Posts Tagged ‘World Bank’

Chinese stocks crash another 7% while World Bank warns of further possible shocks

January 7, 2016

European stock markets can be expected to decline another 2-3% today. The Chinese stock markets hit the automatic circuit breakers soon after they opened today when they dropped another 7%. The devaluation of the Chinese Yuan continues apace with a 0.5% drop, which is the largest single day drop since August when it was devalued 2%. The Shanghai composite index is now down at 3115, down from the high of 5000 it reached in June 2015. In the meantime Brent oil fell below $35 which is the lowest since 2004.

Back in August last year I expected market “bottom” to be when the SCI was less than 3200 and oil was around $30 per barrel.

So I’m looking for the SCI at or less than 3200 and oil prices of about $30/barrel to start getting bullish again. That will not be before November/December this year.

And until then its probably best to keep cash under the mattress.

Hopefully the bottom is not too far away.

sci jan 2016 graphic by bloomberg

sci jan 2016 graphic by bloomberg

In the meantime the World Bank has released its Global Economic Prospects for 2016. WB Global Economic Prospects January 2016

While the WB expects global growth to increase slightly from 2.4% in 2015 to 2.9%, it sees some major risks ahead. The nightmare scenario is if the economies of the BRICS countries decline simultaneously and that could spillover and cause a prolonged downturn globally.

The simultaneous slowing of four of the largest emerging markets—Brazil, Russia, China, and South Africa—poses the risk of spillover effects for the rest of the world economy. Global ripples from China’s slowdown are expected to be greatest but weak growth in Russia sets back activity in other countries in the region. Disappointing growth again in the largest emerging markets, if combined with new financial stress, could sharply reduce global growth in 2016. …….

…….. Specifically, a 1 percentage point decline in growth in BRICS is associated with a reduction in growth over the following two years by 0.8 percentage points in other emerging markets, 1.5 percentage points in frontier markets, and 0.4 percentage points in the global economy. Spillovers could be considerably larger if the growth slowdown in BRICS were combined with financial market turbulence.

The World Bank ends by advising developing economies to develop resilience – which may be easier said than done

In the current environment, developing countries need to brace for possible shocks by building resilience to risks to growth. Where they are able to boost government spending or lower interest rates, they can provide support to economic activity. They can further encourage investor confidence with reforms to governance, labor market functioning, and business environments. Measures to absorb young workers or to increase workforce participation will relieve demographic pressures in many countries.

Hopefully the stimulus that low oil price provides will be sufficient to prevent the nightmare scenario.

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Extreme poverty at all time global low while population is at an all time high

October 5, 2015

Being poor is a relative term. To be in “extreme poverty” is an absolute measure. To be “poor” does not require being in “poverty”. The “poor” relative to the “rich” will always be with us and are just as necessary as the “rich”. In fact, that distinction between rich and poor is necessary as long as humans are to be considered individuals with aspirations and not just clones. Income inequality is often equated – especially by those with communistic leanings – with poverty, but this is simply wrong. Income inequality may be an indicator of the ratio of “poor” to “rich” but to be “poor” need have nothing to do with being in “poverty”. “Poverty” is not necessary and the goal is to eliminate extreme poverty by 2030.

The 2015 World Bank Research Note on Extreme Poverty is now out. In 2015, for the first time ever, and in spite of the global population being at an all time high, the number of people in extreme poverty has reduced to less than 10%. In spite of the population increase, the total number in extreme poverty is at the lowest in 25 years. But that is still 700 million (900 million in 2012) in extreme poverty. Sub-Saharan Africa and S Asia are where the misery is concentrated.

Extreme Poverty - World Bank 2015

Extreme Poverty – World Bank 2015

Press Release:

The number of people living in extreme poverty around the world is likely to fall to under 10 percent of the global population in 2015, according to World Bank projections released today, giving fresh evidence that a quarter-century-long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030.

The Bank uses an updated international poverty line of US $1.90 a day, which incorporates new information on differences in the cost of living across countries (the PPP exchange rates). The new line preserves the real purchasing power of the previous line (of $1.25 a day in 2005 prices) in the world’s poorest countries. Using this new line (as well as new country-level data on living standards), the World Bank projects that global poverty will have fallen from 902 million people or 12.8 per cent of the global population in 2012 to 702 million people, or 9.6 per cent of the global population, this year.

Extreme Poverty contributions - World Bank 2015

Extreme Poverty contributions – World Bank 2015

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India still ranks abysmally low in the ease of doing business

September 18, 2015

Two reports have just been issued. The first is the World Bank’s assessment of doing business in India where India’s ranking among countries is depressingly low (considering the size of India’s economy). At 142nd of 189 countries India is in the bottom quartile of all countries. The second report assesses the relative success of the various Indian states in implementing business reforms and is issued by the World Bank and the Indian Government.

  1. Doing Business India 2015 World Bank
  2. State Assessment Report 14 September 2015

The WB assessment is broken down into 10 main areas and they have ranked 189 countries. In most categories the Indian ranking is embarrassingly low. (Even where the ranking is not too embarrassing, I note that there is a downside. Getting credit is apparently not too difficult but the other side of the coin is that the banks are sitting with a great deal of bad debt. Similarly minority interests are well protected but there are many cases of tyranny by the minority). I show the Indian rankings alongside those for Russia, China, Bangladesh and Mexico for reference.

In the overall ranking for Setting up a business India comes in at a lowly 142 of 189 countries. (Mexico 39, Russia 62, China 90, India 142, Bangladesh 173)

The rankings in the 10 main sub-categories are

  1. Starting a business –  Russia 34, Mexico 67, Bangladesh 115, China 128, India 158
  2. Dealing with construction permits – Mexico 108, Bangladesh 144, Russia 156, China 179, India 184
  3. Getting electricity – Mexico 116, China 124, India 137, Russia 143, Bangladesh 188
  4. Registering property – Russia 12, China 37, Mexico 110, India 121, Bangladesh 184
  5. Getting credit – Mexico 12, India 36, Russia 61, China 70, Bangladesh 131
  6. Protecting minority investors – India 7, Bangladesh 43, Mexico 62, Russia 100, China 132
  7. Ease of paying taxes – Russia 49, Bangladesh 83, Mexico 105, China 120, India 156
  8. Trading across borders – Mexico 44, China 98, India 126, Bangladesh 150, Russia 155
  9. Enforcing contracts – Russia 14, China 35, Mexico 57, India 186, Bangladesh 188
  10. Resolving insolvency – Mexico 27, China 53, Russia 65, India 137, Bangladesh 147

The second report deals with the performance of the different states in implementing reforms. Of course the states ranked high are now crowing over those ranked lower down. The hope of the Indian government is that this league table will enhance competition between states and will add an impetus to development.

State rankings September 2015

The ranking of the NCR of Delhi is almost pathetic and lies even behind an Uttar Pradesh (boosted by Noida) and a Haryana (boosted by Gurgaon). And while Gujarat is crowing over Bihar and Tamil Nadu peevishly questions the data, they all seem to forget that these are just state rankings for a country ranking which is abysmally low. States lying below 50% are at levels comparable to the lowest 10% of the 189 countries that have been ranked.

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US is not amused at the rise of AIIB as rival to World Bank

March 20, 2015

The US is not amused.

The list of countries signing up to the Chinese-led initiative which would rival the World Bank is growing as Japan and Australia have now indicated that they too will join. In the last week the UK, Germany, Italy, France and Luxembourg indicated that they too would sign up to the Asian Infrastructure Investment Bank (AIIB) in spite of dire warnings from across the Atlantic. South Korea is also expected to sign up now that the UK and Japan have.

(Reuters) – Japan signaled cautious approval of the China-led Asian Infrastructure Investment Bank (AIIB) on Friday and said for the first time that, if conditions were met, it could join the institution that the United States has warned against.

Australian Treasurer Joe Hockey said there was “a lot of merit” in the bank and the Sydney Morning Herald newspaper reported that Canberra could formally decide to sign up when the full cabinet meets on Monday.

Japan, Australia and the South Korea, all major U.S. allies, are the notable regional absentees from the AIIB. The United States, worried about China’s growing diplomatic clout, has questioned whether the AIIB will have sufficient standards of governance and environmental and social safeguards.

The US  (US Treasury department and the US Congress) was not amused in October last year when “India along with 20 other countries today signed an agreement to become founding members of the China-backed Asian Infrastructure Investment Bank (AIIB) to aid the infrastructure development in the Asian region and reduce the dependence on Western-dominated World Bank and IMF.”  The authorised capital of AIIB is to be USD 100 billion and the initial subscribed capital is expected to be around USD 50 billion. The paid-in ratio will be 20 per cent. The AIIB is to be headquartered in Beijing and it is hoped that it will be operational by the end of 2015.

It was the US opposition to allowing any reform of voting rights at the International Monetary Fund which had irritated and annoyed China and other Asian countries which had led to the Chinese initiative. The proposed – relatively mild – reforms for the IMF were agreed at a G20 meeting in 2010 and have been ratified by all European countries. But the US has not yet ratified these changes. It has not been prepared to permit any weakening of its dominance in the World Bank and the IMF.  The founding members of the AIIB members in October 2014 were China, India, Vietnam, Uzbekistan, Thailand, Sri Lanka, Singapore, Qatar, Oman, the Philippines, Pakistan, Nepal, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Lao PDR, Malaysia, Mongolia and Myanmar.

The US has followed a strategy of criticising the possible environmental and social irresponsibility of the new institution which is intended to focus on transport, energy and telecommunications infrastructure. The US has also raised doubts about the transparency and governance of the proposed new institution and warning other countries not to join. But what was a relatively minor and mainly regional matter has been blown-up by the US opposition. The US strategy of “bad-mouthing” the AIIB seems to have back-fired. Some of the support now coming from countries traditionally seen as US followers can be considered a direct reaction to the bad-willed US opposition. 

From all accounts, the Obama administration has expended serious energy trying to dissuade its allies from joining ……. With the defection of the UK, however, it appears likely that Washington’s carefully constructed coalition will gradually unravel—both Australia and South Korea are apparently reconsidering their earlier reluctance to join the bank and could well use the UK’s decision as political cover for deciding to join the bank.

The European countries (and Japan and South Korea) have realised that their companies must have the chance of bidding for future AIIB infrastructure projects. For at least the next two decades – and maybe longer – there has to be a massive infrastructure investment in Asia. The US will eventually have to join the AIIB or to step aside and to let it proceed. US companies hoping to bid for Asian infrastructure projects would prefer that the US join. But now the US administration has the additional task to do some “face-saving” while it backs away from its ill-considered strategy of opposition.

 

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Potsdam Institute for the World Bank showcases alarmism at it its very worst

November 19, 2012

 Just in time for the COP 18 meetings in Doha, the Potsdam Institute has produced – for the World Bank – the most apalling mish-mash of baseless fear-mongering I have seen for a long time (one could say that being from Potsdam it is only to be expected).  Much about increasing emissions but nothing about the broken link between carbon dioxide and temperature. This is Alarmism at its worst.

Why a 4°C warmer world must be avoided (Summary pdf)

 

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