Monday, January 27, 2014
Friday, January 24, 2014
Argentina is to relax its strict foreign exchange controls, a day after the peso suffered its steepest daily decline in 12 years.
The economy has grown during Cristina Fernandez de Kirchner's presidency, but inflation has soared
Cabinet chief Jorge Capitanich said the country would reduce the tax rate on dollar purchases and allow the purchase of dollars for savings accounts.
The measures would take effect from Monday, he said.
On Thursday, the peso fell 11% against the dollar, its steepest fall since the country's 2002 financial crisis.
The central bank had been acting to support the waning currency amid a loss of investor confidence in the country. But the bank abandoned this policy on Thursday, sparking the peso's fall.
Despite efforts to support the economy, inflation has soared and many analysts expect it to reach about 30% this year.
That erodes confidence in the peso, prompting investors to put their money into US dollars rather than the sinking domestic currency.
Mr Capitanich said the government would reduce the tax rate on dollar purchases to 20% from the current 35%.
He said: "This decision reflects the government's belief that in the context of a floating exchange rate, the price of the currency - that is, the dollar - has reached an acceptable level for the objectives of economic policy."
BBC economics correspondent Andrew Walker said: "Argentina seems to be moving towards a more flexible exchange rate system, which could mean further weakness for the peso.
"That would help the country's competitiveness but the danger is that it could aggravate what is already a serous inflation problem."Restrictions
Under the presidency of Cristina Fernandez de Kirchner, Argentina has introduced a number of restrictions on transactions with foreign currency.
This week, it introduced new restrictions on online shopping as part of efforts to stop foreign currency reserves from falling any further.
Anyone buying items through international websites must sign a declaration and produce it at a customs office, where the packages have to be collected.
The government now limits tax-free purchases to two a year.
Argentina's reserves of hard currency dropped by 30% last year, making support for the peso increasingly unaffordable.
In 2002, millions of Argentines saw their incomes and living standards collapse amid a crisis that included a government default on international debts and 41% inflation.
Wednesday, January 22, 2014
Bilateral trade between China and the United Kingdom hit a "record high" in 2013, according to the Chinese ambassador to the UK, Liu Xiaoming.
The UK has been looking to foster closer trade ties with China
The state-owned Xinhua news agency quoted Mr Liu as saying that bi-lateral trade between the two surpassed $70bn (£43bn) last year.
He said the UK's exports to China grew more than other EU countries.
The UK has been pushing to boost trade ties with Beijing in an attempt to tap into China's domestic market.
Last year, British Prime Minister David Cameron visited the world's second-largest economy to foster closer trade ties.
He was accompanied by more than 100 British business people on the three-day visit - his second to the country.
"The two countries' leaders reached a broad consensus on pushing forward bilateral relationship and expanding co-operation," said Stephen Perry, chairman of the 48 Group Club, an independent business network that looks to promote ties between China and the UK.
"China and the UK working together will benefit our people and contribute to global peace and development," Mr Perry was quoted as saying by Xinhua.
Meanwhile, Chinese firms have been keen to invest in the UK as they look to expand their global reach.
Among the Chinese companies that have announced plans to invest in the UK are Dalian Wanda Group, which has said it will spend £1bn to buy a British yacht maker and develop a hotel property in London.
Network equipment maker Huawei has said it will invest £1.3bn in expanding its UK operations.
The UK has welcomed Huawei's increased investment and expansion despite the firm facing security concerns in other economies such as the US and Australia.
Meanwhile, Beijing Construction Engineering Group (BCEG) will be part of a group investing £800m in Manchester Airport to develop its surrounding business.
Britain is among the top 10 nations globally for outbound Chinese investment and attracts more than double the investment of any other nation in Europe.
Mr Perry said: "The UK can be the most profitable destination in the Western world for Chinese outward investment in infrastructure, real estate, energy and transportation".
Monday, January 20, 2014
Sense of Dread
Thursday, January 16, 2014
The head of the International Monetary Fund has warned about the risks to global economic recovery of deflation.
Christine Lagarde was speaking at the National Press Club, in Washington
Christine Lagarde said that "optimism is in the air" about growth, but the recovery is still "fragile".
"If inflation is the genie, then deflation is the ogre that must be fought decisively," she said in a speech in Washington.
Earlier, the World Bank said that the global economy was at a "turning point" but "remained vulnerable".
"We see rising risks of deflation, which could prove disastrous for the recovery," Ms Lagarde said at the National Press.
There has, for example, been growing debate about whether deflation might take hold in the eurozone, where inflation remains persistently below the European Central Bank's target.
Deflation can reduce personal consumption as people wait for prices to fall further, and discourage investment because it can raise the real cost of borrowing.
Ms Lagarde also warned about the volatility that could accompany the US Federal Reserve's gradual withdrawal of monetary stimulus.
"Overall, the direction is positive, but global growth is still too low, too fragile, and too uneven," she said.
Also on Wednesday, the World Bank said in its annual report that richer countries appeared to be "finally turning a corner" after the financial crisis.
That is expected to support stronger growth in developing economies.
But it warned growth prospects "remained vulnerable" to the impact of the withdrawal of economic stimulus measures in the US.
The US Federal Reserve has already begun to wind down its monthly bond-buying programme, previously set at $85bn (£52bn) a month.
There is concern this could push up global interest rates, which could affect the flow of money in and out of developing countries and lead to more volatile international financial markets.
The World Bank warned that some developing countries "could face crisis risks" if the unwinding of stimulus measures was accompanied by market volatility.
"Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery," said World Bank group president Jim Yong Kim.
"The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets."
The bank forecasts that global GDP will grow by 3.2% this year, up from 2.4% in 2013, with much of the pick-up coming from developed economies.
Developing nations will grow by 5.3% this year, up from 4.8% in 2013.
In an interview with BBC economics correspondent Andrew Walker, World Bank economist Andrew Burns acknowledged that Brazil, Turkey, India and Indonesia were among the countries that could be vulnerable to the impact of US stimulus withdrawal.
However he also noted that the first concrete steps taken by the Federal Reserve to cut back its programme of buying financial assets last month did not severely disturb the markets.
Tuesday, January 14, 2014
(Reuters) - Negotiators in the U.S. Congress on Monday unveiled a $1.1 trillion spending bill that aims to prevent another government shutdown while boosting funding levels slightly for military and domestic programs - but not for "Obamacare" health reforms.
With a deadline looming at midnight Wednesday for new spending authority, lawmakers will still need a three-day stop-gap funding extension to ensure enough time for passage of the spending bill this week.
The measure eases across-the-board spending cuts by providing an extra $45 billion for military and domestic discretionary programs for fiscal 2014, to a total of $1.012 trillion. It also provides an additional $85.2 billion for Afghanistan war funding that is typically handled off-budget.
The spending measure fills in the details of a budget agreement passed in December in the aftermath of a 16-day shutdown of many government agencies in October. The shutdown was prompted largely by disputes over funding for "Obamacare" health insurance reforms.
Although many programs will get a slight increase over 2013 levels and avoid steep cuts previously slated for this year, the proposed bill does not provide any increase for implementation of the Affordable Care Act, President Barack Obama's signature healthcare reform law.
According to a House Republican summary, a public health fund will be reduced by $1 billion to prevent Health and Human Services Secretary Kathleen Sebelius from "raiding" these funds to spend on Obamacare insurance exchanges.
The chairs of the Senate and House of Representatives Appropriations Committees said in a joint statement that the deal will eliminate the economic instability caused by Congress' recent funding battles.
"As with any compromise, not everyone will like everything in this bill, but in this divided government a critical bill such as this simply cannot reflect the wants of only one party," Democratic Senator Barbara Mikulski of Maryland and Republican Representative Harold Rogers of Kentucky said in a statement.
White House Budget Director Sylvia Mathews Burwell said the measure will help fund critical investments in education and infrastructure.
"This legislation adheres to the funding levels in the budget agreement enacted in December, unwinds some of the damaging cuts caused by sequestration," she said in a statement.
The military avoids about $22 billion in the across-the-board cuts, with total non-war spending of about $520.5 billion under the bill, while agencies focused on domestic programs will get $491.8 billion, representing an increase of about $22 billion over sequester levels.
But some controversial budget items took a hit. The spending measure provides no funds for high-speed rail projects, and it again denied a funding transfer needed to pay for critical reforms to the International Monetary Fund.
MILITARY PENSION FIX
But both Republicans and Democrats touted a provision in the bill that reverses planned military pension cuts for disabled veterans, a controversial part of the December budget deal that helped pay for about $6 billion in new spending. Military retirees of working age were to see smaller cost-of-living increases in their pensions starting in 2015 but it was later discovered that the change was inadvertently applied to disabled veterans and survivors of deceased veterans as well.
While the spending bill will reverse the cuts for disabled veterans and survivors, many Republicans in Congress still want to cancel the cuts for all retired military service members.
Negotiations on the measure bogged down as lawmakers attempted to attach policy provisions on issues ranging from restricting abortions to curtailing regulation of carbon emissions. Many of these were successfully fought off, including new abortion provisions, Mikulski told reporters.
Democratic aides said the bill includes no new provisions prohibiting regulations on greenhouse gas emissions, nor forestry and stream management. They also prevented new gun-rights language from inclusion.
But Republicans did get a policy provision into the measure that prohibits funding of the Obama administration's "light bulb standard," which prohibits the manufacture of incandescent light bulbs in favor of newer technologies that reduce energy consumption.
Passage of the measure would leave just one more significant fiscal policy hurdle during the current fiscal year which ends on September 30 - an increase in the federal debt limit. This will likely be needed by March or April to avoid a default on the Treasury's debt and the resulting market turmoil.
(Editing by Lisa Shumaker and Eric Walsh)
Monday, January 13, 2014
(Reuters) - The British government confirmed on Monday that it will take responsibility for all British government debt should Scotland vote for independence in September, a move it hopes will avoid jitters in bond markets ahead of the referendum.
"In the event of Scottish independence from the United Kingdom, the continuing UK government would in all circumstances honor the contractual terms of the debt issued by the UK government," the Treasury said in a statement.
An independent Scotland would be responsible for "a fair and proportionate share" of Britain's liabilities but a share of the outstanding debt would not be transferred to Scotland, it said, adding the terms of repayment would be subject to negotiation.
Britain's net debt stood at nearly 1.2 trillion pounds at the end of the 2012-13 fiscal year.
(Reporting by William Schomberg, Editing by Belinda Goldsmith)