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Thursday June 20th, 2024

IMF trims global growth estimates 2020-21 but sees improving outlook

AFP – Easing US-China trade tensions have lessened uncertainty and the world economy may have hit bottom but a sharp slowdown in India is creating a drag worldwide, the International Monetary Fund said Monday.

However, while the risks to the global economy have grown smaller, the Washington-based global lending institution cautioned that outcomes “depend to an important extent on avoiding further escalation” between Washington and Beijing.

In the latest update to its World Economic Outlook, the IMF cut the global growth estimate for 2020 to 3.3 percent, 0.1 percent lower than in the prior report released in October.

It lowered the 2021 forecast by 0.2 percent, to 3.4 percent.

The sharp drop for India “accounts for the lion’s share of the downward revisions,” the IMF said.

IMF chief Kristalina Georgieva pointed to India’s struggles with declining consumption and investments, budget deficits and delays in making structural reforms.

“After a synchronized slowdown in 2019, we expect a moderate pick-up in global growth this year and next,” Georgieva told a news conference on the eve of the 50th World Economic Forum in Davos, the annual gathering of business and political elites.

“We are already seeing some tentative signs of stabilization but we have not reached a turning point yet,” she cautioned.

The IMF said the relationship between China and the United States, the world’s dominant economic powers, is still troubled by “unresolved disputes”.

“The risk of protracted subpar global growth remains tangible despite tentative signs of stabilizing momentum,” the fund warned in its quarterly report.

“Policy missteps at this stage would further enfeeble an already weak global economy.”

The charity Oxfam, in an annual report released Monday, warned of growing social inequality and the pressures that is generating.

It said the world’s 2,153 billionaires now have more money than the planet’s 4.6 billion poorest people.

“The gap between rich and poor can’t be resolved without deliberate inequality-busting policies,” Oxfam’s India head Amitabh Behar said.

– US-China trade deal –

US President Donald Trump signed a deal with China last week that eases the escalating trade tensions but leaves in place tariffs on two-thirds of the goods imported from the Asian economic power.

The trade truce led to an upgrade of China’s growth forecast to 6.0 percent in 2020, with a slight slowdown to 5.8 percent projected for next year.

But the giant Asian economy has been on a steadily slowing path for some time.

Meanwhile, the IMF trimmed US growth just a tenth to 2.0 percent this year, and to 1.7 percent in 2021.

Since 2018, Washington and Beijing have exchanged tit-for-tat tariffs on hundreds of billions of dollars in two-way trade.

“Trade truce is not the same as trade peace,” Georgieva said on Friday.

In its previous analysis, the IMF estimated that trade conflicts and tariffs cut 0.8 percentage points off of global growth.

But two-thirds of that damage was due not to the tariffs but to trade uncertainty created by the conflict, which causes companies to put the brakes on investment.

If tensions flare again, or if Trump’s trade dispute with the European Union or confrontation with Iran should worsen, that too could undermine the “nascent bottoming out of global manufacturing and trade, leading global growth to fall short” of forecasts, the report said.

– Slowing growth in India –

Receding risks of a hard Brexit have helped stabilize the outlook for Britain and the European Union. And healthy private consumption has helped the still-slow but upgraded growth prospects in Japan.

However, the IMF once again slashed expected GDP growth in India, by 1.2 percentage points this year and 0.9 point in 2021 compared to the October forecasts.

While growth remains relatively robust at 5.8 percent and 6.5 percent for the two years, respectively, it is not enough to continue to reduce poverty in the growing South Asian economy.

India has for years been a major engine of global expansion along with China, while advanced economies have bumped along at far slower rates.

But it had already been downgraded in October due to a bigger-than-expected decline in domestic demand amid growing stress in the financial sector.

Meanwhile, Latin America continues to slow, even as Brazil has stabilized and growth there was upgraded.

Mexico was downgraded, while Chile suffered “a sizable markdown” amid widespread social unrest.

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Sri Lanka shares debt management experience at global forum

ECONOMYNEXT – Sri Lanka has shared its experiences at a forum on debt management to “provide lessons for others”, State Minister of Finance Shehan Semasinghe has said.

Semasinghe spoke on “The Role of Debt Management in Navigating Crises” at the 14th Debt Management Facility (DMF) Stakeholders’ Forum, in Livingstone, Zambia.

“I shared the experiences of Sri Lanka which can provide valuable lessons for others and explored the critical elements of capacity building and sound institutional practices in managing debt, particularly in the context of economic challenges,” Semasinghe said on X (twitter).

“Sri Lanka’s experience demonstrates that effective debt management is not just about managing numbers but also about building robust institutions and capacities.”

The journey underscores the importance of transparent, accountable governance and the need for international support and cooperation in times of crisis, he said.

“Sri Lanka prioritized addressing gaps in public debt management by drafting a consolidated Public Debt Management Act, ensuring clarity and legal robustness and establishing a centralized Public Debt Management Office with operational autonomy.

“The role of debt management in navigating crises is multifaceted and critical. Further, by investing in capacity building, adhering to sound institutional practices, and strategically managing debt restructuring and liability operations, countries can better withstand economic shocks and pave the way for sustainable recovery.”

Developing countries face severe debt distress as they are more vulnerable to external shocks, Semasinghe said, and “managing global debt requires coordinated international efforts on debt restructuring where necessary, timely fiscal policy adaptation and help sustainable economic growth.”

The state minister also pointed out the financial impact of climate change was an emerging challenge, as countries need investment to mitigate and adapt to climate impacts, “especially through non-debt creating inflows, which would require private capital mobilization.” (Colombo/Jun20/2024)

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Sri Lanka rupee closes stronger at 305.10/30 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed stronger ahead of the long weekend at 305.10/30 to the US dollar on Thursday, up from 305.40/55 to the US dollar Wednesday, dealers said, while some bond yields edged up.

A bond maturing on 15.12.2026 closed at 10.45/80 percent, up from 10.35/75 percent.

A bond maturing on 01.07.2028 closed at 11.20/45 percent.

A bond maturing on 15.09.2029 closed at 12.00/15 percent, up from 11.95/12.35 percent.

A bond maturing on 01.12.2031 closed at 12.05/25 percent.
(Colombo/Jun20/2024)

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Sri Lanka stocks close up, JKH trade pushes turnover

ECONOMYNEXT – The Colombo Stock Exchange closed up on Thursday, data on its site showed.

The broader All Share Index closed up 0.19 percent, or 23.11 points, at 12,249; while the more liquid S&P SL20 Index closed up 0.15 percent, or 5.33 points, at 3,610.

Turnover was 2 billion. Nearly half of this (Rs980mn) came from a crossing on John Keells Holdings Plc. The share closed down at 202.00.

“There were several crossings today which pushed turnover,” market participants said.

“Institutions and high net-worth activity drove the market, while the retail investors we feel are still about uncertain and adopting a wait-and-see approach.”

Melstacorp Plc was among the companies that saw active volumes (Rs194mn) in the day. The share closed up at 87.10.

Top contributors to the index included TeeJay Lanka Plc (up at 41.70), Sampath Bank Plc (up at 79.50), Hatton National Bank Plc (down at 201.00). Hayleys Plc (up at 105.00) and its subsidiary Hayleys Fabric Plc (up at 46.60) were also positive contributors. (Colombo/Jun20/2024)

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