South Korea announces $51bn infrastructure spend ahead of elections
South Korea plans to pour billions of dollars into developing public infrastructure in a stark U-turn for President Moon Jae-in’s administration, which is struggling to boost growth despite low interest rates and a record fiscal stimulus. Seoul will increase spending at state-run institutions by 12 percent to Won60tn ($51.2bn) this year, with the bulk of the money set aside for infrastructure building and housing construction, the finance ministry said on Wednesday. Mr Moon, a popular leftwing leader, had ruled out using the property market to “artificially” boost the economy ahead of his election in 2017. However, he is now under growing pressure to revitalise the economy ahead of new polls in April. Asia’s fourth-largest economy is expected to record its weakest annual growth in a decade when it reports 2019 data later in January. It has been hit by a downturn in the global memory chip market, the US-China trade war and China’s economic slowdown. “A shift in policy is under way as the government has become more desperate to boost growth ahead of the election,” said Paul Choi, a strategist at CLSA. “We are likely to see more changes in where the government spends money as it remains questionable how big an impact fiscal stimulus so far has had on job creation and economic growth.”
Malaysia’s shadow economy worth 20pc of GDP
Malaysia’s shadow economy is uncommonly high for a developing country, observed Lim Guan Eng. The finance minister said that in developing countries, the shadow economy normally takes up 12 percent of the nation’s gross domestic product (GDP), but in Malaysia, that percentage is a lot higher. When we talk about shadow economy, in most economies it is around 5 percent. In developing countries, it is around 12 percent but in Malaysia, it is very high. It is around 20 percent of our GDP. When talking about the shadow economy, it is because of corruption, smuggling and all these unreported incomes. The Inland Revenue Board (IRB) is looking to increase our income but we are doing it in a softer, gentler approach through continuous engagement.
Is Indian economy really recovering from slowdown?
Presenting the Economic Survey in Parliament in July 2019, the Narendra Modi government had estimated that the GDP (gross domestic product) growth rate for 2019-20 to be 7 percent. Six months later the government has lowered the estimated GDP growth rate for the year to 5 percent. It is still good news given that the GDP growth rate is on downward spiral for six consecutive quarters, finishing at 4.5 percent in the September 2019 quarter. Pegging overall advanced GDP growth rate at 5 percent also means that the economy will reverse the downward growth trend in the third and final quarters of 2019-20. The official estimate is that the second half of the fiscal would grow at 5.25 percent.
However, there are some key facts that do not allay fears expressed by experts, including last year’s Nobel Prize winner Abhijit Banerjee. He said the Indian economy is very close to a big and long recession if urgent corrective steps are not taken. Private consumption has been the villain for battered GDP growth rate in India. Private consumption contributes about 60 percent to the GDP. It is growing at 5.7 percent in 2019-20, much below the rate for previous financial year when it grew at 8.1 percent. The GDP growth rate then was 6.8 percent against first advance estimate of 7.2 percent. To boost consumption, the government increased its expenditure – which is yet another key component of GDP calculation. Against last year’s 9.2 percent, the government planned to increase its expenditure by 10.5 percent. However, recent developments – lower than expected tax collection and US-Iran tension suddenly pushing oil prices – are likely to put a curb on government expenditure to meet the fiscal deficit target.
Japan households’ mood hits 5-year low
Japanese households’ confidence in the economy worsened to a five-year low in the three months to December, a central bank survey showed on Thursday, adding to a recent slew of gloomy signs for the fragile recovery.
The ratio of households who expect prices to rise a year from now also slid to a more than two-year low, underscoring the challenge the Bank of Japan faces in firing up inflation to its elusive 2percent target.
A diffusion index measuring households’ confidence in the economy stood at minus 29.8 in December, the worst reading since the corresponding month of 2014, the quarterly survey showed.
The survey, conducted for about a month to Dec. 3 on 4,000 households, also showed that 32.9percent of respondents cut back on spending after a sales tax hike in October.
Households curbed spending on dining out, clothing and daily necessities after the tax increase, the survey showed, highlighting the toll that the higher levy was taking on private consumption.
Asked how prices were moving when excluding the impact of the sales tax hike, 64.5percent said prices rose from a year ago, down from 70.5percent in the previous survey.
Of the total, 73.3percent expect prices to rise a year from now, down from 79.8percent three months ago and the lowest level since September 2017, the survey showed.
Vietnam’s economy shines in 2019 but concerns exist for 2020
In 2019, the global economy witnessed a steady deceleration. According to estimates made by the International Monetary Organization (IMF) in October 2019, growth reached only 3.0 percent compared to 3.6 percent in 2018, lower than forecasts made in July and April respectively by 0.2 and 0.1 percentage points. Trade flow and foreign direct investment also decreased.
Uncertainty and high risks impeded growth momentum as a consequence of geo-political confrontations and a conflict between investment liberalisation and protectionism, not to mention climate change.
China’s 2020 growth forecast held at 5.9 pc
China’s growth is forecast to decelerate to 5.9 percent this year, according to the World Bank, and while its latest Global Economic Prospects report suggests global growth will accelerate slightly in 2020, the outlook for the world economy remains “fragile” amid major risks to even their “tepid” forecast.
The prediction for China in 2020 is unchanged from the World Bank’s previous forecast in October, with the world’s second largest economy set to decelerate from 6.1 percent in 2019. China’s growth slowed to 6.0 percent in the third quarter of 2019, with Beijing expected to support a target of around 6 percent for this year.
Overall, the global economy will grow by 2.5 percent in 2020, up from 2.4 percent in 2019, the weakest growth rate since the global financial crisis in 2008-2009, the World Bank said, as trade and investment gradually recover.
“Downside risks predominate, including the possibility of a re-escalation of global trade tensions, sharp downturns in major economies, and financial disruptions in emerging market and developing economies,” said the World Bank.
Singapore cautiously optimistic about growth
Singapore is cautiously optimistic about its economic growth prospects in the year ahead, but several uncertainties remain in the global economy, Trade and Industry Minister Chan Chun Sing told Parliament on Monday (Jan 6).
The biggest uncertainty is the relationship between the United States and China, he said, noting that it is the most important bilateral relationship for both countries and the entire world.
The recent announcement of phase one of the US-China trade deal and the averting of further trade tensions is positive for all economies, and Singapore hopes this is the first step towards putting the relationship between the two countries back on a stronger footing, Mr Chan added