Keeping Indonesia’s economy afloat through the COVID-19 pandemic
Indonesia faces one of the most difficult outlooks in Asia amid the economic pandemic unleashed by COVID-19. The principal economic problem is not the old one of capital flight, but about funding the fiscal response necessary to address a massive once-in-a-lifetime shock. With little on offer from the international system, Indonesia is rightly looking to find its own way, including by having taken the unorthodox step of allowing the central bank to directly finance part of the budget deficit. To enable this, the central bank could establish a clearly defined policy of yield curve stabilisation — buying government bonds in the primary and secondary markets to stabilise bond yields close to ‘normal’ market rates, while providing a readily scalable amount of budget financing. This would provide a clearer policy framework than both the current approach and alternatives presently under consideration in Indonesia. It would, however, carry some risks. Indonesia could therefore also look to bilateral partners, notably Australia, to provide a large-scale standby loan facility as a complement to the budget backstop being provided by Bank Indonesia.
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India-Bangladesh trade resumes at Petrapole after west Bengal Govt allows import cargo to come in
India-Bangladesh trade saw a partial resumption at Petrapole — the largest land port in Asia — on Sunday evening after the West Bengal government allowed vehicles from the neighbouring country to come into the State.
Five trucks carrying garments came in from Benapole (on the Bangladesh side), while a similar number of vehicles carrying fish from the southern States was allowed into Bangladesh, said sources.
Trade at this gateway had come to a standstill from July 1 onwards after a section of stakeholders in Bangladesh objected to the West Bengal government disallowing movement of trucks from Benapole to Petrapole. The State government had been concerned about the spread of Covid-19 into the border villages. Bangladesh on its part has claimed that Benapole was a green zone with no Covid cases there.
Following the stoppage of trade, some 700-800 odd trucks had been stuck on the Indian side, while another 500 vehicles were waiting on the Bangladesh side. a number of trucks had been diverted to the nearby land port of Gojadanga to avoid congestion there.
Petrapole, located 100 kms from the city, in the North 24 Paraganas district, accounts for nearly 47 percent of the $11 billion India-Bangladesh bilateral trade.
“Truck movements have resumed with both sides agreeing to follow certain standard operating procedures. We hope that things will normalise over the next one to two days,” Karthik Chakraborty, Secretary, Petrapole Clearing Agents’ Staff Welfare Association told BusinessLine.
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Russia tells us to “mind own business” over media freedom
Moscow has angrily told the US embassy to “mind your own business” after Washington’s diplomatic mission raised concern about curbs on media freedom in Russia.
Rebecca Ross, the spokeswoman for the US embassy, on Tuesday expressed concern about a clampdown on journalists in Russia.
“Watching arrest after arrest of Russian journalists – it’s starting to look like a concerted campaign against #MediaFreedom,” she tweeted.
“Mind your own business,” the Russian foreign ministry tweeted late Tuesday.
Earlier that day the FSB security agency, the successor to the Soviet-era KGB, arrested a respected former journalist, Ivan Safronov, 30, on suspicion of state treason.
His detention sparked an uproar among supporters and journalists who say his arrest is punishment for his coverage of Russia’s defence sector.
A member of Safronov’s defence team, Yevgeny Smirnov, has said the former journalist, who used to work for Kommersant and Vedomosti newspapers, is suspected of cooperating with Czech intelligence since 2012.
The FSB investigators believe that the Czech intelligence acts under the guidance of the United States, Smirnov told AFP.
The FSB says that Safronov has collected confidential data about the Russian military, defence, and security and handed it over to the intelligence of a NATO member country.
On Monday, a reporter from the northwestern city of Pskov was fined nearly $7,000 for “justifying terrorism”, in a case that sparked an outcry.
Prosecutors had requested that Svetlana Prokopyeva be sentenced to six years in prison for a commentary about a bomb attack.
All major TV stations are under state control in Russia.
Journalists working for print and online outlets have recently complained about increasing curbs on press freedoms and pressure from the Kremlin.
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Japan business confidence worst since 2009 crisis
Confidence among major Japanese manufacturers has plunged to its lowest level since the global financial crisis, a key survey showed Wednesday, as the coronavirus dries up global demand.
The Bank of Japan’s June Tankan business survey — a quarterly poll of about 10,000 companies — showed a reading of minus 34 among big manufacturers, the lowest since June 2009 when worldwide financial shocks hammered the world’s third-largest economy.
It was the biggest quarterly drop since early that year, and even worse than analysts had feared after the index turned negative in March.
“These figures show that companies believe it will take a long time for the economy to recover,” Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute, said.
The coronavirus has hit Japan less hard than many advanced nations, with fewer than 1,000 deaths and about 19,000 cases. Nevertheless, the contagion has taken a bitter economic toll, knocking the country into its first recession since 2015.
Prime Minister Shinzo Abe has passed two record stimulus packages worth nearly $2 trillion to cushion the impact, including handing out 100,000 yen ($925) to every man, woman and child in Japan.
Unemployment is rising, albeit to a rate that would make most countries jealous. Data released on Tuesday showed the jobless level rose from 2.6 percent to 2.9 percent.
The low unemployment figure reflects a shrinking workforce given Japan’s rapidly aging population, 28 percent of which is 65 or over.
Analysts said that millions of people, especially women, had left the workforce during the pandemic to care for families.
Millions are also on furlough, meaning that the unemployment data may be considerably less rosy than it looks, said Shimamine.
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“One estimate says the jobless rate is actually 11 percent if you incorporate those on furlough,” he said.
Japan was struggling with the effects of natural disasters and a hike in consumption tax even before the pandemic crippled the global economy.
Once it hit, there were no mandatory lockdowns in the country, the government instead asking people to stay at home — requests that were largely heeded.
But that, coupled with a shuttering of the country’s borders, battered tourism and consumer spending, especially for the hospitality industry.
Daichi Kawabata, economist at Mizuho Research Institute (MRI), said the negative sentiment expressed in the survey reflected fears that economic activity would never return to pre-pandemic levels.
“Restaurants, for example, have to keep distance between customers. That will give them only half of the revenue they had earned before,” he said.
Confidence among big non-manufacturers nosedived to minus 17 from plus 8 in March, also the worst since 2009.
Among large companies in the accommodation and food industries, the confidence survey showed an eye-watering minus 91, the worst since comparative data became available in 2004.
The short-term business sentiment survey reports the difference between the percentage of firms that are upbeat and those that see conditions as unfavorable.
A negative reading means more companies are pessimistic than optimistic. It is considered to be the broadest indicator of how Japan Inc. is faring.
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Hotter world will see 21pc GDP fall, India on “ruinous trajectory”: study
Hotter temperatures by 2100 could slash global GDP by more than 20 percent, according to new research, and the way the economic impact will be distributed threatens to turn climate change into an enormous driver of worldwide inequality. A new analysis of the relationship between heat and economic performance released this week by Oxford Economics, a global forecasting firm, identified a divide between nations on either side of 15 degree Celsius (59 degree Fahrenheit), the “global sweet spot” for economic activity. A country whose average annual temperatures are cooler than 15 degree Celsius, including those in North America and Europe, stand to benefit slightly in the short term from rising temperatures. Tropical and subtropical countries whose average temperatures are already warmer than 15 degree Celsius, including the entire global South, face catastrophic economic degradation. India is singled out by Oxford Economics as following a particularly ruinous trajectory, with GDP falling 90 percent by 2100 if countries don’t improve current policies. The grim forecast relies on capturing the historical relationship between GDP and temperature. Once established, researchers use climate projections for the rest of the century to produce GDP estimates. The paper assumes an emissions trajectory that could raise global average temperatures by 3 degree Celsius before 2100 without more aggressive efforts to stop it. The new analysis is an independent update to a landmark 2015 study in the journal Naturethat introduced the technique for projecting the economic impacts of a hotter world. The top-line result-a 21 percent global GDP hit by 2100-is in line with the original work. The updated research includes an additional decade of data and 40 more countries, bringing the total under analysis to 203. The original study has become influential tool, now that mainstream economists are building scientific projections of global warming into models of growth. The original 2015 study has gone on to inform the International Monetary Fund’s climate work and many others. Economists had long dismissed climate change as a future problem that remained decades away, said James Nixon, chief European economist at Oxford Economics and the author the new white paper. “Obviously, when you get into the literature, you realize that’s not quite the case,” he said. “Because we’re producing long-term forecasts for countries like India who are likely to be adversely affected by climate change, we need to find a way of quantifying and thinking about how much we should be writing down their forecast.”
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After covid-19: rebooting business in China
China was the first country to experience the ravages of COVID-19, having lost 4,634 people to the pandemic with 83,565 confirmed cases to date. Draconian measures were used to bend the curve and essentially stop the spread of the disease, although reports indicate that recently new cases have emerged, including those stemming from a Beijing market. For the most part, however, China has loosened restrictions and re-opened large parts of its economy. Individuals scan government-mandated QR health codes with their smartphones, and daily life has been restored to some sense of normalcy with restaurants serving customers and retail shops open to shoppers.
In this pivotal and important time, with streams of foreign policy arguments and opinion pieces sharply analyzing current U.S.-China geopolitical tensions continuing to pour forth, we at the Stanford China Program wanted to take stock of how businesses and the overall economy are coping as China tries to reopen its businesses and reboot its economy. Toward this effort, we conducted a collaborative survey of 135 senior executives in China from May 13-26. The survey was designed to help us better comprehend the variation in how Chinese businesses are reopening as well as how Chinese business leaders are viewing their prospects for the future. The research findings, based on one of the largest surveys to date of senior executives in China, helped us explore the following types of questions: What kinds of businesses have done better and what kinds have done worse? What role has the government played in economic assistance and business reopening? And how do China’s business leaders view the deterioration in U.S.-China relations, the possibility of decoupling, and even future access to technology? The economic picture coming out of China has been mixed. The most prominent economic data point released by the Chinese government to date is the 6.8 percent drop in China’s first-quarter GDP — an unprecedented contraction since the country began its reform and opening over 40 years ago. Yet, China’s official unemployment data showed very little change, increasing from 5.3 percent in January, when COVID-19 first broke out, to 6 percent in early June. That workforce data, however, is limited to a survey of urban workers. It does not include the approximately 170 million rural migrant workers, nor the underemployed and informal workers for whom the impact of the pandemic has been severe. More recently, there have been some positive signs of a rebound: the May Purchasing Manager’s Index (PMI) figure expanded to 50.7 and exports grew by a surprising 3.5 percent in April. The overall economic picture, in other words, is still unclear and yet to be determined.