Asia-Pacific Region
China should not rely on massive stimulus to overcome ‘unprecedented’ economic slowdown
China should not try to bolster its coronavirus-hit economy by again resorting to a massive debt-fuelled fiscal and monetary stimulus programme, according to a group of government advisers.
Various early indicators suggest China’s economy will slow in the first quarter of 2020, with some even suggesting it will suffer a first contraction since the end of the Cultural Revolution in 1976.
This raises the question if China will miss its key 2020 growth target, with voices on both sides of the debate discussing what stimulus policies are needed to offset the deep impact of the coronavirus.
China is already leaning towards some additional stimulus, with Premier Li Keqiang ordering the central bank pump additional money into the banking system, while President Xi Jinping has announced the need for more spending on “new infrastructure”
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Indian economy is fighting two battles — but it’s not that bad
The Indian economy is facing a war on two fronts now — the global market dislocation on the back of the COVID19 pandemic, and the vulnerabilities of our domestic economy.
The first — and bigger battle for now — is the fluid worldwide risk-off context. As it is, amid trade wars and geopolitical flashpoints, the world had entered 2020 fearing an economic slowdown. The added battle against the COVID19 pandemic will almost certainly result in a sharp reduction in worldwide economic activity. That could result in bankruptcies, layoffs, and credit defaults, even as whole societies battle serious health hazards.
As these primal fears play out, markets are experiencing sharp dislocation. The 10 percent fall in the S&P500 index on March 12 exceeded any single day fall during the global financial crisis. Many established markets across asset classes are seeing a sharp drop in liquidity, as risk managers rush to the exit door at the same time. Correlations are breaking down as well — in many cases, hedges put on to manage risk are adding to pain.
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Indonesia to support economy with US$8 billion stimulus to counter covid-19 impact
Indonesia announced a 120 trillion rupiah (US$8.1 billion) stimulus package on Friday (Mar 13) to support Southeast Asia’s biggest economy as the spread of the coronavirus disrupts global activity.
The stimulus, representing 0.8 percent of gross domestic product (GDP), includes exempting some workers in manufacturing from income tax and giving manufacturing companies a discount on corporate tax payments, Finance Minister Sri Mulyani Indrawati told a news conference.
Indrawati has previously warned that Indonesia’s economic growth could slow to 4.7 percent this year if the virus outbreak slows Chinese and global growth. Indonesia’s economy grew 5.02 percent last year.
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Bangladesh economy and the secret of its success
The influential and popular magazine Economist brings out a special issue at the beginning of every year. This issue deals with the various possibilities of the new year. This year’s issue, ‘The World in 2020’ ranks Bangladesh at No. 3 among the top 10 countries in terms of GDP. The magazine says Bangladesh’s growth will be 7.7 percent in the new year. China has dropped out of the top 10 and India has somehow retained a foothold at No. 10.
The International Monetary Fund (IMF) also publishes a regular update on global economic growth. Analysing the latest report, the US news agency said that in 2019, about 86 percent of the global economic growth took place in 20 countries, which includes Bangladesh.
Pakistani academic Pervez Hoodbhoy recently wrote in Dawn, Bangladesh is not some Scandinavian heaven. It is poor and overpopulated, under educated and corrupt, frequented by natural catastrophes, experiences occasional terrorism, and the farcical nature of its democracy was exposed in the December 2018 elections. But the earlier caricature of a country on life support disappeared years ago.
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Philippines to borrow more than planned to combat coronavirus impact
The Philippine government will be borrowing even more this year, as revenue collection is expected to drop by as much as P91 billion due to the economic slowdown triggered by the novel coronavirus.
In a press briefing on Tuesday, March 10, Finance Secretary Carlos Dominguez III said the budget deficit may hit as high as 3.6 percent of the country’s gross domestic product (GDP), assuming that the economic impact of the virus would last until June.
Dominguez said the increased borrowings would help sustain President Rodrigo Duterte’s ambitious Build, Build, Build infrastructure program.
Socioeconomic Planning Secretary Ernesto Pernia said the economic team programmed the ceiling for the budget deficit to hit a maximum of 3 percent for 2020. Pernia added that economic growth may fall by a full percentage point due to the economic slowdown. This means that the government may miss its GDP target of 6.5 percent to 7.5 percent for this year. Lower tourism-related activities and weaker trade are the main contributors for the economic slowdown.
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Central bank of Myanmar cuts interest rates by 0.5pc
The Central Bank of Myanmar (CBM) announced that it will reduce interest rates by 0.5 percent, effective April 1.
According to the directive, the minimum bank deposit rate will be lowered to 7.5pc from 8pc, while the maximum lending rate will be lowered to 12.5pc for collateralised loans and 15.5pc for non-collateralised loans, from 13pc and 16pc, respectively.
The move comes shortly after the World Health Organization defined the COVID-19 outbreak as a pandemic on March 12, triggering a collapse in global markets.
Central banks around the world have also eased rates to stimulate their economies. On March 11, the Bank of England announced an emergency rate cut by half a percentage point to 0.25 percent.
The week before, the US Federal Reserve lowered the federal funds rate by half a percentage point to a range between 1pc to 1.25pc, its deepest cut since 2008.
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Vietnam airlines to cut flights to London, Paris and Frankfurt
Starting March 25, Vietnam Airlines will temporarily reduce flights between Vietnam and Europe due to the coronavirus (Covid-19) outbreak in Europe.
Vietnam Airlines said it is temporarily reducing the number of flights between Vietnam and Europe by 14 flights per week. This includes its routes from Hanoi and Ho Chi Minh City to London, Paris and Frankfurt.
The Vietnamese flag carrier currently operates a total of 27 round-trip flights per week between Vietnam and London, Paris and Frankfurt.
Business Traveller Asia-Pacific has asked Vietnam Airlines which specific flights will be cancelled.
The Vietnamese national airline said it is the only carrier that operates direct flights between Vietnam and Europe at the moment.
It added that it will “promptly” resume its lights to Europe “once the epidemic situation has stabilised”.
The airline said it is now conducting body temperature checks prior to boarding for every passenger departing from Europe and providing them with face masks to use during the flight. It will also disinfect all aircraft used on international flights, and aircraft in which passengers have recorded “abnormal” health symptoms.
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Some Japanese fret more over economy and virus than olympics
Amid the spreading coronavirus and uncertainty over the fate of the Tokyo Olympics, many Japanese may be more concerned about the virus, what happens to their schools, and the state of the economy. Canceling the Olympics might be a secondary worry.
The fate of the Olympics is a daily topic as Japan’s government struggles to bring the coronavirus outbreak under control. U.S. President Donald Trump made a suggestion to postpone the Tokyo Olympics for a year because of the spreading coronavirus.
His suggestion was immediately shot down on Friday by Japan’s Olympic minister Seiko Hashimoto, a former Olympic medal winner.
Japanese organizers, government officials, and the International Olympic Committee have denied they will cancel or postpone. They say the Olympics will open on July 24 at the new $1.43 billion national stadium.
Not everyone that The Associated Press interviewed on Friday in central Tokyo seemed convinced.
“If you think about the safety of athletes, I don’t think we should have the Olympics,” said Yoshio Yoshimoto, a 70-year-old contract worker. “Who would take responsibility if you force it and the coronavirus outbreak turns worse?”
Yoshimoto, wearing a surgical mask, said national leaders should focus on people’s health, rather than thinking about ways to hold the Olympics. “Even if the economy gets better, is the price worth it if people get sick,” Yoshimoto said.
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400 Billion Baht stimulus announced to boost Thai economy
“The package will inject an estimated 400 billion baht into the economy in a bid to return growth to positive territory.”
On Tuesday’s Thai cabinet meeting gave the greenlight to a new stimulus package. The government expects the approved 400 billion baht to reduce the impact of the Covid-19 coronavirus outbreak. Last week’s 2,000 baht cash stimulus proposal, which was largely roasted in Thai social media after being proposed by the economic ministers, isn’t included in yesterday’s approved package.
The Kasikorn Research Centre has slashed its forecast for Thailand’s GDP growth this year to 0.5 percent. They believe the outbreak will wipe over 400 billion baht off tourism receipts. Thai PM Prayut Chan-o-cha says the 400 billion baht package is a first-phase measure “that could be followed by second-phase action if the impact persists”.
Meanwhile, the Finance Minister Uttama Savanayana believes the stimulus package will ease conditions for the public and businesses suffering from the impact of the virus.
“The short-term measure will last for a few months, after which the Covid-19 situation will be assessed again.”
The package will cover all sectors and is designed to benefit 14.6 million low-income earners who account for 22 percent of the Thai population – a total of 50,000 village funds nationwide, 7.2 million farming households and 3 million small-to-medium-sized enterprises (99 percent of all business enterprises).
“It will provide assistance to the general public and to SME entrepreneurs.”
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Malaysia’s sugar purchases from India hit record amid diplomatic spat
India’s exports of sugar to Malaysia so far in 2020 have nearly tripled over the figure for all of last year, as Kuala Lumpur steps up purchases to placate New Delhi in a trade dispute that halted its palm oil exports to India, trade officials said.
The record buying could also help India, the world’s biggest producer of sugar, to cut stockpiles that are squeezing domestic prices.
India had been the biggest buyer of Malaysian palm oil for five years, but purchases ground to a halt after the January curbs, a retaliation for then prime minister Mahathir Mohamad’s criticism of New Delhi’s policy regarding its Muslim minority.
“This year Malaysia was aggressively buying Indian raw sugar, which was a pleasant surprise,” Praful Vithalani, president of the All India Sugar Trade Association (AISTA), told Reuters.
The trade body’s data shows Malaysia has imported 324,405 tonnes of sugar from India this year. That compares with India’s exports last year of around 110,000 tonnes and a 2008 record of 313,406 tonnes, according to trade estimates. Malaysia imported a total of 1.95 million tonnes of raw sugar in 2019, data from the International Sugar Organization on Refinitiv Eikon shows. It typically buys more from Brazil and Thailand than from India.