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November 23, 2021
Tunisia is in a bleak economic position, following an 8.6% contraction in GDP last year and years of sclerotic economic growth, plus elevated unemployment. Bond yields have soared since the start of 2020 as investor sentiment turned sour. Moreover, approximately 20% of the population is living in poverty or is economically vulnerable, according to the World Bank. The pandemic has made things worse—especially for young people and women—but Tunisia’s economic malaise was already endemic. Bloated SOEs, inefficient allocation of public spending (on wages and subsidies rather than social security and investment), and external imbalances all weigh on the economy.
Against this dismal economic backdrop, President Kais Saied, who had been elected as president in 2019, launched a coup against the democratically-elected government in July and assumed unchecked executive powers. He retains majority public support, with thousands of Tunisians pouring onto the streets in support of his leadership. However, Tunisia’s deep-seated economic woes have not gone away with the uprooting of the democratic regime. In particular, the government needs USD 5 billion to pay for its budget deficit and loan repayments, which it is currently unable to cover.
November 22, 2021
Last year, the Chinese government implemented policy measures to cool its overheating property market known as the “three red lines”. This limited the amount of debt developers could hold relative to their assets, hampered companies’ ability to source financing and resulted in massive deleveraging for selected developers in order to comply with Beijing’s new rules. The government has since announced additional policies, further hampering developers’ balance sheets. The measures have had a notable effect: Property sales in China were down over 20% in October, while construction and investment activity have taken a hit so far this year. Evergrande Group—China’s second-largest property developer—has been a high-profile victim of the moves.
November 12, 2021
The JPMorgan Global Manufacturing PMI suggested that supplier delivery times reached a survey record high in October, which continued to spark producer price pressures as input costs rose at the highest level in 13 years and output charges rose to a fresh record high.
November 4, 2021
COP26 kicked off in Glasgow last week, and fossil fuels are big on the agenda, with dramatic reductions in their production necessary to limit global warming to 1.5°C. However, as detailed in our 29 September newsletter, energy prices have spiked recently, in a reminder that despite the current move towards more sustainable growth, fossil fuels are still king in the energy market—and are likely to remain so for some time. So what will fossil fuel prices look like at the end of our forecast horizon in 2025?
October 27, 2021
In mid-October, the ProShares Bitcoin Strategy exchange-traded fund (ETF) commenced trading under the ticker (BITO). This represented the first U.S. asset giving exposure to bitcoin-pegged futures contracts (not spot prices). Despite not receiving formal approval from the Securities and Exchanges Commission (SEC), the NYSE Arca certified its approval for listing, allowing investors to trade the BITO ETF under federal law without SEC intervention. Consequently, the new ETF allows for trading through regular investment accounts, circumventing the need to invest through cryptocurrency exchanges—which tend to have security issues and are relatively less accessible for traditional investment groups. On its first day of trading, the ETF raked in roughly USD 550 million—one of the largest opening days on record for an ETF—and reached over USD 1 billion in volume of transactions. Moreover, open interest—a dial used to determine market sentiment and strength behind price trends—in bitcoin has surged in recent weeks.
October 21, 2021
At the beginning of 2021, our panel of analysts projected the ASEAN region would expand at the fastest pace in nearly a decade. Skip forward to our latest gauge of the ASEAN economy in late October, and expectations for growth this year are lagging behind 2019’s—despite a massively low base effect due to the pandemic.
October 19, 2021
With the pandemic still raging and Federal Reserve tapering on the horizon, we examine the outlook for the “Fragile Five” emerging market economies.
October 14, 2021
In an attempt to simplify daily transactions, the Central Bank of Venezuela decided to chop six zeros off its national currency on 1 October. The move marked the third rebasing of the Bolivar since 2008 as political turmoil over the past several years and U.S. sanctions imposed in 2019 continue to batter economic output and cause hyperinflation.
Referred to as the Digital Bolívar, the new version of the national currency is expected to have a minimal impact on taming price pressures and supporting the economic recovery, as the majority of everyday transactions are already settled in U.S. dollars. This informal dollarization has helped to temper the rise in prices: Inflation has gradually eased since March, falling to the lowest level in nearly a year in September. Therefore, the Digital Bolivar will mainly serve to boost the digitalization of the economy and simplify tax collection and accounting procedures. The physical usage of the new Bolivar may help to facilitate transactions for some daily purchases which still use the currency, such as public transport and subsidized gasoline, likely providing marginal productivity gains along the way.
October 6, 2021
The analysts we polled have grown more upbeat about the outlook for the economy of the Middle East and North Africa (MENA) in recent months, with the consensus 2021 GDP growth forecast for the region being revised up 0.3 percentage points since June. This is likely in part the result of OPEC+ gradually loosening its grip over global oil supply: the cartel agreed to raise production limits by 0.4 million barrels per day (mbpd) from August. Moreover, surging global oil prices bode well for the public coffers of regional oil exporters, which should support government spending. In addition, several key economies, such as Israel, Saudi Arabia and the UAE, have had successful vaccine rollouts—Israel and the UAE in particular are world leaders when it comes to the pace of vaccination—which has aided domestic activity.
September 29, 2021
At the close of September, European natural gas prices ended the day near 27 USD per mmBtu, which was up almost 62.0% month-on-month and around 340% higher on a year-to-date basis. An array of factors have caused the inexorable rise in prices within Europe: relatively low stockpiles following a colder-than-normal winter at the start of the year; increased demand related to the ongoing recovery in economic activity and the easing of Covid-19 restrictions; government intervention in the form of higher carbon taxes across the Euro area; a lack of alternative power sources, particularly due to tepid wind power generation; and limited supply out of Russia due to disruptions at some of its gas facilities in recent months.
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