Asian economies cut rates, move to blunt impact of coronavirus

About 10 percent of Thailand’s economy hinges on exports to Beijing, which are vulnerable to shocks from a further slowdown in China’s economy. (AP)
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Updated 06 February 2020

Asian economies cut rates, move to blunt impact of coronavirus

  • Bank of Thailand cut its prime rate to a record low 1 percent from 1.25 percent on Wednesday
  • The Philippine central bank is due to update its monetary stance

BANGKOK: Thailand’s central bank cut its benchmark interest rate and other Asian countries look set to follow suit as they seek ways to soften the impact of the outbreak of a virus in China that has killed more than 560 people.
The Bank of Thailand cut the prime rate to a record low 1 percent from 1.25 percent on Wednesday to help the economy weather a series of setbacks.
Many of China’s neighbors are reeling from plunging tourist arrivals and other adverse impacts from the outbreak that has spread from the central Chinese city of Wuhan to more than 20 countries.
Governments and central banks have indicated they’re prepared to act to prevent the outbreak from throwing regional economies into chaos.
The Bank of Thailand said the softer credit policy would help businesses and households cope as risks rise from mounting debt.
A severe drought and uncertainties brought on by the trade war between China and the US are also casting a shadow over the outlook for one of Southeast Asia’s biggest economies.
“The Thai economy would expand at a slower rate in 2020 than previously forecasted and much further below its potential due to the impact of the outbreak of coronavirus,” a delay in enacting the annual budget and the drought, the central bank said in a statement.
“Exports of goods would decline in line with trading partner economies and potential impacts of regional supply chain disruptions,” it said.
Analysts are predicting that the central bank will cut the benchmark rate by another 0.25 percentage point, perhaps as soon as March.
Singapore, the Philippines and Indonesia are among other countries that have signaled a readiness to adjust policies if need be.
The Monetary Authority of Singapore said Wednesday that it had “sufficient room” to ease the exchange rate “in line with the weakening of economic conditions as a result of the outbreak.”
The Philippine central bank is due to update its monetary stance on Thursday.
About 10 percent of Thailand’s economy hinges on exports to China. The share of such exports is even higher for Vietnam, Taiwan, South Korea and Malaysia.
Exporters of major commodities like oil, coal and iron ore also are vulnerable to shocks from a further slowdown in China’s economy.
The trend toward easing credit began last year as relations between China and the US dipped to their worst in decades and is expected to continue.
Analysts at Fitch Solutions Macro Research said Wednesday that they estimate regional growth could slow to 4.0 percent from 4.3 percent in 2019 if the outbreak leads to a much slower rate of growth for China. Economists already are forecasting that China’s economy, the world’s second largest, will expand at about a 5 percent pace in 2020, down from 6.1 percent last year.
The Fitch report reckons that China accounts for more than two-thirds of growth for developing economies in Asia and for almost 80 percent of travel.
Apart from the interest rate cut, Thai authorities have taken a series of steps to ease conditions for businesses, including tax cuts, easing loan repayment terms and extending the deadline for filing personal income tax from March to June.


Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Updated 16 January 2021

Canadian firm pulls out of Carrefour takeover after France insists ‘No’

  • Carrefour has more than 12,300 stores in more than 30 countries and employs 320,000 people worldwide
  • Canada's Couche-Tard has offered to take over the French supermarket giant for 16 billion euro ($19.5 billion)

PARIS: Canadian convenience store chain Couche-Tard has reportedly pulled out of a multi-billion euro takeover of supermarket giant Carrefour after the French government said it would veto the deal.
Negotiations over the 16 billion euro ($19.5 billion) deal ended after a meeting between the French Minister of the Economy Bruno Le Maire and the founder of Couche-Tard Alain Bouchard, Bloomberg news agency said, citing sources.
French ministers had insisted Friday they would not agree to the takeover because it could jeopardize food security, an even more important consideration given the coronavirus pandemic.
In an attempt to reassure ministers, Bouchard had promised to invest billions in Carrefour, said he would maintain employment for two years and that the group would be listed on the Paris Stock Exchange in parallel with Canada, Bloomberg reported.
Contacted by AFP, neither Couche-Tard nor Carrefour had confirmed the information on Friday evening.
Although talks had stopped, anonymous sources cited by Bloomberg said negotiations could resume if the French government changes its position.
But on Friday, France’s Economy Minister made his choice public, telling BMTV and RMC: “My position is a polite, but clear and definitive ‘No’.”
“Food security is a strategic consideration for our country and one does not just hand over one of the large French distributors like that,” Le Maire said.
“Carrefour is the biggest private sector employer in France with nearly 100,000 employees,” he noted, and the group accounts for 20 percent of the food distribution market in the country.
The French statements have not convinced the Canadian government.
A Canadian federal source said while they could understand concerns over allowing a foreign firm to take over such a large national employer, concerns over food security were unsubstantiated.
“But we cannot accuse a leading Canadian company like Couche-Tard of endangering the food sovereignty of an entire country,” the source, who requested anonymity, told AFP.

'Food sovereignty'
On Wednesday, Couche-Tard submitted a non-binding offer for Carrefour, valuing the group at more than 16 billion euros ($19.5 billion).
Le Maire made clear immediately that he was not in favor of a deal involving “an essential link in food security for the French, of food sovereignty.”
The government’s reaction had caused “surprise” at Carrefour itself, according to sources who said the comments were “premature” given that merger discussions had barely begun.
“We haven’t decided yet whether the interest shown is attractive for us,” one company official said on condition of anonymity earlier in the week.
Carrefour has more than 12,300 stores of various formats in more than 30 countries and in 2019 generated a net profit of 1.3 billion euros ($1.5 billion) on revenue of 80.7 billion euros ($97.4 billion).
It employs 320,000 people worldwide.
Couche-Tard has a worldwide network of more than 14,200 stores and earned a net profit of $2.4 billion on sales of $54 billion in its last complete year.
In the United States and several European countries, as well as in Latin America and southeast Asia, it operates under Circle K and other brands.