LONDON: The British economy will avoid falling into recession this year, according to upgraded growth forecasts Tuesday from the International Monetary Fund.
In its latest assessment of the UK economy, the Washington-based fund said domestic demand had proven more resilient than anticipated in the face of the surge in energy costs.
The IMF now thinks the British economy will grow by a still-modest 0.4 percent this year partly as a result of higher wages, up from its previous prediction just a month ago of a 0.3 percent decline. The more positive projection came alongside warnings of a “subdued” outlook for growth and the threat posed by ongoing global uncertainty.
IMF Managing Director Kristalina Georgieva said at a press briefing in London that the latest assessment reflects “favorably” on the UK in comparison to other countries in the Group of Seven leading industrial nations.
“We are likely to see the UK performing better than Germany, for example,” she said.
Despite the more upbeat assessment, the IMF said inflation is likely to remain stubbornly high over the coming years and only return to the Bank of England’s target of 2 percent in mid-2025, six months longer than it predicted earlier this year.
Like other central banks, the Bank of England has been raising interest rates aggressively over the past 18 months or so to a 15-year high of 4.5 percent after inflation spiked sharply, first because of bottlenecks caused by the coronavirus pandemic and then Russia’s invasion of Ukraine, which sent energy and food prices surging.
Figures on Wednesday are expected to show inflation in Britain falling back below 10 percent for the first time since August, largely because the sharp spike in prices caused by the invasion of Ukraine will fall out of the annual comparison.
Andrew Bailey, governor of the Bank of England, told lawmakers on Tuesday that inflation had “turned the corner.”
The IMF also praised the British government for reestablishing credibility following the “stress episode” of last September’s big tax cuts of the short-lived government of former Prime Minister Liz Truss.
That mini-budget led to a sharp increase in borrowing costs and fears about the viability of some pension funds as financial markets questioned the government’s unfunded tax cuts.
Truss’ premiership soon came to an end and the Conservative Party promoted Rishi Sunak to take the helm. He and his Treasury chief, Jeremy Hunt, made it their priority to restore faith in Britain’s finances by reversing those tax cuts and tightening spending.
Hunt said the IMF report vindicated the government’s efforts to “restore stability” but that the “job is not done yet.”
With a general election set to take place next year and the Conservatives trailing heavily in the opinion polls, the pressure is mounting on Sunak to cut taxes, a course that IMF cautioned against taking.
“Of course, it is attractive to look into ways in which the tax burden is lighter, to inject more investment opportunity,” Georgieva said. “But only when it is affordable — and at this point of time, neither it is affordable nor it is desirable.”
UK economy to avoid recession but inflation still a worry, IMF says
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UK economy to avoid recession but inflation still a worry, IMF says
- The IMF now thinks the British economy will grow by a still-modest 0.4% this year partly as a result of higher wages, up from its previous prediction just a month ago of a 0.3% decline
- IMF Managing Director Kristalina Georgieva said at a press briefing in London that the latest assessment reflects “favorably” on the U.K. in comparison to other countries
Respite for oil market amid rate hike worries
- Oil markets may have been oversold in the last two trading days, says analyst
RIYADH: Oil steadied on Thursday as a potential pause in US interest rate hikes and the passing of a crucial vote on the US debt ceiling bill were offset by a report of rising inventories in the world’s biggest oil consumer.
US Federal Reserve officials on Wednesday suggested interest rates could be kept on hold this month and the US House of Representatives passed a bill suspending the government’s debt ceiling, improving the chance of averting a disastrous default.
Brent crude futures fell 10 cents, or 0.14 percent, to $72.50 a barrel by 1339 GMT while US West Texas Intermediate crude rose 7 cents, or 0.1 percent, to $68.16. Both benchmarks fell on Tuesday and Wednesday.
“Oil markets may have been oversold in the last two trading days,” said CMC Markets analyst Tina Teng. “Sentiment rebounded amid the debt bill’s passage in the House and (the) Fed’s rate hike pause signal.”
HIGHLIGHTS
• Market sources citing American Petroleum Institute figures on Wednesday said that US crude inventories rose by about 5.2 million barrels last week.
• Brent crude futures fell 10 cents, or 0.14 percent, to $72.50 a barrel by 1339 GMT while US West Texas Intermediate crude rose 7 cents, or 0.1 percent, to $68.16.
Mixed demand indications from China, the world’s biggest oil importer, have nonetheless weighed on the market, as has industry data showing a rise in US crude inventories.
Market sources citing American Petroleum Institute figures on Wednesday said that US crude inventories rose by about 5.2 million barrels last week.
“The current mood is one of pessimism,” said Tamas Varga of oil broker PVM. “Investors have been pragmatic and risk averse of late.”
Also in focus is the June 4 meeting of the OPEC+ producer group, in which the Organization of the Petroleum Exporting Countries and allies including Russia will discuss whether or not to cut oil production further.
Barclays forecast
British multinational bank Barclays has slashed the average price of its Brent crude forecast for this year from $92 to $87 a barrel. The bank also slashed its price forecast of Brent for 2024 as it cut the average projected price to $87 a barrel from $97.
Chinese company in Brazil
China’s CNOOC Ltd. has begun production at the Buzios5 well off the coast of Brazil, the company said in a statement on Thursday.
The well is the fifth phase of the Buzios oil field off Brazil’s southeast coast. At an average water depth of 1,900 meters to 2,200 meters, the field is the world’s largest deep-water pre-salt oil field, with daily production of 600,000 barrels, the company said.
CNOOC’s Brazilian subsidiary owns 7.34 percent of the Buzios shared reservoir, which is 88.99 percent owned by Brazilian state-owned oil and gas company Petrobras. CNOOC paid $1.9 billion to Petrobras last year to secure a 5 percent stake in a production sharing agreement at the field.
UAE’s in-country value projects driving billions to local firms
ABU DHABI: More than $27.23 billion has been redirected to the local economy since the UAE Ministry of Industry and Advanced Technology (MoIAT) and ADNOC launched major in-country value programs to support domestic industries.
Speaking at the Make in the Emirates Forum, Abdulla Al-Shamsi, Assistant Undersecretary of MoIAT, said more than $14.43 billion of investment was redirected to the local economy last year alone, an increase of 25 percent year-on-year.
“The National In-Country Value Program is a nationwide program that speaks one language across many different sectors,” Al-Shamsi said. “It’s one methodology and this is something we’re very proud of because it benefits the private sector and when the private sector sees this it helps them prepare, invest, and spend.”
The forum heard how the National ICV Program is “functionating well and accelerating.”
The forum also heard how industrial zones are playing a critical role in the in the country’s sustainable industrial development and broader economic prospects. Local industrial leaders described how they are utilizing alternative energy resources such as solar and hydrogen to reduce their carbon footprint.
The second edition of the Make it in the Emirates Forum concluded on Thursday with the UAE showcasing its unique value proposition to international investors.
Investors were invited to explore opportunities and competitive advantages, with panel discussions focusing on the National In-Country Value (ICV) Program, the role of industrial zones, competitive financing as a key enabler and local talent in the private sector.
The UAE’s industrial exports reached $47.6 billion in 2022, growing 49 on 2021. The industrial sector's contribution to GDP rose to $49.5 billion in 2022, a 38 percent increase on 2020.
The Make it in the Emirates Forum is organized by the Ministry of Industry and Advanced Technology in partnership the Abu Dhabi Department of Economic Development (ADDED) and ADNOC.
On the first day of the forum, the UAE government announced $2.7 billion in industrial offtake agreements, building on the $29.9 billion of offtake agreements announced at the 2022 edition of the forum.
Pakistan posts record inflation for second consecutive month
- Inflation of 37.97% in May set national record, adding to problems of balance of payment and risk of sovereign default
- In April, the bureau said Pakistan's CPI at 36.5% was the highest recorded as well as the highest in South Asia
ISLAMABAD: Pakistan's annual inflation rate rose to 37.97% in May, the statistics bureau said on Thursday, setting a national record for the second month in a row, adding to its problems of a balance of payment crisis and the risk of a sovereign default.
Already in April, the bureau said Pakistan's CPI at 36.5% was the highest recorded, as well as the highest in South Asia, ahead of Sri Lanka, which posted annual inflation of 25.2% in May.
Pakistan's month-on-month rise in May was 1.58%, the bureau said in a statement, adding vegetables, pulses, wheat, wheat flour, rice, eggs and chicken in food items and fuel and gas prices caused the increase.
Inflation has been on an upward trend since early this year after the government took painful measures as part of fiscal adjustments demanded by the International Monetary Fund (IMF) to unlock stalled funding.
The IMF demands include the withdrawal of subsidies, a hike in energy prices, a market-based exchange rate and new taxation to generate extra revenue in a supplementary budget.
Islamabad says it has met the demands, but the IMF has yet to release the $1.1 billion funding stalled since November as part of the $6.5 billion Extended Fund Facility agreed in 2019.
The funding is critical for Pakistan to unlock other bilateral and multilateral financing.
Pakistan’s national currency makes historic recovery against USD in open market — currency dealers
- Appreciation follows central bank’s decision to allow banks to buy dollars from interbank market for credit and debit card payment settlements
- Rupee was trading at Rs290 in open market during afternoon trading session as compared to Rs315 in the previous day’s trading
KARACHI: Pakistan’s national currency posted historic gains against the United State dollar in the open market on Thursday, following the central bank’s decision to allow banks to buy dollars from the interbank market for credit and debit card payment settlements, currency dealers said.
The rupee was trading at Rs290 in the open market during the afternoon trading session as compared to Rs315 in the previous day’s trading, showing an appreciation of 8 percent, according to dealers.
“The rupee has appreciated more than Rs25 in the open market and this has happened for the first time in the history of Pakistan,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), told Arab News.
The currency appreciated in the open market after the central bank on Wednesday allowed authorized dealers, that is banks, to “purchase dollar from the interbank for settlement of the card based cross border transactions with IPS (Instant Payment System),” a notification said.
Prior to the State Bank notification, commercial banks were buying around $15-20 million from the free market per day, putting an excessive burden on it, the key reason for the widening gap between the interbank and open market, according to Bostan.
“The banks were buying dollars from the open market at Rs315 but they were selling to their customers for the settlement at Rs325,” Bostan said, adding that banks had been buying from the open market but selling to their credit card holders at higher rates which excessively burdened the free market.
“They, Finance Minister Ishaq Dar and Central bank, took the timely decision and allowed them to purchase from the interbank market instead of the exchange companies,” he added.
Bostan’s claims could not be independently verified.
The ECAP chief predicted that the central bank’s decision would lead to further appreciation of the rupee in the open market, to reach close to the interbank rate.
The rupee in the interbank was trading between Rs290 and Rs300 at the end of trading session on Thursday, according to Bostan.
Pakistani analysts said the central bank’s move had eased the pressure on the open market and would also narrow the gap between the open and interbank markets in line with the International Monetary Fund’s conditions.
“The demand for credit and debit card settlement is around $2 billion to $2.5 billion per annum and the central bank’s decision has eased off the pressure from the open market,” Tahir Abbas, Head of the research at Arif Habib Limited, said. “The IMF also wanted to reduce the gap between the exchange rates prevailing in the interbank and open markets.”
The rupee in the interbank market closed at Rs285.47 against the greenback on Wednesday.
Amid decades-high inflation, Pakistan slashes petrol price by Rs8 per liter
- After revision in prices, petrol will now be sold for Rs262 per liter, says finance minister
- Pakistan slashes prices of high speed diesel, light diesel oil by Rs5 per liter respectively
ISLAMABAD: Pakistan’s Finance Minister Ishaq Dar announced the government’s decision to slash the price of petrol by Rs8 per liter on Wednesday, as Pakistan attempts to provide relief to the masses amid decades-high inflation.
Inflation increased to a historic high of 36.4 percent in Pakistan in April 2023, the highest since 1964, after the South Asian country hiked fuel and energy prices to revive a $6.5 billion loan program with the International Monetary Fund (IMF).
To reduce the burden of inflation from the masses, Pakistan slashed the price of petrol by Rs 12 per liter two weeks ago. The South Asian country revises prices of petroleum products fortnightly.
In a brief video message on Wednesday, the finance minister said that prices of petroleum products had not reduced drastically over the past 15 days nor had the value of the rupee significantly improved against the US dollar.
“The maximum that we could reduce the petrol price [a fortnight ago] was Rs12 per liter,” Dar said. “Today, by reducing an additional Rs8 per liter, the price of petrol will reduce by Rs20 per liter in total. So, its price will reduce from Rs270 per liter to Rs262 from June 1,” he added.
Dar also announced a reduction in the price of high speed diesel by Rs5 per liter and light diesel oil by Rs5 per liter. The price of kerosene oil will remain unchanged, he added.
The finance minister said after the latest price reduction, high speed diesel, kerosene, and light diesel oil would cost Rs253, Rs164.07, and Rs147.68 per liter respectively.
Pakistan also slashed its oil imports by almost half last month, reducing it by 48 percent to 1.07 million tons during April 2023 as compared to 2.05 million tons during April 2022, a research report by Pakistan’s largest securities brokerage company, Arif Habib Limited, said.
