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Middle East conflict lifts mortgage costs worldwide despite steady policy rates
8 days ago•Source: Financial Times
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6.365 min•8 days ago
China’s Housing Slump Echoes Japan, But Path Ahead Remains Unclear
FT Alphaville shows China’s housing bust could trigger real-economy spillovers—weaker consumption, tighter local budgets from land sales, and potential bank stress—because housing accounts for a large share of private wealth and household debt. Using Rogoff-Yang’s dataset and city-level data, the piece compares the trajectory to Japan’s 1990s bust, suggesting a Japan-like long adjustment or a US-like shorter downturn, with much still to come.
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Central banks warn US-stablecoins could deepen dollarisation in emerging markets
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"China's Bold Industrial Strategy: A Glimpse into the Future"
China has surged ahead in global manufacturing, particularly in clean energy, by leveraging government and banking power, and fostering competition among private companies. The U.S. and Europe are now trying to catch up by investing heavily in domestic industries and blocking Chinese products, but China's decades of experience and infrastructure investments give it a significant advantage.
G7 Unites Against China's Economic Threats
France's Finance Minister Bruno Le Maire warns that the global economy is at risk due to a surplus of cheap Chinese exports, a concern echoed by the Group of Seven. Le Maire emphasizes the need to address China's economic model, which he believes threatens not just the EU and the US, but the entire world economy.
"Global Economy's Resilience Masks Rising Debt and Inequality Amid Uneven Growth"
The global economy appears to be heading for a soft landing in 2024, with the US, UK, and Germany showing signs of resilience and growth. However, this positive outlook is overshadowed by increasing levels of debt, division, and inequality, posing significant risks to the world economy.
"Assessing Global Economic Recovery: Diverging Prospects and Uncertainty in 2024"
The US and India are generating optimism for global economic growth in 2024, with both countries expected to play significant roles in driving the recovery. As the world emerges from the pandemic, the collaboration and economic policies of these two nations are seen as key factors in boosting the global economy.
IMF Chief Urges Caution Amidst Weak Global Economy
The head of the International Monetary Fund has warned that the global economy is facing a decade of weak growth, citing factors such as aging populations, low productivity, and the aftermath of the pandemic. She emphasized the need for policies to address these challenges and promote sustainable and inclusive growth.
"OECD Warns of Inflation Risk Amid Red Sea Tensions"
The OECD warns that ongoing tensions in the Red Sea could lead to significantly higher inflation due to a 100% rise in seaborne freight rates, potentially increasing import price inflation across its 38 member countries by nearly 5 percentage points. Major shipping firms began diverting vessels away from Egypt's Suez Canal in late 2023, leading to longer journey times and capacity reduction in the global market. While the shipping industry had excess capacity last year, the OECD is closely monitoring the situation and notes positive data showing inflation coming down among its members. The organization also adjusted its economic growth forecast for the U.S., euro zone, and U.K.
IMF Upgrades Global Growth Forecast, Anticipates Inflation Retreat
The International Monetary Fund (IMF) has raised its global economic growth outlook, expecting a 3.1% growth rate in 2024 and 3.2% in 2025, with inflation projected to decrease. The U.S. is anticipated to experience a soft landing with a slowdown in growth, while the euro area may struggle. Global trade is projected to grow at a slower rate, and concerns persist about the banking system's exposure to commercial real estate. The IMF foresees central banks maintaining current interest rates until the second half of 2024, and notes a trend of increasing protectionist measures impacting globalization.
"IMF Raises Global Growth Forecast on US Resilience and China Policy Support"
The IMF has raised its global growth forecast for 2024 to 3.1%, citing the resilience of the U.S. economy and fiscal support in China, with large emerging markets also performing better than expected. Despite new risks from commodity price spikes and supply chain issues, the IMF sees a reduced likelihood of a "hard landing." Inflation is falling faster than expected, leading to the possibility of central banks easing policy rates in the second half of the year, but there is a risk of policy remaining too tight for too long, which could slow growth and bring inflation below 2% in advanced economies.
"Davos 2024: Embracing 'Glocalisation' and Optimism Amid Global Upheaval"
The World Economic Forum in Davos concluded with a panel discussing the state of the global economy, acknowledging that while most countries have outperformed expectations, there are challenges ahead. The global economy is facing fractures, with a grim struggle for economic supremacy between Washington and Beijing, widening gaps between north and south, and challenges to liberal democracy. Despite this, globalisation is not dead, but is evolving into "glocalisation," characterized by shorter supply chains, emphasis on domestic manufacturing, and a more strategic role for government. The shift towards onshoring previously outsourced production has been accelerated by recent events, leading to a growing interest in industrial policy and green growth plans.
"Global Carbon Tax Debated by World Leaders at World Economic Forum"
During a panel at the World Economic Forum, Singapore President Tharman Shanmugaratnam called for a global carbon tax as a solution to climate change, emphasizing the need for a coordinated system of carbon taxes, subsidies for vulnerable households, and funding for developing countries. Saudi Arabia's finance minister expressed agreement with the need for solutions to address climate change but highlighted challenges in implementing a carbon tax and redirecting funds to low-income countries. Germany's finance minister suggested a carbon market as an alternative to a carbon tax, proposing that countries could invest in renewable energy production in developing countries as part of emissions compensation.