Indonesia: the pros and cons of cutting fuel subsidies
The price of subsidized petrol in Indonesia could rise by up to a third if the government follows through on plans discussed by ministers this week.
Cutting subsidies in an era of rising oil prices would allow the government to spend more on infrastructure – which the country desperately needs – but the cuts are not without risk. Continue reading »
Belarus’s salary dilemma
Alexander Lukashenko wants average salaries in Belarus to go up – and what the authoritarian leader wants, he usually gets, which is likely to mean more trouble for the ex-Soviet republic’s battered economy.
“What is the average salary of $500? This is quite a low level – we should get higher. And this is a task for everybody,” Lukashenko told local officials this week, according to the local press. Continue reading »
Nigeria: bad time to be a consumer
Your typical Nigerian consumer, whoever he or she may be, is not having a good time of it. Fresh from the depressing news that those living in absolute poverty is rising, there is a “double whammy” of price rises to contend with, as one bank put it in a research note.
After the removal of the fuel subsidy (that caused protests and strikes, costing the economy over $1bn), a new electricity pricing regime is expected in the first quarter of 2012 – which could raise costs by 50 per cent. This has prompted a report on Nigeria by BofA Merrill Lynch to forecast consumer expenditure to slow by 4.2 percentage points in 2012. Continue reading »
South Africa: shoppers’ surprise
Ahead of next week’s budget, Pravin Gordhan, South Africa’s finance minister, was handed some positive news that may help lift some of the gloom around the slow pace of his country’s economic growth.
Data released on Wednesday revealed that headline retail sales growth in Africa’s largest economy rose by an above-consensus 8.7 per cent in December, up from 7.2 per cent in November.
The economy is among the hardest hit in Africa by the eurozone crisis, as about a third of manufactured exports go to Europe. This year the International Monetary Fund cut its growth forecast to 2.5 per cent from 3.6 per cent. This compares poorly with 5.5 per cent for sub-Saharan Africa as a whole. Yet retail sales held up pretty well last year. Continue reading »
India inflation down in January
India’s headline inflation fell to 6.55 per cent in the month of January, down from 7.47 per cent in December, to a 26-month low, according to data released Tuesday.
This was widely seen as good news for the economy, but offered little clarity on whether the country’s conservative central bank will begin cutting interest rates, which have been blamed for faltering growth.
S Korea rates: wait and see
No sudden moves from the Bank of Korea on Thursday, which held the base rate at 3.25 per cent for an eighth straight month.
It looks a sensible decision. South Korea’s all-important exports may have suffered an alarming drop in January but it is not yet time to pull the emergency cord. Inflation is still lurking in the wings and Kim Choong-soo, the central bank governor, is still sounding hawkish about combating risks. Continue reading »
Russia: pre-poll inflation at new low
How’s this for a nice set of pre-election numbers? Russia’s Federal Statistics Service reported on Monday that inflation fell last month to 4.2 per cent – a new post-Soviet low and well down on December’s 6.1 per cent.
It couldn’t be better for prime minister Vladimir Putin as he campaigns to return to the Kremlin in next month’s presidential election. While growth matters in the Russian economy, for poorer voters inflation matters even more, particularly those trying to get by on state salaries and pensions. Continue reading »
Asian inflation: an awkward fall
While emerging market central banks are now mostly cutting interest rates to boost growth, they are still keeping an eye out for inflation, which is much more of a danger in EMs than the developed world.
So the drop in CPI for Indonesia, South Korea and Thailand on Wednesday was good news for any potential rate-cutters.
The question is: are the falls enough to prompt further easing? Continue reading »
Turkish inflation: at mercy of the lira
Turkey’s central bank plans to get the country’s double digit inflation rate on track – but not before the middle of next year. And the success of its plans will largely depend on a relatively strong Turkish lira.
That’s the gist of a letter sent by Erdem Basci, central bank governor, to the country’s government, to explain why inflation, supposed to be 5.5 per cent at the end of 2011, instead reached 10.45 per cent. Continue reading »
Russian inflation: not dead yet
In emerging markets, the threat of inflation is far from dead. The latest official to warn of the risks is Alexei Ulyukayev of the Central Bank of Russia, who said on Thursday that keeping inflation to 6 per cent this year would be “more difficult” than in 2011.
According to Reuters and Bloomberg, Ulyukayev said early rate cuts were unlikely even though inflation is now at a post-Soviet low of 4.7 per cent and economic growth is slowing.
The central bank is wise to be cautious: with the government ramping up public spending in advance of next month’s presidential election, it’s better to wait a few months before joining other EM central banks in monetary easing. Russia is not yet secure in its 20-year fight with inflation. Continue reading »
10 things about EMs from the IMF
The IMF World Economic Outlook update released on Tuesday makes pretty ugly reading, as Chris Giles reports in the FT, with world economic growth set to be significantly weaker than previously thought.
But what specifically does it mean for emerging markets? Here are 10 things we have learnt from the IMF report. Continue reading »
India inflation: not as good as it looks
The Indian economy got a bit of good news Monday when headline inflation for the month of December fell sharply to a 24-month low of 7.47 per cent year-on-year, down from 9.11 per cent in November.
But a closer look reveals a correction based almost solely on a drop in the price of vegetables and shows that price pressure continues on manufactured products, even as fears grow about another severe depreciation of the rupee if the eurozone crisis deepens. Continue reading »
South Korean inflation: home-baked
South Korea loves blaming outsiders for its inflation headaches. But this week is a classic example of why eye-watering food and agricultural prices are really a homemade problem.
Seoul is sending very confused signals. It is unclear whether the priority is to fight prices or to protect inefficient producers and suppliers who are keeping prices too high. The central bank held rates at 3.25 per cent for a seventh continuous month on Friday, not knowing which way to run. Continue reading »
India IP: maybe too good
After a dismal October, India’s industrial production swung back into positive territory, growing 5.9 per cent year-on-year in November, according to data released by the Central Statistics Office.
After five months of IP growth falling – and indeed contracting in October - it was a welcome respite, but might the comeback be too good? Continue reading »
China inflation: glass half full/empty
Both pessimists and optimists found something to talk about in China’s December inflation figures. The headline number – a CPI rise of 4.1 per cent year-on-year – was just enough to show overall inflation is still falling in China.
But the details could be seen as reason for further caution. Continue reading »
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