Tag Archive for IMF

International Debt Burden of Africa

The path to prosperity doesn’t lie amidst countries building even bigger international debt states Akinwumi Adesina, the head of the African Development Bank.   He is quite clear when he urges the continent’s governments to try and boost tax revenue not grab yet more international loans.  The statement comes whilst Africa, once again grapples with an economic slump.

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Mr Adesina is reported with an interview in the Financial Times to be expecting yet another downturn in the economy of Africa largely being triggered by a slump in commodity prices.  This issue greatly affects Africa as well as the slow down in Chinese economic growth.  Yet as always Africa is one of the first to suffer from external economic slowdown, largely because of it’s relative financial weakness, in other words it’s large levels of debt.

The phrase ‘fiscal consolidation’ is often used to describe Africa’s position and potential solution.  The reality is that decades of borrowing have had only limited success in delivering long term growth in the region.  Sure when economic booms are happening in other places, Africa is dragged along through a demand for it’s commodities but the weakness is evident as soon as this demand drops.  Nigeria has plunged into yet another recession simply due to the oil price fall, although to be fair this is the first for nearly twenty years.

The pattern will be repeated across sub-Saharan Africa, with GDP falling from it’s 3.5% level in 2015.  Many nations are suffering from dwindling government revenues, and the wide budget deficits mean that governments have little monetary options available to them.  The temptation of increasing debt is always there but this is precisely the reason why African economies are so vulnerable, billions of dollars of debt taken up in the ‘good years’ reduce the capacity of these governments to respond in a slump.

These debts have to be repaid and the costs of servicing them often rocket in poor economic conditions simply because of the weakness of most African currencies.  The scarcity of foreign currencies also impacts African countries and businesses to invest.

Borrowing overseas with a weak domestic currency is a recipe for disaster,  investment funds should ideally be sourced locally.  For example there are huge African investment and pension funds which ideally could be used to support the African economy.  Too often this money is invested in Western countries and businesses to the detriment of African businesses.  It’s often depressing to sit in the presentations of these Pension and investment funds produced by some anonymous company who conducts most of their business through a residential VPN (see here) to be extolling the virtues of some international company with minimal links to the African continent when local companies are starved of investment and the potential for growth.

Frank Ifield

Is US Growth Going to Slowdown?

Well the IMF seems to think so, in it’s latest assessment of the US economy the International Monetary Fund reduced it’s growth forecast for the US by nearly a third.  They also suggested that perhaps there was still some need for the virtually nil interest rates to remain at that rate for the time being.

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The estimates of the US economy fell by .8% from the April estimation, to an expected growth rate of 2% in 2014.   Why the turnaround? Well the first quarter results were weak although this was very probably due to the very severe winter impacting on all areas of the economy from employment, housing through to retail sales.

It’s not all bad news, it seems that the IMF considered this to be just something of a blip in the recovery – maintaining the 3% growth estimate for 2015.  The caveat for this though is to increase the minimum wage and keep investing heavily in it’s infrastructure which could be difficult in the political climate.

This reduction in estimates wasn’t entirely unexpected as the IMF had already hinted that this would happen in relation to the poorer growth results in many of the other major economies across the world.  The Ukraine crisis is also having an impact on economic growth particularly if sanctions on Russia are increased.

It’s going to mean that there’s some impact on the markets, employment goals are not going to be reached until 2017, and it’s expected this will be in an environment of low inflation.  It’s one of the reasons that  the IMF is urging the US to keep it’s interest rates low, the markets were expecting a rise after mid-2015 but that could be later now if the advice is heeded.

The US equity market like that of most of Europe is experiencing rises virtually across the board.  This is of course partly due to the low interest rates making investment cheaper and of course a stream of positive indicators.   The pressure will be upwards on shares the longer the interest rates stay low.  There are worries of a market correction within the equity market with many experts hedging fund with safer investments like telcos and utility companies.

You can check the latest share prices and get some excellent investment advice on some of the US media and equity research funds.  Beware though due to the sometimes complicated state tax and federal laws, these are often limited to US only customers, unless you buy VPN services and use them remotely of course.

Richard Hargreaves II

Technical Source: – hide IP software

Portugal Economic Recovery Still on Track

There is a feeling that the economic prospects for Portugal are at last showing some sign of recovery.    This month (May 2014) the bailout organised by the international community and the IMF is nearing it’s end.  The last review of the bailout was perhaps the first one with a slightly optimistic short term outlook.

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The IMF though did stress that there should be no let up on the economic reforms, the growth of debt is still concerning and without these reforms could easily spiral out of control very quickly.  Unemployment is probably the most worrying aspect of the recovery, it is obviously the one with the highest social cost.  At over 15% it is still among the highest in Europe and like other countries the worse affected sector are the countries young people.  However economic activity is improving all the time so it is hoped that this will filter through to the employment figures very shortly.

The reduction of GDP budget deficit is of course the core goal of the IMF bailout targets, Portugal has so far achieved or in some instances beaten it’s agreed levels.  Although the official bailout is finished this month, there will be a continuation of some payments whilst the deficit is still being tackled.

Furthermore the country has the option to request a standby loan, mainly to support the substantial shortfall that is still in existence for the 2015 economic year.  Access to the financial markets is still limited and until Portugal has full access to the credit markets then it is likely it still will need some financial assistance to stay in the Euro and maintain it’s austerity programme.

The full economic figures and economic indicators can be obtained from a variety of financial data sites.  If you want background stories and information on the European economies then check out the financial pages of the BBC website, all data should be available but you may need to use a VPN to access some of the transmitted broadcasts – here’s a guide.

James Goldwing writes on several technology and economic websites and blogs.

 

EU Concerns Over Greek Repayment

It seems quite a long time since the doomsayers of the Euro Zone where out in force.   The speculation then was not ‘if’ a country would default and crash out of the currency union, but rather ‘when’ and ‘who’.  There were predictions that Greece, Ireland, Spain and Portugal where likely candidates but at the moment those predictions look misplaced.

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However throughout the hysteria and doom laded forecasts, the fundamental economic data hasn’t really changed.  There are still too many European countries literally swamped in debt with little expectation of that changing soon.  The problems have moved off the front pages of the financial press but they’re still very much with us.

The European Commission has last week urged Greece to step up it’s efforts to reduce national debt quicker than is currently happening.   It is worried that agreed targets for reduction look unlikely to be met despite some swinging austerity measures.   There has been an increase in confidence that the worse was over in countries like Greece, yet EU officials don’t all share this optimism.

Figures like debt being more than 170% of the overall economic output of a country, are truly staggering.  With this sort of burden on an economy, it’s difficult to see where any increase in prosperity can come from.

These economic targets were strictly linked to the bailout of the Greek economy, one of the conditions for example was that debt should be decreased to 124% of GDP by the year 2020.   Latest EU estimates suggest that this target will not be met, in addition further long term goals will also be missed.

However there is hope, and it is expected that both the EU nations and the IMF would react to these problems rather than let Greece stagger towards other defaults and failures which will almost certainly effect growth prospects and confidence.  It was agreed that if these targets were not met, then renewed efforts and help may be available.  It was a realization that these goals may not be realistically achievable in the current economic climate and that other measures may have to be deployed.   One of the important factors that is fundamental to the Greek recovery is the level of interest it pays on it’s debts, lowering this could make a huge impact on the economy in the short term.

The Greek economy will certainly need some more help, it lacks the monetary tools to make significant changes on it’s own.  The UK economy is leading the way of recovery but of course it’s not part of the Eurozone currently.  There is much talk and several decent documentaries available on UK TV documenting this recovery.  To access these you’ll have to be in the UK or have access to a UK IP proxy, try this one.

To end some good news though for the Greek economy.  At the beginning of the month, it was able to return to the Bond market. This enabled the country to at least raise finance from private investors after being absent from this sector for nearly five years.

Ukraine Faces Economic Crisis

There’s one country dominating European news channels at the moment – the events in Ukraine seem to be moving with ever increasing speed.  Most reports of course are concerned with the country’s political future and it’s relationship with Europe and Russia.

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However there is another crisis which is looming for whoever ends up being in charge of this divided country – an economic one.  The country is hugely indebted and relies heavily on the one country it is seeking to distance itself from – Russia.  In fact there is a major lending programme in place which is essential to Ukraine’s survival agreed with the Russian government and currently only 20% of it implemented.  It would be highly unlikely to continue if the new EU friendly Ukraine turns it’s back on it’s powerful neighbour.

It is estimated that Ukraine needs about £21 billion over the next couple of years to maintain stability.  If the Russians pull the plug on aid, which seems likely then it is to Europe that the country will look.  It has already been mentioned by several important European officers who are well aware that the country will require substantial economic aid.  The US Treasury secretary has also said that international support would be the best way forward probably via the IMF.

So will the US and EU fill the ever growing hole in the Ukrainian finances?  It has happened before but the previous lending programmes with the country have not been overly successful, with the Ukranian authorities not sticking to the agreed policies in return for financial support.  There were many problems but the central one was probably the reluctance of the government to raise the country’s energy prices.  The subsidies cost Ukraine finances which they couldn’t really afford, it also meant that there was little encouragement for being more fuel efficient in both industry and domestic markets.

But it’s not all gloom and doom for the country, there are many resources the country can turn to with a modicum of political and financial stability in place.  Like many former Soviet countries, there is a strong educational system in place and Ukraine has a large population of young well educated young people.   There is also a large entrepreneurial spirit, and many people are highly active in the global digital economy.  They use technologies such as VPNs, proxies and even these Smart DNS technology like this to break down digital borders that many countries have put in place.

There is a huge potential in the country, like most former Soviet countries when they broke away their economies contracted rapidly as they struggled to transform from a centrally planned economy to a western style capitalist economy – it’s never an easy process.  There’s a lot of coverage in the media throughout Europe but some of the best is possibly in Germany through their domestic broadcasters – for those outside the country and with the necessary language skills you can use this technique to help bypass the geo blocks which normally block access.

 

Torrid Times in Emerging Markets – G20 Focus

This weekend in Sydney, the finance ministers of the G20 group of countries meet.  Every meeting has an official theme, and this one is no exception – the subject is restoring global group.

Over the last few years we have seen amid the turmoil in the developed economies of the world, the emergence of huge growth in Asia and South American economies in particular.  Much of this growth had in part been due to the other countries problems particularly the US.  The US Federal Reserve for example  has been buying bonds in order to keep money cheap and interest rates low – this has helped the US economy return to growth but it has many other economic impacts.  For example funds were driven towards the emerging countries seeking to invest in the higher growth rates and higher interest rates.

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Now this money is being returned to a more prosperous US, also because the risks in developed countries are much lower. This is causing a huge problem with big falls in currencies in Argentina and India for example.  The US has faced some criticism that it’s own economic policies have caused such instability in other countries.

Over the last few years, we amongst others have reported some of the incredible rises in the economies of some of these nations particularly the likes of Brazil and Argentina.  However it seems that the underlying instability and weaknesses of these economies means that they could be subject to damaging fluctuations when big economies like the USA change their policies.

It’s unlikely that we will ever see the situation where a country like the US will alter it’s economic policy in order to reduce global instability, western democracies really aren’t built like that.   However it is hopeful that meetings like this with the other G20 countries will at least make them ‘mindful’ of the affect that their policies can have on other countries with less stable infrastructure.

There are some interesting debates on the US media both print and online, you can access the US online news services from ABC, CNN and NBC by using a US proxy service like this.

Additionally there is coverage of the G20 meeting itself on the BBC website, the majority is accessible internationally although to view the news and broadcast documentaries  – you may need to watch this video.

Additional
For accessing the above reports on an iPad please see this post

The End of the Irish Bailout

This is the month (December 2013) when the Republic of Ireland will reach the end of it’s internationally funded bailout programme. The journey began in November 2010 when it’s biggest banks reached the brink of collapse in spectacular fashion.  To rescue them the country was forced to take a 67 billion Euro loan, another huge amount was taken from the the State’s Pension reserve fund.

There was obviously a political cost to pay, the ruling coalition was dumped out of power a few weeks later.  The two parties were hit hard – Fianna Fail plummeted and the junior party, the Greens completely wiped out.

Now Ireland is seeking to regain some control and it’s independence again. It will crucially be able to borrow on the International bond markets too.  It is hoped the worse of this humiliating episode in Irish history will be at an end.

It is expected that Ireland’s experience will be held up as a role model for those who find themselves in a similar situation.  The country has applied and accepted severe austerity measures with relatively little fuss.  A political cost has been paid of course, but that was almost inevitable whichever course of action was taken.

The leaders of countries like Portugal, Spain and Greece will be carefully looking at the example of Ireland and seeing if they can replicate it’s recovery.  Ireland of course is still saddled with many problems – including huge debts but there is now light at the end of the tunnel.  Ireland has many reasons for optimism including many booming companies who have set up there due to it’s low levels of corporation tax.  The links with both Europe and close bonds with the UK combined with low tax threshold are of obvious attractions.  However there are still some barriers especially in the digital economy.

You may be surprised to hear  that a country so closely tied with the UK is unable to access it’s national broadcaster on the internet.  This fact the author discovered last week on a visit, fortunately with some internet trickery that was solved through this method I found on Youtube.

So does this mean that austerity can work, is it the answer that debt ridden Europe is looking for? Perhaps it is the problem is that in many cases it also represents political suicide if the measures deliver results over decades rather than years. For instance the IMF loans to Ireland will not be paid off until 2042, and the country will have to endure extensive audits until 75% of the loans have been settled. It’s not a timescale that normal democratic politics fits in well with unfortunately, politicians get elected from providing ‘good stuff’ not paying off loans.

Canadian Economic Outlook

If you live in Europe, there is a tendency to doom and gloom when you are talking about economics.  However slowly but surely the expectations are beginning to rise, the word upgrade is starting to be used more often in the IMF assessment reports.

The latest economy to be revised upwards is that of the Canadian economy, with a small increase in the growth expectations for this year and next.  Canada was never quite as affected by the global financial problems having to some extent ‘put it’s house in order’ some years ago.  The growth rate is only expected to be around 2-2.5% but this comes on the back of consistent if unspectacular growth over the last few years.

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The IMF continue to emphasize the global situation which is dragging back many economies including Canada.   Growth around the world is expected to be around 3%, although this should rise significantly over the next few years.

Countries like Canada have based their economies on slow, consistent growth and limiting public expenditure and debt.  The lessons of European and the US appear to have strengthened this resolve.  Although Canada has not suffered any significant GDP falls, there is an air of austerity to the policy making.  If you watch regularly the Canadian finance and news shows you will see this being reflected in day to day life.  Here’s how I watch the Canadian broadcaster by the way – http://www.proxyusa.com/how-to-watch-canadian-tv-from-the-us , although I haven’t figured out how to watch on more TV yet.  If you prefer a video explanation that can bring Canada into your living room – here’s another method – right here.

The IMF of course are not always correct in their growth figures.  The Bank of Canada has a much more optimistic expectation for 2014, of nearly three percent in 2014.  We will have to see who comes out closest in next years economic data.