Showing posts with label Economic. Show all posts
Showing posts with label Economic. Show all posts

28 January 2020

Has the World Economy Reached Peak Growth?


LONDON – At the start of a new decade, many commentators are understandably focused on the health of the global economy. GDP growth this decade most likely will be lower than during the teens, barring a notable improvement in productivity in the West and China, or a sustained acceleration in India and the largest African economies.

Open societies have not always needed defending in the determined way that they do today. But the tide turned against them after the 2008 global financial crisis, and, more than a decade later, the threat posed by authoritarian nationalism continues to rise. 

Until we have final fourth-quarter data for 2019, we won’t be able to calculate global GDP growth for the 2010-2019 decade. Still, it is likely to be around 3.5% per year, which is similar to the growth rate for the 2000s, and higher than the 3.3% growth of the 1980s and 1990s. That slightly stronger performance over the past two decades is due almost entirely to China, with India playing a modestly expanding role.

Average annual growth of 3.5% for 2010-2019 means that many countries fell short of their potential. In principle, global GDP could have increased by more than 4%, judging by the two key drivers of growth: the size of the workforce and productivity. In fact, the 2010s could have been the strongest decade of the first half of this century. But it didn’t turn out that way. The European Union endured a disappointing period of weakness, and Brazil and Russia each grew by much less than in the previous decade.

27 January 2020

Striking Oil Ain’t What It Used to Be

By Amy Myers Jaffe 

On January 7, the oil and gas companies Apache Corporation and Total SA announced a major oil find off the coast of Suriname, not far from enormous offshore deposits in neighboring Guyana discovered by ExxonMobil last year. The size of the Suriname discovery is yet to be determined, but it could be large enough to transform the small South American country, where per capita income is less than $6,000. Just three months prior on the other side of the Atlantic, the British oil major BP announced the largest natural gas discovery of 2019: the energy equivalent of 1.3 billion barrels of oil lies waiting to be extracted off the coast of Mauritania, more than enough to support a liquefied natural gas (LNG) hub. And the same year in Mozambique, Total acquired a $3.9 billion stake in an LNG project whose total cost will likely dwarf that country’s national economy.

At a time when many countries are finally trying to reduce their reliance on fossil fuels, the world is suddenly awash in oil and gas discoveries. But for the countries with the newest finds, many of them in Africa and South America, mineral wealth may not be the bonanza it was in decades past. Large oil and gas companies see long-term prices trending downward. As a result, they are investing in fields that can be brought into production quickly instead of developing expensive, far-flung reserves. Global natural gas markets, in particular, face a huge glut of resources and projects that must compete against the falling price of renewable energy technologies. As a result, Suriname, Guyana, Mauritania, Mozambique, and a handful of other developing countries with recent fossil fuel finds are in a desperate race against time.

The Ukrainian Economy in 2020: A Difficult Road Ahead

By: Vladislav Inozemtsev

The start of 2020 in Kyiv was initially thought to be a triumphant one. The last weeks of 2019 brought some de-escalation in the war in Donbas (EADaily, December 30, 2019), new hopes for peace and, importantly, formidable economic successes. Notably, the United States adopted new sanctions that delayed construction of the Nord Stream Two natural gas pipeline, thus forcing Russia to sign a renewed gas transit contract with Ukraine (, December 31, 2019) as well as to pay Gazprom’s penalties to Ukraine’s Naftohaz, in line with earlier rulings by a Stockholm arbitration court (, December 31, 2019). At the same time, in recent months, fears of a sovereign financial defa­ult—widely discussed since President Volodymir Zelenskyy started his tenure last May (EADaily, May 29, 2019)—have now entirely evaporated.

But in mid-January, the situation in Kyiv was roiled again, this time by a political scandal involving the release of tapes on which Prime Minister Oleksiy Honcharuk can be heard rudely dismissing the president’s abilities to understand and analyze the economic situation (, January 15, 2020). Honcharuk quickly submitted his resignation, which, for now, President Zelenskyy has rejected (, January 17, 2020). Undoubtedly, if the Honcharuk Cabinet is dissolved in the near future, various Ukrainian clans and political groupings will immediately arise, leading to unpredictable outcomes. Nevertheless, an overview of recent economic developments helps to clarify some of the foreseeable challenges and perspectives for the Ukrainian economy going forward.

Gold in an era of drones, deep mines, and dedollarization

Greg Callaway is a consultant in McKinsey’s Johannesburg office; Oliver Ramsbottom is a partner in the Hong Kong office. Simon London, a member of McKinsey Publishing, is based in the Silicon Valley office.

Tentative Stabilization, Sluggish Recovery?

by Gita Gopinath

In the October World Economic Outlook, we described the global economy as in a synchronized slowdown, with escalating downside risks that could further derail growth. Since then, some risks have partially receded with the announcement of a US-China Phase I trade deal and a lower likelihood of a no-deal Brexit. Monetary policy has continued to support growth and buoyant financial conditions. With these developments, there are now tentative signs that global growth may be stabilizing, though at subdued levels.

In this update to the World Economic Outlook, we project global growth to increase modestly from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021. The slight downward revision of 0.1 percent for 2019 and 2020, and 0.2 percent for 2021, is owed largely to downward revisions for India. The projected recovery for global growth remains uncertain. It continues to rely on recoveries in stressed and underperforming emerging market economies, as growth in advanced economies stabilizes at close to current levels.

26 January 2020

India’s Economy: When Will the Elephant Dance?

Thirty years ago, the world saw the Indian and Chinese economies as being comparable. Both were considered engines of global growth. Today, the view looks different. China’s GDP and per capita income are nearly five times those of India. Meanwhile, India’s economic engine is sputtering — GDP growth today is the lowest it has been in six years.

In order to prevent the situation from worsening, the Modi government should pay undivided attention to getting growth back on track, says Duvvuri Subbarao, former governor of the Reserve Bank of India, and a research fellow at the Center for Advanced Study of India (CASI) at the University of Pennsylvania. He recently gave a talk at Penn titled, “Will the Indian Elephant Dance Again?

Knowledge@Wharton interviewed Subbarao about his views on the Indian economy and how it can get back on track, among other issues. An edited transcript of the conversation follows. (Listen to the podcast at the top of this page.)

Knowledge@Wharton: Why is the elephant an apt metaphor for the Indian economy?

25 January 2020

As World Economy Shifts Gears, Trade Growth Slows

By Adam Tooze
Source Link

As the global business and political elite gather at Davos this year, the question remains open: Is the trade war on? Or is it off again?

As far as China and the United States are concerned, a tenuous truce seems to have been declared. Phase 1, signed last week, eases some Trump administration sanctions on China in return for Beijing’s vow to step up its purchases of American farm products and other goods.

But cheer not. Few experts believe that this opens a path to Phase 2 and beyond.

The ongoing trade challenges lie not only with China. In an election year, the Europeans, with their trade surpluses in autos and luxury goods, could also be a tempting target for President Trump.

Adding to the uncertainty is the administration’s decision to block the World Trade Organization from adding members to its appellate court, crippling the organization’s ability to rule in trade disputes.

22 January 2020

The World Must End The US’ Illegal Economic War – OpEd

By Kevin Zeese and Margaret Flowers

The United States is relying more heavily on illegal unilateral coercive measures (also known as economic sanctions) in place of war or as part of its build-up to war. In fact, economic sanctions are an act of war that kills tens of thousands of people each year through financial strangulation. An economic blockade places a country under siege.

A recent example is the increase in economic measures being imposed against Iran, which many viewed as more acceptable than a military attack. In response to Iran retaliating for the assassination of General Qassem Soleimani and seven other people, Iran used ballistic missiles to strike two bases in Iraq that house US troops. President Trump responded by saying he would impose more sanctions on Iran. Then he ended his comments by urging peace negotiations with Iran. The United States needs to understand there will be no negotiations with Iran until the US lifts sanctions that seek to destroy the Iranian economy and turn the people against their government.

Can the US Strengthen Its Economic Arsenal in Asia?

By Robert Farley
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The Center for New American Security has issued a report titled “Strengthening the Economic Arsenal,” designed to refine thinking on the economic toolkit that the United States can use to achieve its goals in the international community. Elizabeth Rosenberg and Jordan Tama caution against the new consensus on the lethality of sanctions, which has reversed a decades-long consensus on the weakness of blunt economic measures. But they also provide a series of arguments on how to make U.S. sanctions more effective.

The report focuses heavily on sanctions, and in particular the increasing sophistication and “lethality” of sanctions over the past two decades. The authors draw a stark contrast between thinking on sanctions in the 1990s, when Iraq and Cuba offered glaring examples of failed sanctions regimes, and the much more carefully targeted regimes of the 2010s, which have directly attacked the sinews of national economies, as well as the finances of regime elites.

Rosenberg and Tama argue that the United States needs greater clarity on how sanctions end in order to generate more effective compellence. Sanctions cause pain, with the point being for the target to change its behavior in order to relieve that pain. But while the United States can readily decide to inflict pain, the mechanisms for relieving pain (both executive and congressional) often fail to end sanctions even after the target has capitulated. This criticism cuts deep, as the foreign policy community in the United States can rarely agree on whether the goal of coercion is to change the behavior of Iran/North Korea/Russia/China, or to fundamentally undercut the regimes that rule those countries. But when leaders do not believe that the pain will end even if they change behavior, they are unlikely to go to the trouble of changing their ways.

Will Trump’s Trade Wars Reshape the Global Economy?

Once relatively staid, the global economic and trade system has been anything but since U.S. President Donald Trump took office.

The United States and China seem to have hit the pause button yet again on their on again, off again trade war that began last year. Trump launched the series of tit-for-tat tariff hikes over China’s perceived unfair trade practices, including forced technology transfers and the theft of intellectual property. After bringing the world to the brink of a global trade crisis and damaging producers—particularly U.S. farmers—the two sides appeared to be inching toward a deal over the summer. Negotiations then stalled again, and Trump returned to the threat of raising tariffs on a broad range of Chinese imports to the U.S. After a subsequent round of talks, however, Trump announced a limited “phase one” agreement that gives both sides more time to try to iron out their broader differences. That stopgap deal was finally signed today.

Trump’s unpredictable negotiating style and his willingness to brandish the threat of tariffs for leverage in trade talks cannot be particularly reassuring to European officials, who have yet to start their own trade negotiations with the U.S. Trump has already decried what he sees as unfair trade deficits with European Union countries, particularly Germany, and he imposed tariffs on steel and aluminum imports from some allies, without seeming to understand that the EU negotiates trade terms as a bloc. A U.S.-Europe trade war could do lasting damage to both sides.

20 January 2020

Economic Conditions Snapshot, December 2019: McKinsey Global Survey results

The views of respondents to McKinsey’s latest survey on economic conditions end the year on a somewhat more upbeat note, moving away from earlier pessimism.1 While executives still tend to report negative sentiments, a growing share of respondents see current and future global conditions as stable or improving.

Views on conditions at home are also more tempered overall in this latest survey, as a larger share of respondents say their economies are unchanged from—as opposed to worse than—six months ago.2 In Latin America and in India, where executives are likeliest to report that present conditions have declined, respondents most clearly predict improvement in the months ahead.

Among perceived risks to global and domestic growth, trade conflicts and trade-policy changes remain at the fore, but social and political risks have risen on the list of commonly cited threats. Respondents identify social unrest as a global risk more often than they have all year, and they are more likely now than in the previous survey to say domestic political conflicts and transitions of political leadership are a top threat to their countries’ economies.
Though still cautious, views on the world economy grow more favorable

19 January 2020

The future is now: How oil and gas companies can decarbonize

By Chantal Beck, Sahar Rashidbeigi, Occo Roelofsen, and Eveline Speelman
Source Link

If the world is to come anywhere near to meeting its climate-change goals, the oil and gas (O&G) industry will have to play a big part (Exhibit 1). The industry’s operations account for 9 percent of all human-made greenhouse-gas (GHG) emissions. In addition, it produces the fuels that create another 33 percent of global emissions (Exhibit 2).
Exhibit 1
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18 January 2020

Infographic Of The Day: How The STEM Crisis Is Threatening The Future Of Work

STEM, or science, technology, engineering, and math has more recently become a bigger part of American children curriculums with the coining of the term in 2001 by Judith Ramaley. Over the last decade, the U.S. has seen nearly 2 million new STEM jobs - but students' math and science scores continue to lag behind other nations.

2020 trends to watch: Policy issues to watch in 2020

2019 was marked by massive protest movements in a number of different countries, impeachment, continued Brexit talks and upheaval in global trade, and much more. Already, 2020 is shaping up to be no less eventful as the U.S. gears up for presidential elections in November.

Brookings experts are looking ahead to the issues they expect will shape the world this year and the solutions to address them. Below, explore what our experts have identified as the biggest policy issues in their field for 2020, the ideas or proposals they encourage policymakers to consider, and the overlooked stories that deserve greater attention.

12 January 2020

Gas Line, Q4 2019

Gas Line is a quarterly publication that looks at major news stories in global gas—ranging from project development to markets and geopolitics. My goal is not to cover every story but to draw connections between stories across time and space in order to shed light on the major themes that will drive global gas markets in the years ahead. My main takeaways from this quarter:

Crisis Averted—Sort of

The bottom line: These past few months have shown that European gas security, in the old sense, is now largely a Washington obsession and a transatlantic issue. Russia and Ukraine reached an agreement before December 31, thus averting another gas crisis. At the same time, the United States imposed sanctions on Nord Stream 2, and Allseas, the contractor laying the pipeline for the project, suspended its operations. Yet prices at TTF, the main European hub in the Netherlands, averaged 37 percent lower in December 2019 than in December 2018—which did not exactly signal a crisis.

The backstory: The transit contract that allowed Russian gas to reach Europe through Ukraine was expiring on December 31, and this date has long been feared in Europe—any failure by the two sides to reach an accommodation could have disrupted gas flows to Europe. There were many issues complicating a settlement: Ukraine was hoping to bring its legislation in line with European rules; there were outstanding legal claims between the two sides; for a few years, Ukraine had ceased to buy gas from Russia directly; the prospect of Nord Stream 2 and TurkStream hung over the proceedings, a reminder that Ukraine’s transit role was likely to shrink over time; and, of course, hostilities between the two countries were ongoing, just as a new president in Ukraine became the focal point for the impeachment of President Trump.

11 January 2020

Top Energy Stories Of 2019

by Robert Rapier
Source Link

I close out every year with an examination of how my annual predictions fared, followed by what I felt were the top energy stories of the year. I then open up the new year with energy sector predictions for the upcoming year. Today, my top energy stories of 2019.

A plant manager I once worked for was fond of the saying “Perception is reality."

I hated the phrase. I am a logical math and science guy. After all, 1+1 is never 3, even if you believe it to be so. Reality is reality, regardless of what your perception may be.

But I came to understand what he meant by the phrase, even if I didn’t agree with it. How you perceive things influences your actions. It is your reality, even if isn’t objective reality.

From Oil Rents to Inclusive Growth: Lessons from the MENA Region

Hassan Hakimian

A copious literature on resource curse correlates oil rents with poor economic outcomes in resource-rich economies. The common yardstick for evaluating economic performance in these countries is generally GDP growth rates. This paper focuses on the broader question of whether the oil-exporters in the MENA region in general and in the GCC states in particular have been successful in turning their hydrocarbon wealth for the benefit of their population at large. To find out if their experience has been conducive to ‘inclusive growth’, we compute a novel Inclusive Growth Index and its associated rankings for 154 countries to shed light on their performance both over time and in a comparative context. The results show a marked deterioration in the case of MENA’s oil-exporting countries over the period 2001-5 and 2006-10 particularly marred by a poor record in job creation, especially for their young population.

10 January 2020

Gas Line, Q4 2019

Gas Line is a quarterly publication that looks at major news stories in global gas—ranging from project development to markets and geopolitics. My goal is not to cover every story but to draw connections between stories across time and space in order to shed light on the major themes that will drive global gas markets in the years ahead. My main takeaways from this quarter:

Crisis Averted—Sort of

The bottom line: These past few months have shown that European gas security, in the old sense, is now largely a Washington obsession and a transatlantic issue. Russia and Ukraine reached an agreement before December 31, thus averting another gas crisis. At the same time, the United States imposed sanctions on Nord Stream 2, and Allseas, the contractor laying the pipeline for the project, suspended its operations. Yet prices at TTF, the main European hub in the Netherlands, averaged 37 percent lower in December 2019 than in December 2018—which did not exactly signal a crisis.

9 January 2020

Dirty Money How Corruption Shapes the World

By Oliver Bullough 

There is an old joke about a drunkard searching for his keys under a streetlight. A passerby stops to help. After a few minutes of failing to find them, he asks the drunkard if he is sure that this is where he lost them. “No,” the drunkard replies, “but it’s dark everywhere else.”

That is how humans approach many daunting tasks, not least of them writing about corruption. We know that it’s a problem, we know that it’s serious, but we are reduced to hunting for evidence in the light cast by the few countries willing and able to prosecute the crime. Darkness stretches all around: we are missing out on a whole world of evidence that remains completely obscure.

In a speech he delivered in 1996, James Wolfensohn, then president of the World Bank, likened corruption to cancer. “Corruption diverts resources from the poor to the rich, increases the cost of running businesses, distorts public expenditures, and deters foreign investors,” Wolfensohn explained. It was a new, post–Cold War world, and he wanted to spearhead a push for cleanliness and corporate accountability now that it was no longer acceptable to ignore kleptocracy for reasons of geopolitical expediency. Two years later, Wolfensohn’s counterpart at the International Monetary Fund, the economist Michel Camdessus, put a figure on the phenomenon: he estimated that between two and five percent of global money flows had criminal origins. 

8 January 2020

Is This The Next Great Oil Frontier?

By Meredith Taylor 
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Now Namibia is joining the African oil conversation with one of the most oil-friendly regimes on the continent. It’s offering 5% royalties on what might just be a very productive shale play in Reconnaissance Africa’s (RECO.V) Kavango Basin.

Emerging markets are where oil upside might be found these days but navigating them is a challenge.

As Africa’s largest producer of oil, Nigeria has outsized status in the hydrocarbons world. But the party is coming to an end from an investor’s standpoint.

Nigeria is home to about 37 billion barrels in oil reserves. And while it’s got some 32 active oil rigs out there, only 81 wells were completed last year - down from 141 in 2014.

Since oil prices started tumbling in 2014, the government has been taking more from oil companies, with back taxes and new legislation. Now, it wants majors Chevron, Shell and French Total SA to pay them around $62 billion. It claims in was short-changed under a revenue-sharing agreement dating back to the 1990s.