United States of America
The US has seen a rise in prices of goods and services by 0.3%, excluding food and fuel. This rise was more than anticipated by economists and the Fed, who had increased interest rates by a quarter of a percentage point last year. The aim is to increase inflation to 2%, which is considered a healthy number for an economy. The deflationary or disinflationary pressure leads painstakingly slow price changes and doesn’t stimulate spending, like in the case of meeting the target 2%. With favorable changes in sight there are strong chances of an interest rate high of 1% this year.
Oh, and yes, Trump is being a nuisance.
The peso has depreciated 13% against the dollar, primarily due to high trade volumes. Peso is the most traded currency in emerging markets after the Yaun, exceeding it by $15 billion. In order to curb its fall, the Bank of Mexico has raised interest rates by half a percentage point to 3.75%. Most this the peso has gained momentum by 5%. Another challenge that the government is yet to fully tackle is the oil glut. While one-fifth of the public revenue is derived from oil, the state run Petroleos Mexicanos has suffered from losses again this year, continuing its eleven year decline.
Former President Luiz I. Lula da Silva has been roped in for questioning in the biggest graft scandal the country has ever seen. Damage from this scandal which is centered around the stated owned oil company, Petrobras could amount to $5.3 billion. The country which has already been degraded to junk by rating agency S&P is struggling to survive. With the government and the opposition hesitant when it comes to implementing austerity measures, something the nation is in dire need of, the future seems bleak. Someone I recently met said, “Does Brazil even exist anymore?”.
China recently released its draft for 5YP (2016-2020), which focused on these keep topics:
-Keeping growth at close to 6.5-7%, services accounting for 56% of the GDP
-Increasing employment by creation of 50 million jobs by 2020
-Increasing their nuclear capacity
-Introducing a sin tax on pollution and capping energy consumption at 5 billion tonnes by 2020 (4.3 billion, 2015)
For a country that relied on oil for 2/3rd of its revenue, the oil glut has hit Nigeria hard. The naira’s value has fallen by 25% (2015-2016). The naira is pegged at 199 to a dollar and with the Buhari refusing to devalue the same, the nations foreign reserves have depleted at an alarming rate. For a food deficit nation like Nigeria, people are finding it difficult to buy even milk at an affordable rate. Stocks are down 15%, the economy is growing at only half the rate it was growing at in 2014 and inflation has reached a three year high of 9.6%.
The government has planned to roll back the EPF after protesting regarding the 60% taxation policy at withdrawal. The government is also set to introduce 8-10 new PSBs, starting with mergers of small players with the larger ones. The State Bank of Indore and the State Bank of Saurashtra are set to merge with the parent. This is in tandem with the government’s push for consolidation and capitalization of the PSBs that have been sitting on a pile of NPLs.