Nepal’s financial sector doing well in post-pandemic economy
The Two-year-long Covid-19 pandemic hammered the economy and pushed many companies to the edge of bankruptcy, but Nepal’s financial sector has rebounded quickly and remained sound and resilient, the latest central bank report says. According to the Financial Stability Report released on Thursday by Nepal Rastra Bank, profitability of the banking sector rose by 21.01 percent to Rs71.30 billion in the last fiscal year ended mid-July 2021. In the previous fiscal year, profitability had declined by 20.61 percent. Net profits of commercial banks grew by 16.60 percent to Rs63.37 billion in the last fiscal year, compared to a sharp 16.66 percent drop in the previous year. All commercial banks posted profits in the last fiscal year. The contribution of interest income was 81.39 percent of the total income in the review year, down from 86.52 percent in the previous year. The pace of credit flows from banks and financial institutions increased by 27.76 percent in the fiscal year 2020-21 compared to a 12.32 percent growth in fiscal 2019-20. Bank deposits swelled by 20.50 percent in fiscal 2020-21, up from 17.27 percent in the pre-Covid period of fiscal 2018-19, as per the report. “Nepal’s banks and financial institutions have stood reasonably sound in terms of capital, liquidity and asset quality,” the report said. “Largely, overall indicators of the financial system remained acceptable and the stress situation could not be noticed.” Nepal’s economy is in the recovery phase from the Covid-19 pandemic shock. Economic activities have been expanding along with the easing of Covid-19 restrictions and availability of vaccines in recent months.
Is Bangladesh heading toward a Sri Lanka-like crisis?
Sri Lanka has been mired in economic turmoil over the past few months, with the country battling severe shortages of essential items and running out of petrol, medicines and foreign reserves amid an acute balance of payments crisis. The resulting public fury targeting the government triggered mass street protests and political upheaval, forcing the resignation of Prime Minister Mahinda Rajapaksa and his Cabinet, and the appointment of a new prime minister. Many in Bangladesh fear that their country could face a similar situation, given the rising trade deficit and foreign debt burden.
Bangladesh imported goods worth $61.52 billion (€58.48 billion) in the first nine months of the 2021-2022 fiscal year, a rise of 43.9 percent compared to the same period last year.
Exports, however, rose at a slower pace of 32.9 percent while remittances from Bangladeshis living abroad — a key source of foreign exchange — dropped about 20 percent in the first four months of 2022 from the year before, to $7 billion.
China pledges support for ailing economy, analysts doubt impact
China has pledged tax cuts and infrastructure spending to support economic growth, as economists poured doubt on a strong rebound for the world’s second-largest economy as long as lockdowns persist. Beijing will increase annual tax cuts by more than 140 billion yuan ($21bn) to 2.64 trillion yuan, offer tax rebates to more economic sectors, and postpone social security payments worth 320 billion yuan until the end of the year, the state-run Xinhua news agency quoted the State Council, China’s Cabinet, as saying on Monday. Other measures include 150 billion yuan ($22.5bn) in emergency loans for the struggling aviation sector, the issuance of 300 billion yuan ($45bn) in bonds to fund railway construction, and investment in new projects in energy, transport and water conservation. “At present, the downward pressure on the economy continues to increase and it’s very difficult for many market entities,” the cabinet said, according to Xinhua. China’s leaders have pledged to ramp up support for the flagging economy, even as they double down on an ultra-strict “dynamic zero COVID” policy that has confined millions to their homes, shuttered factories and thrown supply chains into disarray.
Sri Lanka has fallen. will other economies follow?
Financial crises have a domino effect. A seemingly small event in one country can have far-reaching consequences around the world. We’ve seen it in the 1997’s Asian Financial Crisis and again in the global financial crisis of 2009. Sri Lanka is experiencing its worst financial crisis since gaining independence in 1948. For years, Sri Lanka spent more than it earned and covered the gaps with debts. When President Gotabaya Rajapaska was elected in 2019, he ordered deep tax cuts as a populist move instead of adopting policies to narrow the country’s gaping deficits. With that, it was only a matter of months before the country depleted its cash reserves. With more than $50 billion in foreign debts and a shortage of cash, the country struggles today to pay for essential imports like food, medicines, and fuel for its power plants. Sri Lanka’s 22 million people are starving and this has triggered civil unrest.
India is fastest-growing major economy
India is still the fastest-growing major economy even as the Ukraine conflict impacts the global gross domestic product (GDP), according to a UN report. India is projected to grow by 6.4 percent in 2022, slower than last year’s 8.8 percent, due to higher inflationary pressures and uneven recovery of the labour market curbing private consumption and investment, the UN report shows.
The UN Department of Economic and Social Affairs said in its World Economic Situation and Prospects (WESP) report released on Wednesday that the war in Ukraine has upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures, PTI reported.
As energy prices rise, Japan’s economy falls quarterly
According to data released Wednesday, Japan’s GDP shrunk by 1 percent in the first quarter as rising prices and COVID-19 limitations dampened spending and investment. The Cabinet Office said that Japan’s real gross domestic product, or GDP, decreased 0.2 percent in January-March compared to the previous quarter, as household spending and government investments fell.
Japan never had a lockdown but periodically put restrictions on businesses, mostly having restaurants and bars close early, to curb the spread of the coronavirus pandemic. The last such restrictions ended in March. Some medical experts say the nation is seeing a surge in COVID-19 cases since then, because of the more contagious omicron variant. Japan has recorded about 30,000 COVID-19-related deaths so far.
| Japan Economy | ||||
|---|---|---|---|---|
| Indicators | Last | Previous | Value in | Date |
| GDP Growth Rate | -0.2 | 0.9 | percent | 22-Mar |
| GDP Annual Growth Rate | 0.2 | 0.4 | percent | 22-Mar |
| GDP Growth Annualized | -1 | 3.8 | percent | 22-Mar |
| Unemployment Rate | 2.6 | 2.7 | percent | 22-Mar |
| Inflation Rate | 2.5 | 1.2 | percent | 22-Apr |
| Inflation Rate Mom | 0.4 | 0.4 | percent | 22-Apr |
| Interest Rate | -0.1 | -0.1 | percent | 22-Apr |
| Balance of Trade | -839 | -414 | JPY Billion | 22-Apr |
Malaysia among economies to win big from high commodity prices
Malaysia will be among the economies that win big from high commodity prices and will pay less of a price on the inflation side as it exports several times its domestic production, according to a Moody’s Analytics report. It highlighted that Malaysia, Colombia, Indonesia and Saudi Arabia are among the few economies that would benefit from high commodity prices. “For Colombia and Saudi Arabia, this is crude oil. For Indonesia and Malaysia, this is palm oil, the price of which has surged following severe global shortages of Russia- and Ukraine-produced sunflower oil,” senior economist Jesse Rogers said in an analysis titled “Emerging Market View: The Growth Recession”. He said across the rest of the emerging world, inflation is pushing higher, and central banks are not going to give up until it is tamed. “Monetary policy in most of Latin America is now in restrictive territory. And even in Southeast Asia, where inflation is a relative oddity, higher prices are sprouting.
| Malaysia Indicators | ||||
|---|---|---|---|---|
| Indicators | Last | Previous | Value in | Date |
| GDP Growth Rate | 3.9 | 4.6 | percent | Mar/22 |
| GDP Annual Growth Rate | 5 | 3.6 | percent | Mar/22 |
| Unemployment Rate | 4.1 | 4.1 | percent | Mar/22 |
| Inflation Rate | 2.3 | 2.2 | percent | Apr/22 |
| Interest Rate | 2 | 1.75 | percent | May/22 |
| Balance of Trade | 23548 | 26648 | MYR Million | Apr/22 |
| Current Account | 2983 | 15332 | MYR Million | Mar/22 |
| Indonesia Economy | ||||
|---|---|---|---|---|
| Indicators | Last | Previous | Value in | Date |
| GDP Growth Rate | -0.96 | 1.06 | percent | Mar/22 |
| GDP Annual Growth Rate | 5.01 | 5.02 | percent | Mar/22 |
| Unemployment Rate | 5.83 | 6.49 | percent | Mar/22 |
| Inflation Rate | 3.47 | 2.64 | percent | Apr/22 |
| Inflation Rate Mom | 0.95 | 0.66 | percent | Apr/22 |
| Interest Rate | 3.5 | 3.5 | percent | May/22 |
| Balance of Trade | 7560 | 4535 | USD Million | Apr/22 |
| Current Account | 221 | 1496 | USD Million | May/22 |