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Global economic giants worse inflation and forecast recession, Australia included

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By Dana Malcolm

Staff Writer

 

#Australia, October 29, 2022 – One of the top twenty economies in the world, Australia has the 9th highest GDP per capita in the world but even that healthy economy is feeling the pinch of Covid-19 and the Russian invasion with energy prices reaching shocking levels.

September inflation sits at 7.3 percent, a 32-year high.

The main culprit was the country’s rising energy prices.  And still consumers’ energy bills in the country are set to increase by more than 56 percent in the coming months and 150 thousand people will possibly be laid off, according to reports from 9 News Australia.

The Government is scrambling to put measures in place to soften the hard transition with extensions on paid parental leave, cheaper childcare, minimum wage increase and cheaper medication, but the prognosis hasn’t improved.

In light of the massive increase in energy bills, the Government is demanding that The Australian Competition and Consumer Commission asses the code of conduct for the gas industry and reassess the agreements that govern reasonable pricing for consumers, according to the Guardian.

With the decrease in oil production sanctioned by the Organization of Petroleum Exporting Countries (OPEC) in the last month, things could get worse for the country.

Six of the largest economies globally are facing tough times as well.  Japan barely avoided a recession this quarter, China is experiencing a slowdown but remains above water, Germany is headed for recession this winter, the U.S. is projected to be in recession in the next 12 months, Canada is expected to tip into a ‘modest recession’ this quarter and Brazil is expected to fall into its deepest recession on record.

Finance

UK holds steady on interest rates 

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Dana Malcolm

Staff Writer 

 

#UnitedKingdom, September 24, 2023 – For the first time since 2021, the Bank of England has decided to ‘hold steady’ on interest rates rather than increase them.

The decision comes following an unexpected fall in inflation in the European country.

It means UK consumers’ interest rate remains at 5.25 percent.  According to the BOE reports tabled on September 21st, only 5 of the nine members of the Monetary Policy Committee (MPC) voted to keep the rate steady.

The Bank expects the inflation rate, currently at 6.7 percent, to reach the two percent target by mid-2025 and food inflation is going down.

But at the same time, the UK’s Gross Domestic Product GDP declined in July and growth is expected to stay weak, plus, unemployment is on the rise in the country.

“The Labour Force Survey unemployment rate rose to 4.3 percent in the three months to July, higher than expected in the August Report,” the bank explained.

The US also recently held steady on its interest rates after a significant period of increase.

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Finance

Canadian analysts watching for recession 

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Dana Malcolm

Staff Writer

 

#Canada, September 9, 2023 – Financial analysts are watching the Canadian economy for the possibility of recession following a contraction in its Gross Domestic Product (GDP) for the second quarter of 2023, and a decision to keep interest rates at 5 percent.

The Bank of Canada decided to ‘hold steady’ on interest rates this Wednesday, a week after Information shared by Statistics Canada revealed the country’s GDP declined last quarter, failing to reach the over 1 percent growth that was predicted by economists.

“The slowdown was attributable to continued declines in housing investment, smaller inventory accumulation, as well as slower international exports and household spending,” Statistics Canada explained.

Central Banks in North American countries like Canada and the US have been hiking interest rates over the past year to balance out inflation. Both countries want inflation levels to remain at 2 percent.

A recession occurs when a market records negative GDP growth for two consecutive quarters. If Canada records another contraction in its GDP for the third quarter of the year, it will officially be considered to be in a recession.

In late 2022, the Royal Bank of Canada had predicted the country would fall into recession early this year because of cooling housing markets and high interest rates.

The country has not recorded a recession since the beginning of the pandemic.

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Finance

TCI Commercial Banks CAUTIOUS about LENDING, Report reveals

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By Dana Malcolm

Staff Writer

 

#TurksandCaicos, August 14, 2023 – Credit risk in the Turks and Caicos is decreasing; however, local banks are still very cautious with their lending practices, according to the latest annual report from the Turks and Caicos Financial Services Commission (2021-22).

The FSC Bank and Trust Department oversees the six banking institutions operating locally, their report indicated that the bank’s liquid assets grew massively because residents began to save more money.

“The increase in the sector’s assets was funded by customers’ deposits, which grew by 26.5 percent,” it said. That pushed assets between the six banks to $2.7 billion. Banks are turning a profit, just not as much as before COVID-19. Still, the cash was good enough that they could shutter loan loss provisions they had made.

Not only were customers depositing more money, but with the improved state of the local economy, residents wishing to borrow were resilient to the impact of COVID-19.

Also, fewer residents were defaulting on their loans, the FSC found, with a 29 percent drop in non-performing loans (loans in default), and because of that banks spent 40 percent less on provisioning (money used to cover loans in default). Only four percent of all the loans in the country were listed as non-performing, a decline from five point four (5.4) percent the period prior.

Despite this, fearing rising inflation, and health crises globally, banks responded with ‘conservative lending practices and risk appetites.’

This was at the height of the COVID-19 pandemic.

Residents locally have complained bitterly about the difficulty they face in securing loans and Washington Misick, TCI Premier, has repeatedly put local banks on blast for de-risking and vowed to have the UK step in, to date there has been no change.

Meanwhile, five of the six banks recorded increases in assets and loan portfolios were smaller for four of them.

The FSC also revealed that with banks holding tight to the purse strings, an unregulated credit market had been allowed to flourish locally, which they said was a cause for concern.

“A growing non-bank lending market has emerged in the TCI, which creates competition for the banking sector. This increases the risk to the financial sector if left unregulated and should credit conditions deteriorate,” they explained.

Another concerning revelation is that Money Sending Businesses (MSBs), which are heavily patronized in the country because of the high level of expatriate workers, are taking a hit as well. This time because of high banking costs, de-risking and the emergence of alternate ways to send cash.

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