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Tue, 28th February 2017

Anirudh Sethi Report

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Archives of “gross domestic product” Tag

Asia needs $26tn for infrastructure through 2030: ADB report

Asia will need $26 trillion of infrastructure investment in the 15 years from 2016 to 2030, said a report published on Tuesday by the Asian Development Bank.

According to the report, titled Meeting Asia’s Infrastructure Needs, the region needs electricity supply chains to deliver power to the 400 million people who still live without electricity.

 Infrastructure investment in Asia currently meets only about half the demand. Aid from development agencies, such as the ADB, remains a mere 2.5% of total investment. The report calls on regional economies to provide financing through fiscal measures and to make use of private-sector money.

The report covered 45 countries and territories including China and India. To sustain the current level of economic growth, Asia needs $26 trillion over the 15-year period.

In the previous report, released in 2009, the ADB estimated that Asia would need $8 trillion of infrastructure investment between 2010 and 2020.

To get inside Beijing’s head, look at the numbers

As China gears up for its annual legislative session, all eyes are on the economy: specifically, how fast the Communist leaders intend China to grow, and what they are willing to sacrifice for that goal.

The most hotly awaited event of the National People’s Congress will come on March 5 — opening day — when Premier Li Keqiang will announce the government’s economic growth target for 2017. Many expect a downgrade from 2016’s goal of 6.5-7% to “around 6.5%,” according to a major bank.

 Beijing aims to bring China’s gross domestic product to twice the 2010 level by 2020 — a goal frequently, and mistakenly, taken to be merely an aspirational target. President Xi Jinping has called for the eradication of poverty in China by 2021, the hundredth anniversary of the Communist Party’s formation, and pledged a “great revival of the Chinese nation.” In this context, missing the mark could mean the leader’s downfall.

Doubling GDP over a decade requires 7.2% annual growth on average. Rates that were higher than that from 2011 to 2014 mean the country has only to hit 6.3% during the next few years. Targeting 6.5%, and thus avoiding a steep drop-off from last year’s goal, is a clear attempt to avoid any possible misstep ahead of the party’s twice-a-decade National Congress this autumn, when the group will name its next slate of leaders.

Keep spending

But in today’s China, 6.5% is no slight hurdle. To be sure, exports are recovering thanks to a brisk U.S. economy and a yuan some 10% weaker than at its peak. But areas outside major cities remain mired in vacant housing stock, and private investment is sluggish, leaving public works as one of the only viable drivers of growth.

India’s GDP growth to slow to 5.7% in Q4: Nomura

India’s economic growth is likely to remain muted in the first quarter of this calender year with the GDP likely to grow at 5.7% in the January-March period amid subdued activity, says a report.

According to the global financial services major Nomura, following subdued growth in the first quarter, a V-shaped recovery is on the cards due to remonetisation, wealth redistribution and the lagged effects of lower lending rates.

“We expect growth to remain subdued in the first quarter of 2017 as the activity level remains below its recent peak,” Sonal Varma chief India economist at Nomura said in a research note. Nomura expects economic growth to remain in a downtrend.

As per the report, from 7.3% GDP growth in the July-September 2016, the October-December 2016 quarter GDP growth is likely to slow to 6% and further to 5.7% in the first quarter of 2017 (January-March).

“We expect GDP growth to slow from 7.3% in Q3 2016 to 6.0 % in Q4 and 5.7% in Q1 2017,” it said.

Rating agencies follow ‘poor, inconsistent’ standards: Arvind Subramanian

Arvind SubramanianChief Economic Advisor Arvind Subramanian on Tuesday slammed global rating agencies for following “inconsistent” standards while rating India vis-a-vis China, saying they have not taken into account reforms measures like GST, which is a “poor” reflection on their credibility.

He said India has taken reform initiatives like FDI liberalisation, bankruptcy code, monetary policy framework agreement, GST and Aadhaar Bill.

“Despite all these achievements, it is very interesting that the rating agencies have not reflected this… We have shown (in Survey) what kind of inconsistent standards the rating agencies have.

“We call these poor standards because S&P said last year that there is no way they could upgrade India because of GDP and fiscal deficit,” Subramanian said.

US-based Standard & Poor’s (S&P) in November ruled out an upgrade in the country’s rating for some considerable period, citing India’s low per capita GDP and relatively high fiscal deficit.

“The actual methodology to arrive at this rating was clearly more complex. Even so, it is worth asking: are these variables the right key for assessing India’s risk of default?” the Economic Survey asked.

Bank of Japan seen bullish on GDP after eventful 2016

The Bank of Japan is poised to upgrade its three-year economic growth outlook in the final days of January in light of strong recent indicators, though stronger inflation forecasts will be a harder sell.

The central bank will compile its quarterly outlook on economic activity and prices at a two-day policy meeting beginning Monday. The report will outline the BOJ’s forecast for each of the three years through fiscal 2018,

 The last report, released in November, pegged gross-domestic product growth at 1% for fiscal 2016, 1.3% for fiscal 2017 and a slim 0.9% for fiscal 2018. Discussions this time are expected to center on the first two years, with the fiscal 2017 growth forecast thought to be headed for the mid-1% range.

Signs for an upgrade are strong. The BOJ in December boosted its outlook for Japan’s economy as a whole for the first time in 19 months. Such goods as smartphone parts and automobiles are driving up exports and industrial production, while consumer spending on durable goods such as cars is on the rebound as well. Changes made late last year to the GDP calculation method will also give the figure a boost: companies’ research and development spending, which has shown consistent growth over the years, now counts as investment.

BOJ Gov. Haruhiko Kuroda said at a World Economic Forum panel discussion Jan. 20 that he expects Japan’s economy to grow by around 1.5% in fiscal 2016 and fiscal 2017, significantly exceeding the country’s potential growth rate.

World Bank latest reports says global growth to accelerate slightly

World Bank’s latest Global Economic Prospects report … headlines:

 
  • Forecasts global real GDP growth at 2.7% in 2017 vs 2.3% in 2016
  • Forecasts advanced economies’ growth at 1.8% in 2017 (vs 1.6% in 2016)
  • Emerging/developing economies’ growth at 4.2% in 2017 (3.4% in 2016)
  • Forecasts US growth at 2.2% in 2017 (vs 1.6% in 2016) … they say their forecast excludes effects of any policy proposals from trump administration

More:

  • Challenges for emerging market commodity exporters are receding, while domestic demand solid in emerging market commodity importers
  • Fiscal stimulus in US could generate faster domestic and global growth, but extended uncertainty over policy could keep global investment growth slow
  • Forecasts China’s growth slowing to 6.5% in 2017 (from 6.7% in 2016)
(Headlines via Reuters)
 
The World Bank looking at the recovering oil and commodity prices, noting this eases the pressures on emerging-market commodity exporters. Expects the recessions in Brazil and Russia to end.
As always the Bank notes uncertainties in its forecasts (all forecasters should), with upside uncertainty (in the short term at least) on US potential increased fiscal stimulus, tax cuts, infrastructure spending.  Looking further out, though, a surge in debt load, higher interest rates & tighter financial conditions would have adverse effects.
Also downside potential on a more protectionist trade stance.

Demonetisation a big blow! GDP growth may dip below 6% in FY17

With consumption spends in rural and urban India stifled by the acute scarcity of cash, the economy is set to clock sharply lower levels of growth in the current and coming quarters. While the initial days of demonetisation saw economists merely pruning their growth estimates, the cuts could get bigger.

Nomura, for instance, believes there is a downside risk to its Q1 GDP growth projection of 6.9% y-o-y. “Near-term growth may fall much more than expected,” economists at the brokerage wrote. They alluded to proprietary indicators which had slumped to their lowest level since the series started in 1996 and were consistent with a below 6% GDP growth.

While sales have decelerated across markets, given the larger volume of cash transactions, the hinterland has been hurt far more than urban areas.

China Orders Shut Down Of 1,200 Factories After Smog “Red Alert” Declared In Beijing

In addition to its now traditional credit-funded boom-bubble-bust cycle which rotates from asset to asset, and is then promptly recycled courtesy of the nearly $35 trillion in various financial system “assets”, another staple of the “new” Chinese economy are smog alerts following every burst in economic strength driven by “old economy” manufacturing.

That’s what happened overnight, when following months of manufacturing expansion, China’s pollution problem has again caught up, and as a result Beijing’s city government ordered 1,200 factories near the Chinese capital, including a major oil refinery run by state oil giant Sinopec, to shut or cut output on Saturday after authorities issued the highest possible air pollution alert.

Traffic on the city’s roads was lower than usual as residents complied with limits on car use and many of the city’s 22 million residents sat out the haze at home. “I’ll just take a rest and not go outside,” said Wang Jianan, a 23-year-old Beijing resident and teaching assistant. With Christmas just a week away, others resorted to dark humour to help cope with the latest episode of toxic air.

Chinese media reported that at least 388 people have been fined for lighting outdoor barbecues and fires.

Latest Atlanta Fed GDPNow down to 2.4% from 3.6% on November 23

Trade and inventories cited

As per the Atlanta Fed:
“The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2016 is 2.4 percent on November 30, down from 3.6 percent on November 23. The forecast of the combined contributions of real net exports and real inventory investment to fourth-quarter growth fell from 0.61 percentage points to 0.18 percentage points after last Friday’s advance economic indicators report from the U.S. Census Bureau. The forecast of fourth-quarter real consumer spending growth fell from 3.0 percent to 2.2 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.”
 
 That is a pretty hefty drop.  
 

 

India’s Q2 FY17 GDP growth at 7.3% vs 7.6% YoY

India’s GDP (Gross Domestic Product) for the second quarter of FY17 grew at 7.3% versus 7.1% quarter-on-quarter and 7.6% year-on-year. The GDP data comes at a time when there are growing concerns that the demonetisation decision of Modi government may slow down the world’s fastest growing economy in the coming quarters. Fitch Ratings has already lowered India’s GDP growth forecast for this fiscal to 6.9 per cent from 7.4 per cent, saying there will be “temporary disruptions” to economic activity post demonetisation.

It said economic activity will be hit in the October- December quarter because of the cash crunch created by withdrawal and replacement of 500 and 1000 rupee notes that accounted for 86 per cent of the value of currency in circulation. “Indian growth has also been revised down to reflect temporary disruptions to activity related to the RBI’s surprise demonetisation of large-denomination bank notes,” Fitch said, as it revised real GDP growth forecast down to 6.9 per cent for 2016-17, from 7.4 per cent projected earlier