World economy faces supply hit as China battles covid again
The global economy — already struggling with war in Ukraine and the stagflation risks it’s fanning — is bracing for greater disruption as China scrambles to contain its worst outbreak of COVID-19 since the pandemic began. Since Wuhan two years ago, China has had relative success in minimizing disruption by bringing virus cases quickly under control. Now, the geographic spread of infections and higher transmissibility of the omicron variant is challenging the country’s hawkish pandemic strategy of aggressive testing and locking down whole cities or provinces. If China fails to contain omicron’s spread, further movement restrictions would derail the economy’s promising start to the year, weakening a key pillar of global growth. As manufacturer to the world, any disruptions to exports resulting in shortages could also drive up inflation internationally, just as central banks begin hiking interest rates, like the Federal Reserve is expected to do on Wednesday. A survey of fund managers released Tuesday by Bank of America Corp. showed confidence in global growth was the lowest since July 2008 and expectations for stagflation jumped to 62 percent. The survey was conducted in the week through March 10.
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Malaysia on track to achieve 2022 economic targets
Prime Minister Datuk Seri Ismail Sabri Yaakob today denied that the government had failed to revive the economy following the Covid-19 pandemic. He said Malaysia’s positive economic performance in 2021 shows that the country was projected to achieve targets set for this year. Ismail Sabri said based on reports by the Department of Statistics Malaysia and Bank Negara, the country’s economy grew by 3.1 percent in 2021 compared to a contraction of 5.6 percent in 2020. “Many assume that we have failed to revive the economy. In fact, we have already succeeded in reviving the economy. In terms of foreign direct investment (FDI) we have also recorded an increase in 2021 which is more than RM50 billion compared to RM14.6 billion in 2020. “This positive indicator gives the impression that the country is heading towards economic recovery to achieve the projected Gross Domestic Product (GDP) of 5.5 percent to 6.5 percent for 2022, in line with the projections made by the IMF (International Monetary Fund) and the World Bank,” he said when meeting members of Keluarga Malaysia (Malaysian Family) here in conjunction with his official visit to Vietnam.
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BRI provides benefits for Bangladesh
A number of infrastructure projects are being implemented in Bangladesh in collaboration with China. Several of these works are nearing completion. Analysts believe that Dhaka has adopted ambitious plans around these projects on the way up the ladder of economic development. In April 2021, a special report was published in China Daily, a newspaper run by the ruling Communist Party of China, mentioning the importance of the Chinese project in the development of Bangladesh. It said Bangladesh plans to move from a least developed to a developing country by 2026. One of the keys to achieving this goal is China’s cooperation. A number of infrastructure projects, including the $3.3 billion Padma Bridge under construction in Bangladesh, are part of China’s proposed Belt and Road (BRI) initiative. Other Chinese-funded projects in the country include the $1.1 billion Payra Power Plant, the $1.32 billion power grid development, and a $1 billion digitization project. In this regard, Economists in Bangladesh said that Bangladesh is heavily dependent on the success of China’s BRI-related infrastructure projects.
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Ukraine war will worsen India’s economic growth prospects
Prerna Sharma Singh is an award-winning economist specializing in policy and regulation with special reference to the agriculture and food sectors. Caught between Moscow and Washington over its response to the war in Ukraine – New Delhi depends on Russia for weapons and the US is its major export destination – the lingering conflict will seriously complicate India’s macroeconomic outlook. A substantial rise in operating costs will not only slash profits for Indian businesses from airlines to manufacturers of chemical fertilizers and petrochemicals but hit their share market prospects as well. Higher fuel prices will inflict further pain on automobile companies already struggling to deal with rising input costs, the global chip shortage and sluggish demand. While Russia’s share of Indian crude oil imports is minor, as the world’s third-biggest producer pumping as much as 10 million barrels per day, blocking Russian oil exports will keep global crude oil prices elevated. Given that India relies on imports for 85 percent of its oil needs, higher energy prices, even if they remain at their current highs, will weaken India’s currency, put further pressure on inflation, and jack up the cost of maintaining a range of costly subsidies.
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Japan calls for ‘stable’ fx moves as weak yen weighs on import-reliant economy
Japan will closely watch exchange-rate moves as market stability was “very important,” Finance Minister Shunichi Suzuki said on Tuesday in the wake of the yen’s decline to a five-year low against the dollar. While Tokyo policymakers have traditionally favoured a weak yen for the boost it gives to exports, the sliding yen has become a source of worry recently as it further inflates the cost of food, fuel and raw material imports. “Exchange-rate stability is very important. We’ll carefully monitor the currency market and its impact on the Japanese economy,” Suzuki told. He refrained from directly commenting on the dollar/yen’s level and whether a weak yen was negative for Japan’s economy. The yen fell as low as 118.44 per dollar on Tuesday to hit a new five-year low on bets the Bank of Japan (BOJ) will maintain its dovish stance, even as the U.S. Federal Reserve is set to raise interest rates on Wednesday.