbsp;

China&rsquo;s fixed asset investment rose by 8.3 per cent in the first ten months of the year, slightly higher than market expectations.

(WION)

The increase was still lower than the predicted 10.7%

China's retail sales growth rose to 10.0 per cent on-year in October, missing analysts’ forecasts of 10.7 per cent growth -- the rate sales grew at the previous month. Thus there was a slowdown in retail sales despite the growth. Industrial output rose 6.1 per cent in October from a year earlier, the National Bureau of Statistics said, again below analysts’ estimates of 6.2 per cent. The world’s second largest economy has been facing slowing growth of late. China is predominantly an export-led economy but with global demand falling, the country needs to re-work its growth strategy. The country has been trying to move towards consumption-led growth but the transition has been bumpy. Recent data points to the fact that China’s growth is increasingly dependent on government spending and ballooning debt as private investment hovers around record lows. Last week, Alibaba's Singles’ Day festival posted record sales of $17.73 billion. While sales were good, the day-long shopping gala saw slow growth as Chinese shoppers searched for heavier discounts and lower price tags. China’s fixed asset investment rose by 8.3 per cent in the first ten months of the year, slightly higher than market expectations. (WION)

China retail sales grow 10% on-year in October

As a growing power, India has a role to play in meeting the challenge of terrorism, Syrian President Bashar al-Assad has said as the two countries agreed to upgrade their security consultations. 
 
Assad made the assertion during a meeting with Indian minister of state for foreign affairs M J Akbar when the latter called on him yesterday during his Syria visit. 
 
&quot;There was an agreement between both sides for further upgrading security consultations,&quot; the sources said. 
 
However, the sources did not mention the level to which they have been upgraded to. During the meeting, Assad also welcomed India&#39;s objective position on the conflict in Syria and both leaders acknowledged that terrorism was a global problem, sources said. 
 
&quot;As a growing power, India has a role to play in meeting the challenge of terrorism,&quot; sources quoted Assad as saying. 
 
On his part, Akbar, during their meeting, said the age of destruction should give way to the age of reconstruction in Syria. Assad also invited India to play an active role in the reconstruction of the Syrian economy. 
 
Both leaders agreed that as secular nations, India and Syria believe in faith equality. Akbar is currently on a nearly week-long visit to West Asia from August 17. 
 
(PTI)

Indian foreign minister Akbar met President Assad who welcomed India's objective position on the conflict in Syria

As a growing power, India has a role to play in meeting the challenge of terrorism, Syrian President Bashar al-Assad has said as the two countries agreed to upgrade their security consultations. Assad made the assertion during a meeting with Indian minister of state for foreign affairs M J Akbar when the latter called on him yesterday during his Syria visit. "There was an agreement between both sides for further upgrading security consultations," the sources said. However, the sources did not mention the level to which they have been upgraded to. During the meeting, Assad also welcomed India's objective position on the conflict in Syria and both leaders acknowledged that terrorism was a global problem, sources said. "As a growing power, India has a role to play in meeting the challenge of terrorism," sources quoted Assad as saying. On his part, Akbar, during their meeting, said the age of destruction should give way to the age of reconstruction in Syria. Assad also invited India to play an active role in the reconstruction of the Syrian economy. Both leaders agreed that as secular nations, India and Syria believe in faith equality. Akbar is currently on a nearly week-long visit to West Asia from August 17. (PTI)

Syria and India agree to scale up security consultations

It was the year 2005 and I was in the 9th grade. My whole family was talking about a distant relative who got admission in London School of Economics (LSE) for her masters. And just a year later, everyone was again talking about her as she&rsquo;d got a job with some big company in London with a monstrous pay package. In such talks, no one ever knows the exact name of the company or the exact figure of the money. When news travels through multiple sources, such details are often lost in transit. 
&nbsp; 
At an impressionable age of 15, such talks leave a significant impact. One doesn&rsquo;t even realise when they become part of the sub-conscious and influence one&rsquo;s future decisions in one way or the other. Fast forwarding to 2011, I completed my undergraduate studies in Economics from Delhi University and was holding an offer letter from LSE for Masters. It was just 4 years after the financial crisis had rocked the world and the effects of this meltdown had not significantly subsided. Moreover, in the same year, the UK government had stopped giving 2-year work permits along with the student&rsquo;s visas. They were protecting jobs for their own citizens. 
&nbsp; 
A year later, I graduated but with a job in a niche think tank in Delhi. Many of us still reminisce the pre-2008 period. At that time, every student was holding almost two to three jobs with decent salaries much before his/her final exam. Job seekers held the bargaining power. People were taking loans to buy houses and expensive cars as paying the instalments was not a big deal. We indulged, our governments indulged and sometimes over-indulged. There was an element of irrational exuberance. 
&nbsp; 
There are four stages in a business cycle: boom, recession, depression and recovery, with the names themselves indicative of their meanings. Most of us think that recession and depression are the worst phases of a business cycle but are they really? Instead, it is during boom when we take the most stupid decisions, plummeting ourselves into a recession. &nbsp; 
&nbsp; 
Every time there is a boom, we make mistakes and, often, those turn out to be big mistakes. In a paper on the 1997 Asian crisis, Paul Krugman writes: &ldquo;as long as the real estate prices and stock markets were booming, even the questionable investments tended to look good. As the air began to go out of the bubble, losses began to mount, further reducing the confidence and causing the supply of fresh loans to shrink even more.&rdquo; 
&nbsp; 
Before the 2008 crisis, more importance was given to international finance than to international trade. We started moving from real to nominal - an important factor for not being able to contain the crisis in just one part of the world. Most of the European economies were over-leveraged before 2008, thus falling into an abyss of debt crisis after the shocking financial year. 
&nbsp; 
Similarly, in Venezuela, they focused so much on oil during the boom years and lavishly spent their windfall. When the oil prices fell recently, they were unable to bear the losses. Oil was their only source of income. They made the age-old mistake of putting all their eggs in the same basket. 
&nbsp; 
Also, many of the South American economies like Brazil, Colombia, etc. gorged on debt during the so-called happy times with the entire debt being denominated in US Dollars. When the Dollar appreciated significantly and the exports of commodities fell sharply, these countries were unable to service their debt and, as a result, their GDPs contracted and the standards of living worsened. Instead of maintaining the same level, the South American people have actually become poorer. &nbsp;&nbsp; 
&nbsp; 
When there is boom, every institution in every country demands lowering of rules and regulations. Everyone wants to ride the wave, be it the government, banks, financial institutions, citizens or international bodies. People behave irrationally, completely disregarding the consequences of their actions. 
&nbsp; 
We may need a regulator monitoring the activities of the various institutions during such periods of the business cycle so that it stops anyone from making those mistakes which have severe consequences in the long term. But here too, the regulator is caught up in a catch - 22 situation. If the regulator stops irrational behaviour in the beginning and things are upward looking for a while, then people think that the regulating body was panicking for no reason as everything is going great. Nobody understands that this is because the bad elements were weeded out at the right time. 
&nbsp; 
As a world, we need to arrive at a solution to clip this irrational exuberance when we are healthy. Maybe we need to devise a mechanism where someone reminds us of our past mistakes so that we don&rsquo;t repeat them in future.&nbsp;

Every time there is a boom, we make mistakes and, often, those turn out to be big mistakes

It was the year 2005 and I was in the 9th grade. My whole family was talking about a distant relative who got admission in London School of Economics (LSE) for her masters. And just a year later, everyone was again talking about her as she’d got a job with some big company in London with a monstrous pay package. In such talks, no one ever knows the exact name of the company or the exact figure of the money. When news travels through multiple sources, such details are often lost in transit. At an impressionable age of 15, such talks leave a significant impact. One doesn’t even realise when they become part of the sub-conscious and influence one’s future decisions in one way or the other. Fast forwarding to 2011, I completed my undergraduate studies in Economics from Delhi University and was holding an offer letter from LSE for Masters. It was just 4 years after the financial crisis had rocked the world and the effects of this meltdown had not significantly subsided. Moreover, in the same year, the UK government had stopped giving 2-year work permits along with the student’s visas. They were protecting jobs for their own citizens. A year later, I graduated but with a job in a niche think tank in Delhi. Many of us still reminisce the pre-2008 period. At that time, every student was holding almost two to three jobs with decent salaries much before his/her final exam. Job seekers held the bargaining power. People were taking loans to buy houses and expensive cars as paying the instalments was not a big deal. We indulged, our governments indulged and sometimes over-indulged. There was an element of irrational exuberance. There are four stages in a business cycle: boom, recession, depression and recovery, with the names themselves indicative of their meanings. Most of us think that recession and depression are the worst phases of a business cycle but are they really? Instead, it is during boom when we take the most stupid decisions, plummeting ourselves into a recession. Every time there is a boom, we make mistakes and, often, those turn out to be big mistakes. In a paper on the 1997 Asian crisis, Paul Krugman writes: “as long as the real estate prices and stock markets were booming, even the questionable investments tended to look good. As the air began to go out of the bubble, losses began to mount, further reducing the confidence and causing the supply of fresh loans to shrink even more.” Before the 2008 crisis, more importance was given to international finance than to international trade. We started moving from real to nominal - an important factor for not being able to contain the crisis in just one part of the world. Most of the European economies were over-leveraged before 2008, thus falling into an abyss of debt crisis after the shocking financial year. Similarly, in Venezuela, they focused so much on oil during the boom years and lavishly spent their windfall. When the oil prices fell recently, they were unable to bear the losses. Oil was their only source of income. They made the age-old mistake of putting all their eggs in the same basket. Also, many of the South American economies like Brazil, Colombia, etc. gorged on debt during the so-called happy times with the entire debt being denominated in US Dollars. When the Dollar appreciated significantly and the exports of commodities fell sharply, these countries were unable to service their debt and, as a result, their GDPs contracted and the standards of living worsened. Instead of maintaining the same level, the South American people have actually become poorer. When there is boom, every institution in every country demands lowering of rules and regulations. Everyone wants to ride the wave, be it the government, banks, financial institutions, citizens or international bodies. People behave irrationally, completely disregarding the consequences of their actions. We may need a regulator monitoring the activities of the various institutions during such periods of the business cycle so that it stops anyone from making those mistakes which have severe consequences in the long term. But here too, the regulator is caught up in a catch - 22 situation. If the regulator stops irrational behaviour in the beginning and things are upward looking for a while, then people think that the regulating body was panicking for no reason as everything is going great. Nobody understands that this is because the bad elements were weeded out at the right time. As a world, we need to arrive at a solution to clip this irrational exuberance when we are healthy. Maybe we need to devise a mechanism where someone reminds us of our past mistakes so that we don’t repeat them in future.

The classic economic conundrum: Slipping as you rise

The foiled coup attempt seeking to unseat the government of President Recep Tayyip Erdogan has cost the Turkish economy 300 billion Lira ($100 billion), the trade minister was quoted as saying on Tuesday. 
 
Customs and Commerce Minister Bulent Tufenkci was quoted as saying by the Hurriyet newspaper that the heavy price tag may even increase, but insisted that Turkey&#39;s economic fundamentals were solid. &quot;Warplanes, helicopters, weapons, bombs, buildings: 300 billion Lira. Maybe I am underestimating a bit,&quot; he said, referring to the heavy destruction on the night of the coup. &quot;It might go up even more,&quot; he said. 
 
But the minister warned that the entire picture should be seen in a medium-term context, even if some investors had been put off in the short-term. &quot;The putschists made Turkey seem like a third world country,&quot; he fumed. &quot;They (investors) are not coming after the images revealed tanks were deployed on the streets, parliament was bombed,&quot; he said, adding that some foreign orders had been cancelled in the wake of the coup. 
 
But Tufenkci said despite all this Turkey had managed to control the situation. &quot;Had the coup taken place in another country, markets would not have opened earlier than in a week,&quot; he said. The coup took place on Friday July 15, but financial markets in Turkey opened as normal after the weekend. 
 
&quot;The interest rates didn&#39;t rise extraordinarily. The stock exchange&#39;s losses have been limited. There&#39;s no need to revise growth or export figures. The nation has stood firm.&quot; The government has suspended annual leave of public sector personnel in the wake of the coup attempt, blamed by the government on supporters of US-based Islamic preacher Fethullah Gulen. 
 
This measure has affected the tourism industry, already hit by foreigners staying away over security fears after a spate of attacks, as well as a crisis with Russia. &quot;Because of a ban on annual leave, one million (tourism) reservations had been cancelled,&quot; the minister said. The number of foreigners visiting Turkey dropped over 40 per cent in June to its lowest level this year, but there is optimism the Russians will come back after Ankara mended fences with Moscow. 
 
&quot;From now on tourism will also rally,&quot; said Tufenkci.&nbsp; 
 
(AFP)

The number of foreigners visiting Turkey dropped over 40% in June, its lowest level this year

The foiled coup attempt seeking to unseat the government of President Recep Tayyip Erdogan has cost the Turkish economy 300 billion Lira ($100 billion), the trade minister was quoted as saying on Tuesday. Customs and Commerce Minister Bulent Tufenkci was quoted as saying by the Hurriyet newspaper that the heavy price tag may even increase, but insisted that Turkey's economic fundamentals were solid. "Warplanes, helicopters, weapons, bombs, buildings: 300 billion Lira. Maybe I am underestimating a bit," he said, referring to the heavy destruction on the night of the coup. "It might go up even more," he said. But the minister warned that the entire picture should be seen in a medium-term context, even if some investors had been put off in the short-term. "The putschists made Turkey seem like a third world country," he fumed. "They (investors) are not coming after the images revealed tanks were deployed on the streets, parliament was bombed," he said, adding that some foreign orders had been cancelled in the wake of the coup. But Tufenkci said despite all this Turkey had managed to control the situation. "Had the coup taken place in another country, markets would not have opened earlier than in a week," he said. The coup took place on Friday July 15, but financial markets in Turkey opened as normal after the weekend. "The interest rates didn't rise extraordinarily. The stock exchange's losses have been limited. There's no need to revise growth or export figures. The nation has stood firm." The government has suspended annual leave of public sector personnel in the wake of the coup attempt, blamed by the government on supporters of US-based Islamic preacher Fethullah Gulen. This measure has affected the tourism industry, already hit by foreigners staying away over security fears after a spate of attacks, as well as a crisis with Russia. "Because of a ban on annual leave, one million (tourism) reservations had been cancelled," the minister said. The number of foreigners visiting Turkey dropped over 40 per cent in June to its lowest level this year, but there is optimism the Russians will come back after Ankara mended fences with Moscow. "From now on tourism will also rally," said Tufenkci. (AFP)

Coup costs Turkey economy $100 billion: minister

Former Wall Street banker Pedro Pablo Kuczynski was inaugurated as Peru&#39;s new president yesterday, vowing to kick-start the economy and unite a country torn by a photo-finish election. 
 
The 77-year-old centre-right economist extended an olive branch to defeated rival Keiko Fujimori&#39;s party, which controls Congress, saying he would need their help to pass reforms. 
 
He promised to work for all Peruvians, outlining his vision for a &quot;social revolution&quot; in his inaugural address before Congress. 
 
&quot;I will seek equity, equality and fraternity among all Peruvians,&quot; said the man known simply as PPK. 
 
Peru needs &quot;not just economic, but human growth,&quot; he said, vowing to extend basic services such as schools, hospitals and drinking water to the one-third of Peruvians who lack them. 
 
The normally staid Kuczynski, who is known as a technocrat with a stellar resume, choked up as he took the oath of office, then donned his new red and white presidential sash over his pinstriped suit. 
 
Peru is one of Latin America&#39;s fastest growing economies, but growth slowed under outgoing leftist president Ollanta Humala, from 6.5 per cent in 2011 to 3.3 percent last year. 
 
Kuczynski vowed to stimulate the economy, revive the key mining sector, fight the poverty that affects 22 per cent of Peruvians, crack down on corruption, and strengthen the police and prisons to reduce crime. 
 
The Fujimori problem 
 
Foreign investors and markets have welcomed the new president as a reliable pair of hands. 
 
&quot;Kuczynski&#39;s government is likely to remain highly supportive of foreign investment, with minimalist state intervention,&quot; said Diego Moya-Ocampos of consultancy IHS Country Risk. 
 
He predicted Kuczynski would seek to expand Peru&#39;s domestic refining and smelting capacity, and pointed out that his first scheduled trip is to China - which he called a key player in the president&#39;s strategy to make Peru a &quot;metallurgical powerhouse.&quot; 
 
But a large bump is lurking in the road.&nbsp;Kuczynski&#39;s party, the centre-right Peruvians for Change, has just 18 seats in the 130-member Congress. 
 
The new legislature is dominated by allies of Fujimori, the daughter of disgraced and jailed ex-president Alberto Fujimori.&nbsp;Her right-wing party, Popular Force, has 73 lawmakers in Congress. 
 
None of them applauded at any point during the inauguration, Kuczynski&#39;s camp complained.&nbsp;It could prove tough for the new president to advance his reform agenda. 
 
There may be lingering bad blood from the election. Fujimori took five days to concede as results trickled in from the remote reaches of the Peruvian Amazon. 
 
In the end she had little choice but to recognise defeat, by less than a quarter of a percentage point. 
 
The race opened old wounds dating back to the 1990s, when Fujimori&#39;s father was president. 
 
Now serving a 25-year prison sentence for massacres by an army death squad, Alberto Fujimori (1990-2000) is fondly remembered by some Peruvians for his populist streak, his ruthless crackdown on the leftist rebel group Shining Path and his management of a strong economy. 
 
But his authoritarian legacy was also heavy baggage for his daughter. 
 
Her 78-year-old father&#39;s supporters are now pressuring Kuczynski to pardon him. 
 
The president-elect has said he is willing to sign a law granting house arrest to elderly and ailing prisoners such as Fujimori, but will not issue a pardon. 
 
&#39;El Gringo&#39; 
 
Kuczynski, the son of a Jewish doctor who fled Nazi Germany, has had a long career in business and finance. 
 
Educated at Oxford University and Princeton, he has an impressive resume including stints as economy minister and a World Bank economist. 
 
He stressed his age and experience during the campaign. 
 
&quot;I&#39;m old, but my noggin is still working,&quot; he said.&nbsp;But he sometimes struggles to connect with ordinary Peruvians. 
 
He speaks Spanish with an American accent, betraying his long years in the United States. Some Peruvians call him &quot;El Gringo.&quot; 
 
Seeking to lighten the burden of his outsider status, he donned a traditional multicolored woolly hat at campaign rallies, played the flute and trotted out his mascot, a man-sized guinea pig - a symbol of Peru. 
 
(AFP)

The Pedro Kuczynski choked as he took the oath of office. He vowed to kick-start the economy and bring about a social revolution

Former Wall Street banker Pedro Pablo Kuczynski was inaugurated as Peru's new president yesterday, vowing to kick-start the economy and unite a country torn by a photo-finish election. The 77-year-old centre-right economist extended an olive branch to defeated rival Keiko Fujimori's party, which controls Congress, saying he would need their help to pass reforms. He promised to work for all Peruvians, outlining his vision for a "social revolution" in his inaugural address before Congress. "I will seek equity, equality and fraternity among all Peruvians," said the man known simply as PPK. Peru needs "not just economic, but human growth," he said, vowing to extend basic services such as schools, hospitals and drinking water to the one-third of Peruvians who lack them. The normally staid Kuczynski, who is known as a technocrat with a stellar resume, choked up as he took the oath of office, then donned his new red and white presidential sash over his pinstriped suit. Peru is one of Latin America's fastest growing economies, but growth slowed under outgoing leftist president Ollanta Humala, from 6.5 per cent in 2011 to 3.3 percent last year. Kuczynski vowed to stimulate the economy, revive the key mining sector, fight the poverty that affects 22 per cent of Peruvians, crack down on corruption, and strengthen the police and prisons to reduce crime. The Fujimori problem Foreign investors and markets have welcomed the new president as a reliable pair of hands. "Kuczynski's government is likely to remain highly supportive of foreign investment, with minimalist state intervention," said Diego Moya-Ocampos of consultancy IHS Country Risk. He predicted Kuczynski would seek to expand Peru's domestic refining and smelting capacity, and pointed out that his first scheduled trip is to China - which he called a key player in the president's strategy to make Peru a "metallurgical powerhouse." But a large bump is lurking in the road. Kuczynski's party, the centre-right Peruvians for Change, has just 18 seats in the 130-member Congress. The new legislature is dominated by allies of Fujimori, the daughter of disgraced and jailed ex-president Alberto Fujimori. Her right-wing party, Popular Force, has 73 lawmakers in Congress. None of them applauded at any point during the inauguration, Kuczynski's camp complained. It could prove tough for the new president to advance his reform agenda. There may be lingering bad blood from the election. Fujimori took five days to concede as results trickled in from the remote reaches of the Peruvian Amazon. In the end she had little choice but to recognise defeat, by less than a quarter of a percentage point. The race opened old wounds dating back to the 1990s, when Fujimori's father was president. Now serving a 25-year prison sentence for massacres by an army death squad, Alberto Fujimori (1990-2000) is fondly remembered by some Peruvians for his populist streak, his ruthless crackdown on the leftist rebel group Shining Path and his management of a strong economy. But his authoritarian legacy was also heavy baggage for his daughter. Her 78-year-old father's supporters are now pressuring Kuczynski to pardon him. The president-elect has said he is willing to sign a law granting house arrest to elderly and ailing prisoners such as Fujimori, but will not issue a pardon. 'El Gringo' Kuczynski, the son of a Jewish doctor who fled Nazi Germany, has had a long career in business and finance. Educated at Oxford University and Princeton, he has an impressive resume including stints as economy minister and a World Bank economist. He stressed his age and experience during the campaign. "I'm old, but my noggin is still working," he said. But he sometimes struggles to connect with ordinary Peruvians. He speaks Spanish with an American accent, betraying his long years in the United States. Some Peruvians call him "El Gringo." Seeking to lighten the burden of his outsider status, he donned a traditional multicolored woolly hat at campaign rallies, played the flute and trotted out his mascot, a man-sized guinea pig - a symbol of Peru. (AFP)

Former Wall Street banker Kuczynski sworn in as Peruvian president

US telecom giant Verizon Communications Inc said it had agreed to buy Yahoo Inc&#39;s core internet business for $4.83 billion in cash, ending a lengthy sale process for the fading web pioneer. 
 
Buying Yahoo&#39;s operations will boost Verizon&#39;s AOL internet business, which it bought last year for $4.4 billion, by giving it access to Yahoo&#39;s advertising technology tools as well as other assets such as search, mail and messenger. 
 
The deal marks the end of Yahoo as an operating company, leaving it with a 15 per cent stake in Chinese e-commerce company Alibaba Group Holding Limited and a 35.5 per cent interest in Yahoo Japan Corp. 
 
&quot;The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo,&quot; Yahoo Chief Executive Marissa Mayer said in a statement today. 
 
The sale does not include Yahoo&#39;s cash, its shares in Alibaba, its shares in Yahoo Japan, Yahoo&#39;s convertible notes, certain minority investments and Yahoo&#39;s non-core patents. 
 
The Alibaba and Yahoo Japan investments are worth about $40 billion, while Yahoo had a market value of about $37.4 billion as of Friday&#39;s close. 
 
(Reuters)

Buying Yahoo's operations will boost Verizon's AOL internet business, which it bought last year for $4.4 billion

US telecom giant Verizon Communications Inc said it had agreed to buy Yahoo Inc's core internet business for $4.83 billion in cash, ending a lengthy sale process for the fading web pioneer. Buying Yahoo's operations will boost Verizon's AOL internet business, which it bought last year for $4.4 billion, by giving it access to Yahoo's advertising technology tools as well as other assets such as search, mail and messenger. The deal marks the end of Yahoo as an operating company, leaving it with a 15 per cent stake in Chinese e-commerce company Alibaba Group Holding Limited and a 35.5 per cent interest in Yahoo Japan Corp. "The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo," Yahoo Chief Executive Marissa Mayer said in a statement today. The sale does not include Yahoo's cash, its shares in Alibaba, its shares in Yahoo Japan, Yahoo's convertible notes, certain minority investments and Yahoo's non-core patents. The Alibaba and Yahoo Japan investments are worth about $40 billion, while Yahoo had a market value of about $37.4 billion as of Friday's close. (Reuters)

US telecom giant Verizon announces acquisition of Yahoo in $4.83 billion deal

The world&#39;s major economies need to deepen cooperation on tax collection and information sharing as companies seek to minimise the amount they pay to governments, finance ministers at G20 said today.

The issue has become controversial in many countries, with multinational firms from Google to Starbucks facing accusations of not contributing appropriately to the economies where they make their money, and multi-billion-dollar merger proposals being partly driven by tax considerations.

&quot;When the current cross-border tax rules were developed they were tied to concepts that reflected geography and national boundaries,&quot; US treasury secretary Jacob Lew told G20 finance ministers meeting in the Chinese city of Chengdu.

&quot;When we look at technology a lot of that has become harder to define.&quot;

&quot;There needs to be a common standard across countries on important issues of transfer pricing,&quot; he said at a high-level symposium on tax policy, adding that countries had to deal &quot;collectively&quot; with issues that lead to non-taxation.

Closing loopholes, he added, would change the choices businesses make.

The G20 has previously supported proposals requiring authorities to share the identities of shell companies&#39; real owners, and backed creating a blacklist of international tax havens that do not cooperate with information-sharing programmes.

But the discussion as the G20 finance ministers and central bank chiefs meeting opened in Chengdu, in southwestern China, was wider, addressing base erosion and profit shifting, known as BEPS.

The term refers to companies using accounting techniques to shift their profits to low- or no-tax jurisdictions, reducing the amounts they are liable to pay.

Some countries, such as Ireland or Luxembourg, have drawn major firms to establish headquarters or subsidiaries by virtue of their tax rules -&nbsp;a key contributor to Dublin declaring earlier this month that its economy grew by a spectacular 26.3 per cent last year.

&quot;In the 21st century, talent, capital, and even physical infrastructures are increasingly mobile,&quot; said Angel Gurria, secretary-general of the Organisation for Economic Co-operation and Development (OECD).

&quot;So, a global conversation on these issues, on tax policy, is obvious, critical, important,&quot; he said, later naming Google, Apple and Starbucks as example companies.

But he acknowledged that it could be a sensitive subject: &quot;Tax policy has been and remains a sovereign issue.&quot;

The seminar jointly pushed for by Germany, China and the OECD &nbsp;also addressed issues of using tax policy to promote growth.

Earlier French finance minister Michel Sapin said that some countries, &quot;not only China&quot; were &quot;reluctant&quot; on questions of cooperation on tax evasion.

But Chinese finance minister Lou Jiwei said: &quot;We need to deepen the international tax cooperation, building on existing mechanisms.&quot; 
 
(AFP)

The multinational firms use accounting techniques to shift their profits to no-tax jurisdictions, reducing amounts they are liable to pay

The world's major economies need to deepen cooperation on tax collection and information sharing as companies seek to minimise the amount they pay to governments, finance ministers at G20 said today. The issue has become controversial in many countries, with multinational firms from Google to Starbucks facing accusations of not contributing appropriately to the economies where they make their money, and multi-billion-dollar merger proposals being partly driven by tax considerations. "When the current cross-border tax rules were developed they were tied to concepts that reflected geography and national boundaries," US treasury secretary Jacob Lew told G20 finance ministers meeting in the Chinese city of Chengdu. "When we look at technology a lot of that has become harder to define." "There needs to be a common standard across countries on important issues of transfer pricing," he said at a high-level symposium on tax policy, adding that countries had to deal "collectively" with issues that lead to non-taxation. Closing loopholes, he added, would change the choices businesses make. The G20 has previously supported proposals requiring authorities to share the identities of shell companies' real owners, and backed creating a blacklist of international tax havens that do not cooperate with information-sharing programmes. But the discussion as the G20 finance ministers and central bank chiefs meeting opened in Chengdu, in southwestern China, was wider, addressing base erosion and profit shifting, known as BEPS. The term refers to companies using accounting techniques to shift their profits to low- or no-tax jurisdictions, reducing the amounts they are liable to pay. Some countries, such as Ireland or Luxembourg, have drawn major firms to establish headquarters or subsidiaries by virtue of their tax rules - a key contributor to Dublin declaring earlier this month that its economy grew by a spectacular 26.3 per cent last year. "In the 21st century, talent, capital, and even physical infrastructures are increasingly mobile," said Angel Gurria, secretary-general of the Organisation for Economic Co-operation and Development (OECD). "So, a global conversation on these issues, on tax policy, is obvious, critical, important," he said, later naming Google, Apple and Starbucks as example companies. But he acknowledged that it could be a sensitive subject: "Tax policy has been and remains a sovereign issue." The seminar jointly pushed for by Germany, China and the OECD also addressed issues of using tax policy to promote growth. Earlier French finance minister Michel Sapin said that some countries, "not only China" were "reluctant" on questions of cooperation on tax evasion. But Chinese finance minister Lou Jiwei said: "We need to deepen the international tax cooperation, building on existing mechanisms." (AFP)

G20 ministers urge tighter tax rules for multinationals

The world cannot depend on China alone to save it from a Brexit-induced downturn, the country&#39;s premier said today. 
 
Li Keqiang made the remarks after meeting the heads of six global economic organisations, days after the International Monetary Fund&nbsp;(IMF)&nbsp;predicted that uncertainty created by Britain&#39;s vote to leave the European Union would slow the world economy into next year. 
 
&quot;Given the financial fluctuations as a result of Brexit, China will advance market-based reform of its exchange rate,&quot; Li said, adding, &quot;we will not engage in a trade war or currency war.&nbsp;But it is impossible to carry all of the burden of the whole world on our shoulders,&quot; he said. 
 
Improving global economic growth would require the world to step up macroeconomic coordination and increase the transparency of macro policies, Li added. 
 
In an update to its April forecast, the IMF said global economic growth was likely to be 3.1 per cent this year and 3.4 per cent in 2017, a downward revision of 0.1 per cent for both years. At the same time it upgraded its growth forecast for China by 0.1 per cent to 6.6. 
 
The Asian giant&#39;s economy expanded at 6.7 per cent in the April-June period, the same as the first three months of the year, and slowing from a growth of 6.9 for the full year 2015, its weakest annual rate in a quarter of a century.&nbsp;But the second-quarter reading was stronger than expected and fuelled hopes that growth in the world&#39;s second-largest economy may be stabilising. 
 
Li said the IMF hike put &quot;pressure&quot; on China to &quot;maintain growth and stability&quot;, adding that the organisation should &quot;encourage all countries to move in the same direction&quot;. 
 
Following Li&#39;s comments, World Bank president Jim Yong Kim praised China for its commitment to international economic cooperation at a &quot;time when in the West there is a very loud rejection of globalisation and multilateralism&quot;. 
 
The remarks come as Beijing finds itself in a dispute with the EU over whether or not it deserves to be granted market economy status, a designation that would make it much harder for major economies to fight Beijing over alleged unfair trading practices. 
 
Li&#39;s meeting came ahead of a G-20 finance ministers summit in the Chinese city of Chengdu, where representatives from the biggest industrialised and emerging economies are expected to discuss the impact of Brexit. 
 
(AFP)

In the West there is a very loud rejection of globalisation and multilateralism: World Bank president, Jim Yong Kim

The world cannot depend on China alone to save it from a Brexit-induced downturn, the country's premier said today. Li Keqiang made the remarks after meeting the heads of six global economic organisations, days after the International Monetary Fund (IMF) predicted that uncertainty created by Britain's vote to leave the European Union would slow the world economy into next year. "Given the financial fluctuations as a result of Brexit, China will advance market-based reform of its exchange rate," Li said, adding, "we will not engage in a trade war or currency war. But it is impossible to carry all of the burden of the whole world on our shoulders," he said. Improving global economic growth would require the world to step up macroeconomic coordination and increase the transparency of macro policies, Li added. In an update to its April forecast, the IMF said global economic growth was likely to be 3.1 per cent this year and 3.4 per cent in 2017, a downward revision of 0.1 per cent for both years. At the same time it upgraded its growth forecast for China by 0.1 per cent to 6.6. The Asian giant's economy expanded at 6.7 per cent in the April-June period, the same as the first three months of the year, and slowing from a growth of 6.9 for the full year 2015, its weakest annual rate in a quarter of a century. But the second-quarter reading was stronger than expected and fuelled hopes that growth in the world's second-largest economy may be stabilising. Li said the IMF hike put "pressure" on China to "maintain growth and stability", adding that the organisation should "encourage all countries to move in the same direction". Following Li's comments, World Bank president Jim Yong Kim praised China for its commitment to international economic cooperation at a "time when in the West there is a very loud rejection of globalisation and multilateralism". The remarks come as Beijing finds itself in a dispute with the EU over whether or not it deserves to be granted market economy status, a designation that would make it much harder for major economies to fight Beijing over alleged unfair trading practices. Li's meeting came ahead of a G-20 finance ministers summit in the Chinese city of Chengdu, where representatives from the biggest industrialised and emerging economies are expected to discuss the impact of Brexit. (AFP)

Chinese premier: We alone cannot save world from Brexit downturn

North Korea&#39;s economy contracted in 2015 at the sharpest pace in eight years, an estimate from the Bank of Korea showed on Friday, as low global commodity prices landed a blow to exports, a key driver for the impoverished country&#39;s economy. 
 
The gross domestic product in North Korea last year fell a real 1.1 per cent, South Korea&#39;s central bank said, which was the first fall since 2010 and compares with a one per cent gain in 2014. It also marked the fastest decline since a 1.2 per cent drop in 2007. 
 
Isolated North Korea does not publish economic data. 
 
All sectors, except construction and services, declined a likely burden for North Korean leader Kim Jong Un already under pressure from international sanctions against multiple provocations including a nuclear test in January. 
 
&quot;The key reason for the GDP contraction looks to be trade as global commodity prices fell while China demand also declined,&quot; said a Bank of Korea official, who declined to be named as he was unauthorised to speak to media. 
 
&quot;North Korea&#39;s main commodity exports are coal and iron ore, which likely all declined last year.&quot; 
 
Neighbouring China is North Korea&#39;s chief trading partner. 
 
The Bank of Korea data showed exports in North Korea fell 14.8 per cent last year in annual terms as mineral product shipments slumped 14.7 per cent. This was far worse than a 1.7 per cent decline seen in 2014. 
 
Imports dropped a faster 20.0 per cent last year, compared with a 7.8 per cent increase in 2014. 
 
The central bank official said trade is expected to worsen this year as it becomes difficult for North Korea to boost shipments with other countries with international sanctions likely to grow heavier following Pyongyang&#39;s continued missile launches and nuclear threats. 
 
Construction rose 4.8 per cent last year, accelerating from a 1.4 per cent gain in 2014, the same data showed. 
 
Meanwhile, a 0.8 per cent gain in services last year reflects North Korea&#39;s economic shift towards capitalism as the black market there has become more pervasive. Financial services have also grown, which likely contributed to the gain, the BOK official added. 
 
The Bank of Korea has released GDP data on North Korea every year since 1991 based on information received from related sources, including the Ministry of Unification. 
 
(Reuters)

North Korea's economy contracted in 2015 at the sharpest pace in eight years, an estimate from the Bank of Korea showed on Friday

North Korea's economy contracted in 2015 at the sharpest pace in eight years, an estimate from the Bank of Korea showed on Friday, as low global commodity prices landed a blow to exports, a key driver for the impoverished country's economy. The gross domestic product in North Korea last year fell a real 1.1 per cent, South Korea's central bank said, which was the first fall since 2010 and compares with a one per cent gain in 2014. It also marked the fastest decline since a 1.2 per cent drop in 2007. Isolated North Korea does not publish economic data. All sectors, except construction and services, declined a likely burden for North Korean leader Kim Jong Un already under pressure from international sanctions against multiple provocations including a nuclear test in January. "The key reason for the GDP contraction looks to be trade as global commodity prices fell while China demand also declined," said a Bank of Korea official, who declined to be named as he was unauthorised to speak to media. "North Korea's main commodity exports are coal and iron ore, which likely all declined last year." Neighbouring China is North Korea's chief trading partner. The Bank of Korea data showed exports in North Korea fell 14.8 per cent last year in annual terms as mineral product shipments slumped 14.7 per cent. This was far worse than a 1.7 per cent decline seen in 2014. Imports dropped a faster 20.0 per cent last year, compared with a 7.8 per cent increase in 2014. The central bank official said trade is expected to worsen this year as it becomes difficult for North Korea to boost shipments with other countries with international sanctions likely to grow heavier following Pyongyang's continued missile launches and nuclear threats. Construction rose 4.8 per cent last year, accelerating from a 1.4 per cent gain in 2014, the same data showed. Meanwhile, a 0.8 per cent gain in services last year reflects North Korea's economic shift towards capitalism as the black market there has become more pervasive. Financial services have also grown, which likely contributed to the gain, the BOK official added. The Bank of Korea has released GDP data on North Korea every year since 1991 based on information received from related sources, including the Ministry of Unification. (Reuters)

South Korea: North Korea GDP falls steeply

French President Francois Hollande on Thursday told Britain it would have to choose between access to the single market and the free movement of people, when it begins its negotiations on leaving the European Union. 
 
The French leader accepted Britain&#39;s right to delay formal exit talks, but described the timing of its departure as &quot;the sooner the better&quot;, following the country&#39;s shock vote to leave last month. 
 
&quot;It&#39;s the most crucial point... Britain will have to choose: stay in the single market and accept free movement or have another status,&quot; he said without elaborating on the latter option. 
 
Speaking after talks in Paris with British Prime Minister Theresa May, Hollande took a tougher line than German chancellor Angela Merkel a day earlier in Berlin. 
 
&quot;The United Kingdom has decided to leave the European Union. It&#39;s their choice, it&#39;s their responsibility and we respect that decision.... There can be no discussions, no pre-negotiation before the negotiation,&quot; Hollande told a joint news conference with May. 
 
On the timing for the talks, Hollande acknowledged that, Britain would need time to prepare a negotiating position. 
 
&quot;There can be preparations for this negotiation,&quot; he said. 
 
&quot;But I repeat. The sooner the better, it&#39;s in the common interest, of Europe, the United Kingdom, and our economies,&quot; he added. 
 
Encouraging resilience 
 
May said she was committed to achieving a deal that reflected the sentiments expressed by most Britons in the June 23 referendum. 
 
&quot;The message the British people gave in their vote for the UK to leave the EU had a very clear message: that we should introduce some controls to the movement of individuals from countries in the European Union into the UK. 
 
&quot;I&#39;m clear the government should deliver and will deliver on that for the British people. 
 
&quot;But we also want to get the right deal on trade in goods and services,&quot; she said, calling it a matter of importance to both Britain and its EU partners. 
 
May arrived in Paris a day after meeting Merkel in Berlin. 
 
The Conservative leader repeated what she told Merkel, namely, that she would not trigger the two-year EU exit process &quot;before the end of the year&quot;. 
 
Brexit aside she and Hollande were at pains to emphasise the entente between their countries. 
 
A week after the massacre in Nice, May said Britain stood &quot;shoulder to shoulder&quot; as &quot;a great ally and friend&quot;, while Hollande said Franco-British ties &quot;will never come undone&quot;. 
 
Britain&#39;s vote to leave the European Union sent shockwaves through the global economy and sparked political turmoil at home. 
 
European Central Bank chief Mario Draghi struck a reassuring tone, however, in remarks following the ECB&#39;s regular policy-setting meeting. 
 
&quot;After the UK referendum, Euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience,&quot; Draghi said. 
 
On Wednesday, speaking on her first foreign trip since taking office in the wake of the seismic vote, May told Merkel that her government planned on a &quot;sensible and orderly departure&quot; from the EU. 
 
Merkel, who is expected to play a pivotal role in the Brexit talks along with France, said it was in the interests of all that Britain had a &quot;well-defined position&quot; before the talks began. 
 
The Brexit talks are expected to hinge on Britain&#39;s desire to restrict immigration by EU citizens, but still retain vital access to the EU&#39;s single market. 
 
In the UK, EU immigration was the most hotly-debated issue of the referendum campaign. 
 
Brexit campaigners argued that the hundreds of thousands of EU immigrants arriving in Britain every year have pushed down wages for low-paid Britons and overburdened public services. 
 
Unique concerns 
 
Earlier on Thursday Hollande held talks in Dublin with Irish Prime Minister Enda Kenny. 
 
In a joint statement with Kenny he said there should be &quot;a balance of rights and obligations, including in respect of the four freedoms&quot;, referring to the free movement of goods, services, capital and people in the EU. 
 
Ireland&#39;s concerns revolve mainly around the future of its lucrative exports to Britain, and its border with British-ruled Northern Ireland, which would be the EU&#39;s only land border with Britain once it has left. 
 
&quot;Ireland and France are the UK&#39;s nearest neighbours, with significant and complex economic, human, cultural and historical links,&quot; Kenny and Hollande said. 
 
&quot;In consequence, both countries have specific and indeed unique concerns to be addressed in future negotiations,&quot; they said. 
 
Britain on Wednesday took the first step towards Brexit by announcing it was relinquishing its six-month EU presidency which had been due to start in July 2017 and will be taken up by Estonia instead. 
 
(AFP)

UK will not begin the EU exit operation 'before the end of the year', Prime Minister Theresa May reiterated

French President Francois Hollande on Thursday told Britain it would have to choose between access to the single market and the free movement of people, when it begins its negotiations on leaving the European Union. The French leader accepted Britain's right to delay formal exit talks, but described the timing of its departure as "the sooner the better", following the country's shock vote to leave last month. "It's the most crucial point... Britain will have to choose: stay in the single market and accept free movement or have another status," he said without elaborating on the latter option. Speaking after talks in Paris with British Prime Minister Theresa May, Hollande took a tougher line than German chancellor Angela Merkel a day earlier in Berlin. "The United Kingdom has decided to leave the European Union. It's their choice, it's their responsibility and we respect that decision.... There can be no discussions, no pre-negotiation before the negotiation," Hollande told a joint news conference with May. On the timing for the talks, Hollande acknowledged that, Britain would need time to prepare a negotiating position. "There can be preparations for this negotiation," he said. "But I repeat. The sooner the better, it's in the common interest, of Europe, the United Kingdom, and our economies," he added. Encouraging resilience May said she was committed to achieving a deal that reflected the sentiments expressed by most Britons in the June 23 referendum. "The message the British people gave in their vote for the UK to leave the EU had a very clear message: that we should introduce some controls to the movement of individuals from countries in the European Union into the UK. "I'm clear the government should deliver and will deliver on that for the British people. "But we also want to get the right deal on trade in goods and services," she said, calling it a matter of importance to both Britain and its EU partners. May arrived in Paris a day after meeting Merkel in Berlin. The Conservative leader repeated what she told Merkel, namely, that she would not trigger the two-year EU exit process "before the end of the year". Brexit aside she and Hollande were at pains to emphasise the entente between their countries. A week after the massacre in Nice, May said Britain stood "shoulder to shoulder" as "a great ally and friend", while Hollande said Franco-British ties "will never come undone". Britain's vote to leave the European Union sent shockwaves through the global economy and sparked political turmoil at home. European Central Bank chief Mario Draghi struck a reassuring tone, however, in remarks following the ECB's regular policy-setting meeting. "After the UK referendum, Euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience," Draghi said. On Wednesday, speaking on her first foreign trip since taking office in the wake of the seismic vote, May told Merkel that her government planned on a "sensible and orderly departure" from the EU. Merkel, who is expected to play a pivotal role in the Brexit talks along with France, said it was in the interests of all that Britain had a "well-defined position" before the talks began. The Brexit talks are expected to hinge on Britain's desire to restrict immigration by EU citizens, but still retain vital access to the EU's single market. In the UK, EU immigration was the most hotly-debated issue of the referendum campaign. Brexit campaigners argued that the hundreds of thousands of EU immigrants arriving in Britain every year have pushed down wages for low-paid Britons and overburdened public services. Unique concerns Earlier on Thursday Hollande held talks in Dublin with Irish Prime Minister Enda Kenny. In a joint statement with Kenny he said there should be "a balance of rights and obligations, including in respect of the four freedoms", referring to the free movement of goods, services, capital and people in the EU. Ireland's concerns revolve mainly around the future of its lucrative exports to Britain, and its border with British-ruled Northern Ireland, which would be the EU's only land border with Britain once it has left. "Ireland and France are the UK's nearest neighbours, with significant and complex economic, human, cultural and historical links," Kenny and Hollande said. "In consequence, both countries have specific and indeed unique concerns to be addressed in future negotiations," they said. Britain on Wednesday took the first step towards Brexit by announcing it was relinquishing its six-month EU presidency which had been due to start in July 2017 and will be taken up by Estonia instead. (AFP)

Choose free trade or 'another' status, Hollande tells Britain

Already hamstrung by the battle to compete with online rivals, Britain&#39;s major clothing retailers now risk a hit to sales and profits from the higher costs and plummeting consumer confidence that have followed the vote to leave the European Union. 
 
A month after that vote, clothing sellers are nursing big share price falls and contemplating the cost of the depreciation in the Pound versus their most important currency, the US Dollar. 
 
At the same time, consumer confidence has recorded one of the biggest drops in over two decades. With consumer spending accounting for three quarters of Britain&#39;s gross domestic product any drop would have huge implications for the economy. 
 
While a few retailers with big overseas earnings could benefit from the currency move, such as luxury brand Burberry, online fashion retailer ASOS and discount chain Primark, those that will struggle are likely to be British-focused and with already tight margins. 
 
&quot;It was already a tough market,&quot; Andy Street, managing director of John Lewis, Britain&#39;s biggest department store chain, said earlier this month, while Steve Rowe, CEO of Marks &amp; Spencer, the nation&#39;s biggest clothing retailer, described confidence as &quot;fragile&quot;. 
 
While steps by clothing retailers to protect themselves from volatility in foreign exchange rates through hedging will provide some breathing space on the currency issue, the hit to confidence is the more immediate threat, as Britons typically curtail clothes shopping in hard times. 
 
Market researcher Nielsen polled shoppers after the Brexit vote and found 41 per cent planned to change their spending habits to save on household expenses, with clothing and expensive grocery brands in their sights. 
 
In common with all British retailers, clothing sellers were already grappling with intense competition from online-only players and the cost inflation implications of the government-mandated minimum pay rate, the national living wage, as well as increased business rates. 
 
Official data today showed UK clothing sales were falling even before the referendum. Sales volumes in the three months to June were 5 per cent lower than a year earlier, the worst performance for any calendar quarter in 25 years, and in sharp contrast to a buoyant picture for most other categories of retail. 
 
Now clothing retailers also have to deal with a sharply depreciated Pound.&nbsp;Sterling has taken the brunt of market concern since the Brexit vote on June 23, falling to a 31-year low and trading below $1.28 on July 6 against $1.50 the day before the referendum. 
 
With the bulk of British clothing retailers&#39; goods sourced from Asian suppliers and paid for in Dollars, a weaker Pound has a major impact on their buying costs. 
 
Britain&#39;s biggest clothing retailers, including M&amp;S, Next and John Lewis, are hedged up to 18 months ahead, meaning that if Sterling stays depressed the main impact will not start to be felt until the second half of their 2017-18 financial year. 
 
Sportswear retailer Sports Direct is the notable exception, being unhedged for Sterling-Dollar for its 2016-17 year. Its share price is down 32 per cent since the vote. 
 
Clothing companies would normally be expected to hedge for the second half of 2017-18 and beyond, now and over the next few months.&nbsp;But with foreign currency markets volatile, the treasury departments of firms are reviewing their hedging policies. 
 
They face a dilemma, explained a senior banker with several major British retailers as clients, because as UK interest rates look set to be cut there is a risk Sterling could fall further.&nbsp;&quot;Now might not be the right time to do it, equally waiting might not be the right thing to do,&quot; he said. 
 
That unease was echoed by a person with knowledge of the situation at a FTSE 100 clothing retailer.&nbsp;&quot;You don&rsquo;t want to be making a decision in July to hedge for 18 months time, because nobody knows what&rsquo;s going to happen. You could put yourself in a worse position,&quot; said the person, adding that only the brave would start hedging now. 
 
Faced with higher sourcing costs one solution could be to pass those costs on to consumers through higher prices.&nbsp;However, in an already weak market shoppers will have little appetite for inflation, and in the case of M&amp;S, raising prices would run counter to Rowe&#39;s stated strategy of bringing them down to cure the firm&#39;s perceived uncompetitiveness. 
 
The average price of clothing has fallen by 15 per cent in the last 10 years, according to official UK data.&nbsp;The key for clothing retailers will be their ability to mitigate the cost increases they face. 
 
&quot;There are a number of things that we can do in terms of the sourcing side of things,&quot; said Helen Weir, M&amp;S&#39; chief finance officer, noting the firm imports 1 billion to 1.5 billion Pounds ($1.31-$1.97 billion) worth of goods each year in Dollars. 
 
Options include changing the mix of sourcing countries and further increasing the proportion of direct sourcing from factories, cutting out middlemen.&nbsp;Also there might be scope to re-negotiate better terms with suppliers as Asian currencies have depreciated against the Dollar. 
 
Bankers say more radical options would require a cultural shift at retailers.&nbsp;They could pursue &quot;dual pricing&quot;, where they negotiate part payment for supplies in different currencies from the Dollar, for example using the Chinese Renminbi. 
 
Retailers could also collaborate more on ordering, shipping and warehousing to seek economy of scale savings.&nbsp;But efficiencies might be more difficult to achieve than in previous years. 
 
&quot;Companies have already materially improved their gross margins through better buying and efficiencies on the supply side,&quot; said Ernesto Bisagno, senior analyst at ratings agency Moody&#39;s. 
 
Ultimately the clothing sellers with the biggest margins will be best able to weather the storm.&nbsp;Here, Next, Britain&#39;s most successful clothing retailer of the last decade, is the stand-out stock, with an operating margin for 2015-16 of 20.8 per cent, according to Reuters data. 
 
That dwarfs M&amp;S on 7.4 per cent, which is diluted by half of its business being in the lower-margin food sector, Debenhams on 5.8 per cent (for 2014-15), Sports Direct on 9.4 per cent and Primark on 11.9 per cent (for its most recent quarter). 
 
Led by Simon Wolfson, who was among the leading business supporters of Brexit, Next should be well prepared. With some foresight, he had warned in March that 2016 could be its toughest year since 2008. 
 
(Reuters)

Clothing retailers fear volatility in foreign exchange rates, and Britons typically buy less clothes in hard times

Already hamstrung by the battle to compete with online rivals, Britain's major clothing retailers now risk a hit to sales and profits from the higher costs and plummeting consumer confidence that have followed the vote to leave the European Union. A month after that vote, clothing sellers are nursing big share price falls and contemplating the cost of the depreciation in the Pound versus their most important currency, the US Dollar. At the same time, consumer confidence has recorded one of the biggest drops in over two decades. With consumer spending accounting for three quarters of Britain's gross domestic product any drop would have huge implications for the economy. While a few retailers with big overseas earnings could benefit from the currency move, such as luxury brand Burberry, online fashion retailer ASOS and discount chain Primark, those that will struggle are likely to be British-focused and with already tight margins. "It was already a tough market," Andy Street, managing director of John Lewis, Britain's biggest department store chain, said earlier this month, while Steve Rowe, CEO of Marks & Spencer, the nation's biggest clothing retailer, described confidence as "fragile". While steps by clothing retailers to protect themselves from volatility in foreign exchange rates through hedging will provide some breathing space on the currency issue, the hit to confidence is the more immediate threat, as Britons typically curtail clothes shopping in hard times. Market researcher Nielsen polled shoppers after the Brexit vote and found 41 per cent planned to change their spending habits to save on household expenses, with clothing and expensive grocery brands in their sights. In common with all British retailers, clothing sellers were already grappling with intense competition from online-only players and the cost inflation implications of the government-mandated minimum pay rate, the national living wage, as well as increased business rates. Official data today showed UK clothing sales were falling even before the referendum. Sales volumes in the three months to June were 5 per cent lower than a year earlier, the worst performance for any calendar quarter in 25 years, and in sharp contrast to a buoyant picture for most other categories of retail. Now clothing retailers also have to deal with a sharply depreciated Pound. Sterling has taken the brunt of market concern since the Brexit vote on June 23, falling to a 31-year low and trading below $1.28 on July 6 against $1.50 the day before the referendum. With the bulk of British clothing retailers' goods sourced from Asian suppliers and paid for in Dollars, a weaker Pound has a major impact on their buying costs. Britain's biggest clothing retailers, including M&S, Next and John Lewis, are hedged up to 18 months ahead, meaning that if Sterling stays depressed the main impact will not start to be felt until the second half of their 2017-18 financial year. Sportswear retailer Sports Direct is the notable exception, being unhedged for Sterling-Dollar for its 2016-17 year. Its share price is down 32 per cent since the vote. Clothing companies would normally be expected to hedge for the second half of 2017-18 and beyond, now and over the next few months. But with foreign currency markets volatile, the treasury departments of firms are reviewing their hedging policies. They face a dilemma, explained a senior banker with several major British retailers as clients, because as UK interest rates look set to be cut there is a risk Sterling could fall further. "Now might not be the right time to do it, equally waiting might not be the right thing to do," he said. That unease was echoed by a person with knowledge of the situation at a FTSE 100 clothing retailer. "You don’t want to be making a decision in July to hedge for 18 months time, because nobody knows what’s going to happen. You could put yourself in a worse position," said the person, adding that only the brave would start hedging now. Faced with higher sourcing costs one solution could be to pass those costs on to consumers through higher prices. However, in an already weak market shoppers will have little appetite for inflation, and in the case of M&S, raising prices would run counter to Rowe's stated strategy of bringing them down to cure the firm's perceived uncompetitiveness. The average price of clothing has fallen by 15 per cent in the last 10 years, according to official UK data. The key for clothing retailers will be their ability to mitigate the cost increases they face. "There are a number of things that we can do in terms of the sourcing side of things," said Helen Weir, M&S' chief finance officer, noting the firm imports 1 billion to 1.5 billion Pounds ($1.31-$1.97 billion) worth of goods each year in Dollars. Options include changing the mix of sourcing countries and further increasing the proportion of direct sourcing from factories, cutting out middlemen. Also there might be scope to re-negotiate better terms with suppliers as Asian currencies have depreciated against the Dollar. Bankers say more radical options would require a cultural shift at retailers. They could pursue "dual pricing", where they negotiate part payment for supplies in different currencies from the Dollar, for example using the Chinese Renminbi. Retailers could also collaborate more on ordering, shipping and warehousing to seek economy of scale savings. But efficiencies might be more difficult to achieve than in previous years. "Companies have already materially improved their gross margins through better buying and efficiencies on the supply side," said Ernesto Bisagno, senior analyst at ratings agency Moody's. Ultimately the clothing sellers with the biggest margins will be best able to weather the storm. Here, Next, Britain's most successful clothing retailer of the last decade, is the stand-out stock, with an operating margin for 2015-16 of 20.8 per cent, according to Reuters data. That dwarfs M&S on 7.4 per cent, which is diluted by half of its business being in the lower-margin food sector, Debenhams on 5.8 per cent (for 2014-15), Sports Direct on 9.4 per cent and Primark on 11.9 per cent (for its most recent quarter). Led by Simon Wolfson, who was among the leading business supporters of Brexit, Next should be well prepared. With some foresight, he had warned in March that 2016 could be its toughest year since 2008. (Reuters)

British clothing retailers face Brexit double whammy

The uncertainty created by Britain&#39;s vote to leave the European Union will slow the global economy into next year, the International Monetary Fund (IMF) predicted on Tuesday. 
 
Last month&#39;s populist victory in the British referendum has darkened the skies in that country and across the Euro area, according to the global crisis lender, forcing it to cut April&#39;s growth forecasts and rattling what had already been a fragile recovery. 
 
Britain&#39;s relations to the 28-member EU single market were thrown into confusion following the June 23 vote, raising the possibility of sudden, new trade barriers and at least initially causing a selloff in global financial markets. 
 
Analysts have predicted this will weigh on consumption and investor confidence.

In an update to its April forecast, the IMF said global economic growth was likely to be 3.1 per cent this year and 3.4 per cent in 2017, a downward revision of 0.1 per cent for both years. 
 
Brexit was liable to cost the British economy nearly a full percentage point of growth in 2017 as demand will likely be significantly lower than it would have been had the remain camp been victorious. 
 
&quot;Continuing uncertainty is likely to weigh on consumption and especially investment,&quot; the IMF said. 
 
Nigeria, Africas largest economy, saw unusually painful revisions as dropping oil prices have hurt oil revenues, power production and investor confidence. Its economy is now expected to contract by 1.8 per cent rather than grow by 2.3 per cent, a sharp revision that has followed the steep devaluation of the countrys currency. 
 
In a bright spot, stronger activity in the Euro area has seen this years growth forecast revised upward by 0.1 per cent to 1.6 per cent. But possible drops in consumer and business confidence as well as strain on banks means 2017 will likely see a slowdown after the Brexit referendum. Brexits consequences for the United States were likely to be &quot;muted,&quot; with growth steady at 1.8 per cent this year and next, representing a downward revision of 0.2 per cent in 2016. 
 
However, the IMF warned of possibly greater risks for global growth. Non-performing loans and the poor profitability of Greek, Italian and Portuguese banks as well as enduring market turbulence were among factors that &quot;could have severe macroeconomic repercussions,&quot; according to the Fund. 
 
While the short-term prospects for the Chinese economy were unchanged or even improved due to interventions by central authorities -- driving this years forecast up 0.1 to 6.6 per cent -- the heavy reliance on credit to drive growth could create instability. 
 
The recent appreciation of the Yen is likely to counteract an announced two-year delay in hiking a consumption tax in Japan. This has slowed the forecast growth in that countrys already anemic economy, with the IMF revising it downward to just 0.3 per cent, to be followed by a bare 0.1 per cent expansion in 2017. 
 
(Reuters)

Britain's uncertain relations with the 28-member EU single market raises possibility of sudden and new trade barriers

The uncertainty created by Britain's vote to leave the European Union will slow the global economy into next year, the International Monetary Fund (IMF) predicted on Tuesday. Last month's populist victory in the British referendum has darkened the skies in that country and across the Euro area, according to the global crisis lender, forcing it to cut April's growth forecasts and rattling what had already been a fragile recovery. Britain's relations to the 28-member EU single market were thrown into confusion following the June 23 vote, raising the possibility of sudden, new trade barriers and at least initially causing a selloff in global financial markets. Analysts have predicted this will weigh on consumption and investor confidence. In an update to its April forecast, the IMF said global economic growth was likely to be 3.1 per cent this year and 3.4 per cent in 2017, a downward revision of 0.1 per cent for both years. Brexit was liable to cost the British economy nearly a full percentage point of growth in 2017 as demand will likely be significantly lower than it would have been had the remain camp been victorious. "Continuing uncertainty is likely to weigh on consumption and especially investment," the IMF said. Nigeria, Africas largest economy, saw unusually painful revisions as dropping oil prices have hurt oil revenues, power production and investor confidence. Its economy is now expected to contract by 1.8 per cent rather than grow by 2.3 per cent, a sharp revision that has followed the steep devaluation of the countrys currency. In a bright spot, stronger activity in the Euro area has seen this years growth forecast revised upward by 0.1 per cent to 1.6 per cent. But possible drops in consumer and business confidence as well as strain on banks means 2017 will likely see a slowdown after the Brexit referendum. Brexits consequences for the United States were likely to be "muted," with growth steady at 1.8 per cent this year and next, representing a downward revision of 0.2 per cent in 2016. However, the IMF warned of possibly greater risks for global growth. Non-performing loans and the poor profitability of Greek, Italian and Portuguese banks as well as enduring market turbulence were among factors that "could have severe macroeconomic repercussions," according to the Fund. While the short-term prospects for the Chinese economy were unchanged or even improved due to interventions by central authorities -- driving this years forecast up 0.1 to 6.6 per cent -- the heavy reliance on credit to drive growth could create instability. The recent appreciation of the Yen is likely to counteract an announced two-year delay in hiking a consumption tax in Japan. This has slowed the forecast growth in that countrys already anemic economy, with the IMF revising it downward to just 0.3 per cent, to be followed by a bare 0.1 per cent expansion in 2017. (Reuters)

IMF: Brexit to cost Britain nearly 1% growth in 2017

China&#39;s economy expanded more than expected in the second quarter of the year, data showed today, fuelling hopes growth may be stabilising, but analysts warned private investment still needed to pick up. 
 
The world&#39;s second biggest economy grew 6.7 per cent year on year in April-June, slightly quicker than forecast in an AFP survey and the same as the previous three months. 
 
The result is also in line with the government&#39;s 6.5-7.0 target for the full year and will provide some much-needed relief as China and key driver of the global economy suffers its worst rates of growth for 25 years. 
 
&quot;The national economy has achieved moderate but steady and sound development,&quot; National Bureau of Statistics spokesman Sheng Laiyun said, adding he was confident that the annual growth target could be achieved. 
 
Markets were unmoved by the figures, with Shanghai&#39;s composite index ending the morning slightly lower. 
 
However, economists analysts said the growth was driven by state investment in infrastructure and a real-estate rebound, suggesting it may be hard to maintain in the longer-term. 
 
&quot;China is on track of achieving this year&#39;s growth target,&quot; said Haibin Zhu, JP Morgan China chief economist. But he added that while industrial production was &quot;very strong&quot;, private investment was weak. 
 
After decades of breakneck growth policymakers are now trying to retool the economy, embracing weaker growth as a trade-off for structural reforms to wean the country off cheap exports and massive government spending in favour of domestic consumption. 
 
But the transition has proved challenging. 
 
Fixed asset investment, a gauge of infrastructure spending, rose nine per cent in the first half of the year, amid a record credit binge in the first quarter aimed at stimulating China&#39;s slowing economy. 
 
Investment concern 
 
And investment by private businesses grew by less than three percent in the first half of the year, the data showed. 
 
Sheng blamed the slowdown in private investment on overcapacity in traditional industries, barriers for private firms to enter some sectors, and limited access to loans. 
 
Tom Rafferty of the Economist Intelligence Unit said &quot;levels of state investment we have seen are not sustainable if the authorities are at all serious about curbing debt risks&quot;. 
 
The &quot;greatest concern&quot; is the slide in investment by private firms, he added, in a sign that businesses are worried about the wider economy and Beijing is &quot;failing to deliver on promised market reforms&rdquo;. 
 
Factory production and consumer spending grew slightly, and industrial output rose over six per cent on year in June, a slight increase on the previous month, although retail sales rose far more than expected. 
 
The data come days after another downbeat reading on trade, which showed the fall in imports and exports accelerated in June. 
 
Klaus Baader, Hong Kong-based chief economist for Asia Pacific of Societe Generale, said: &ldquo;I think it has been engineered by significant reacceleration in credit growth. He added that the growth figure was &quot;a little bit disappointing&quot;, given the scale of lending expansion. 
 
Official Chinese figures are viewed with widespread scepticism, and just days ago the government altered its growth calculation method for the second time in less than a year. 
 
Today&#39;s figures &quot;should be taken with a grain of salt&quot; because of the political pressures on officials to meet the growth target, research firm Capital Economics said in a note. 
 
(AFP)

The world's second biggest economy grew 6.7 per cent year on year in April-June, slightly quicker than AFP forecast

China's economy expanded more than expected in the second quarter of the year, data showed today, fuelling hopes growth may be stabilising, but analysts warned private investment still needed to pick up. The world's second biggest economy grew 6.7 per cent year on year in April-June, slightly quicker than forecast in an AFP survey and the same as the previous three months. The result is also in line with the government's 6.5-7.0 target for the full year and will provide some much-needed relief as China and key driver of the global economy suffers its worst rates of growth for 25 years. "The national economy has achieved moderate but steady and sound development," National Bureau of Statistics spokesman Sheng Laiyun said, adding he was confident that the annual growth target could be achieved. Markets were unmoved by the figures, with Shanghai's composite index ending the morning slightly lower. However, economists analysts said the growth was driven by state investment in infrastructure and a real-estate rebound, suggesting it may be hard to maintain in the longer-term. "China is on track of achieving this year's growth target," said Haibin Zhu, JP Morgan China chief economist. But he added that while industrial production was "very strong", private investment was weak. After decades of breakneck growth policymakers are now trying to retool the economy, embracing weaker growth as a trade-off for structural reforms to wean the country off cheap exports and massive government spending in favour of domestic consumption. But the transition has proved challenging. Fixed asset investment, a gauge of infrastructure spending, rose nine per cent in the first half of the year, amid a record credit binge in the first quarter aimed at stimulating China's slowing economy. Investment concern And investment by private businesses grew by less than three percent in the first half of the year, the data showed. Sheng blamed the slowdown in private investment on overcapacity in traditional industries, barriers for private firms to enter some sectors, and limited access to loans. Tom Rafferty of the Economist Intelligence Unit said "levels of state investment we have seen are not sustainable if the authorities are at all serious about curbing debt risks". The "greatest concern" is the slide in investment by private firms, he added, in a sign that businesses are worried about the wider economy and Beijing is "failing to deliver on promised market reforms”. Factory production and consumer spending grew slightly, and industrial output rose over six per cent on year in June, a slight increase on the previous month, although retail sales rose far more than expected. The data come days after another downbeat reading on trade, which showed the fall in imports and exports accelerated in June. Klaus Baader, Hong Kong-based chief economist for Asia Pacific of Societe Generale, said: “I think it has been engineered by significant reacceleration in credit growth. He added that the growth figure was "a little bit disappointing", given the scale of lending expansion. Official Chinese figures are viewed with widespread scepticism, and just days ago the government altered its growth calculation method for the second time in less than a year. Today's figures "should be taken with a grain of salt" because of the political pressures on officials to meet the growth target, research firm Capital Economics said in a note. (AFP)

China economy beats growth forecasts in Q2

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