Another 11 countries, termed middle income ones led by South Africa, have their GDP registering 4.3 percent last year, dropping to 3.4 percent this year and back again rising to 4 percent next year, while 14 countries of low income led by Kenya and Ethiopia show their growth rate stabilizing during the three-year period under review at 5.8 percent, 5.9 percent and 5.9 percent respectively.
Finally, the last group comprising 12 fragile countries led by Burundi and Comoros show their economic growth shooting up from 1.7 percent last year to 6.6 percent this year to moderate at a lower rate of 5.8 percent next year.
Such growth that seemed to be out of reach and expectations over the past decade enjoys the possibility of sustainability and the picture looks more buoyant than definitely Europe and North America. In fact, over the past decade, statistics show that six out of the ten fastest growing world economies were in Africa. Not only that, Africa even managed to weather the 2008 financial crisis.
200m Young Population
One of the main reasons for such a surge is the fact that Africa has the youngest population of 200 million people whose ages range between 15-24 years, and according to a forecast that number could double by 2045.
This young population is getting better education, as around 42 percent of those in this age range have a secondary education and that rate is expected to rise to an impressive 59 percent by 2030.
However, though Africa managed to weather the financial crisis four years ago and is less affected by the eurozone debt crisis, generally speaking, except in the case of South Africa, it stands the risk of being highly affected if the expected slowdown of Chinese and Indian economies is to take hold.
That tells about the new relationship where the old metropolitan centers of London, Paris and Brussels of the colonies are no longer calling the shots as far as determining the economic development in the continent.
On the other hand, the new rising Asian powers are hungry for natural resources to feed their growing population and heating economies. The same applies to the Middle East oil producers who have the bulk of their oil exports head toward the Asian markets, where demand was and continues to be high.
Last month, the telecommunication tycoon of Sudanese origin, Mohamed Fathi Ibrahim, better known as Mo Ibrahim, wrote that when he started to build an African mobile phone operation, “very few were willing to hear or believe that Africa was open for business. When I said time and again that you could do business in Africa without paying a dollar in bribes, I was met with disbelief.”
He went on to add that the hopeless continent has become the “next investment frontier as investors consistently make returns impossible elsewhere”.
Through the foundation called after his name that issues an index on good governance, he noticed that over the years the general trend in the continent has been positive given the observation that there is a marked decline in armed conflicts, sustained economic development and significant gains in human development--in education and health services.
Mo is a strong believer in the role of leadership in making such impacts. That is why he established six years ago the Leadership Award to reward excellence with $5 million, but that prize has been withheld three times so far for lack of suitable candidates. In addition to the role of the leadership, much awaits the people in terms of civil society and other organizations.
More Time for Greece
Eurozone finance ministers gave Greece two extra years to wrestle down its budget deficit, pledging to plug the resulting financing gaps to keep the country in the single currency and prevent a renewed flareup of the debt crisis.
Finance ministers granted Greece until 2016 to cut the deficit to 2 percent of gross domestic product. They put off until Nov. 20 a decision on how to cover additional Greek needs of as much as €32.6 billion ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute, Bloomberg wrote.
In the latest compromise in three years of crisis fighting, creditors led by Germany opted to keep money flowing to Greece instead of risking a default that could lead to the nation’s exit from the euro and stir more turmoil for countries left in it.
“Greece has done a big part of what it was supposed to do, adopted an ambitious reform program and a budget for 2013 that’s impressive,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels late yesterday after chairing the ministers’ meeting.
Juncker said “a certain number of avenues” except the writedown of official loans are being looked at for filling the funding gap.
The MSCI Asia Pacific Index dropped 0.7 percent as of 11:53 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index traded 0.4 percent lower. The euro reached a two-month low against the US dollar and oil futures slipped as much as 0.6 percent.
Left unanswered was how the creditor governments will keep Greece afloat without putting up more money themselves, a question that may dog German Chancellor Angela Merkel during her campaign for reelection in late 2013. The role of the IMF, provider of about a third of €148.6 billion in loans funneled to Greece since 2010, also went unsettled.
IMF Managing Director Christine Lagarde took issue with a decision by the euro chiefs to postpone the goal of getting Greece’s debt down to a ‘sustainable’ level of 120 percent of GDP by two years, until 2022.
“Debt sustainability of Greece has to be measured in 2020,” Lagarde said. “We clearly have different views. What matters at the end of the day is the sustainability of the Greek debt.”
“For the moment, Greek debt is not sustainable and therefore we need significant reduction of the debt burden, but that does not include haircuts to principal of public loans,” European Union Economic and Monetary Commissioner Olli Rehn said. “There are other ways and expect it will be a combination of various options.”
In the meantime, Greece will escape a default on Nov. 16 when €5 billion in treasury bills become due. Greek banks will be able to roll over their bill holdings, saving the country from the “financing cliff”, Rehn said.
The search for a solution will run in parallel with parliamentary debates in countries such as Germany, Finland and the Netherlands, three countries that have handed control over bailout policy to lawmakers concerned about wasting taxpayers’ money.
“Everyone needs to be very pragmatic,” said Finance Minister Pierre Moscovici of France, which under new President Francois Hollande has emerged as an advocate of the fiscally strapped south. “We have an agreement on principles. Now we have to apply them.”
India Sees End of Gloom & Doom
Indian Prime Minister Manmohan Singh has said the economic “gloom and doom” clouding the country in recent years has been dispelled and that he is determined to push ahead with further reforms.
Singh said that in 2006, a 10-percent annual growth looked eminently achievable and the sense of optimism was all pervading. But he admitted that since then, Indian exports have shrunk and the fiscal deficit has gone up, The Economic Times reported.
“Growth decelerated to 6.5 percent last year and may be only around 6 percent in the current year,” he said. “This has dampened investor sentiment.
“Doubts are being raised in some quarters about the India growth story going astray,” he added.
Singh vowed that a raft of reforms announced in September would revive the economy and attract foreign investment, with more policy changes in the pipeline.
“We have dispelled gloom and doom, improved the climate for foreign investment (and) are working hard to restore investor confidence and the growth environment,” Singh told business leaders in Mumbai, India’s financial capital.
In a strongly-worded speech, Singh said that his government “bit the bullet” when introducing recent reforms, including to the retail sector that will allow global chains such as Walmart and Tesco to open branches in India for the first time.
The move has attracted fierce opposition and many Indian states may still act to keep out giant supermarkets to protect small shopowners.
“Some of the steps were considered by many of our critics as politically impossible. We bit the bullet and did what we felt was the right thing to do,” Singh said. “Undoubtedly, more needs to be done.”
The reforms have already cost the ruling coalition its majority with the exit of an allied party that has threatened to bring a no-confidence motion against the government when parliament reopens later this month.
The Congress-led government has suffered a difficult second term in power amid policy paralysis, worsening economic data and corruption allegations, and is looking to revive its fortunes with the next general elections due in 2014.
“We can, and we must, correct our own weaknesses, and create new opportunities for economic growth and employment,” Singh said, pointing to recent lowering of fuel subsidies as one move to tackle the fiscal deficit.
He promised imminent changes to tax avoidance rules to address “very negative reaction from investors”, and said infrastructure projects would be given rapid clearances to end one of the biggest drags on growth.
Turkey May Cut Rates
Turkish Central Bank Governor Erdem Basci said a measured rate cut may be forthcoming from the bank if the lira remains strong.
“The lira has come to an excessive appreciation level. If it firms further, it may necessitate a policy reaction by the central bank,” Basci said at an event organized by state-run Anatolian News Agency.
Basci said the bank would react in the short term if the real exchange rate index that it looks at to gauge lira strength or weakness stood between 120-125 and it would take a strong policy action by using all its tools if the real exchange rate index crossed 130.
At the end of October, the index stood at 117.40.
Following Basci’s comments, the yield on Turkey’s two-year benchmark bond fell to a record low of 6.36 percent, from 6.53 percent beforehand. The lira weakened to 1.7991 to the dollar, from 1.7896 late on Friday.
Oil Demand to Rise 14% by 2035
The global thirst for oil will grow in the next two decades driven by demand from emerging nations and the rise of the US as the top producer, the International Energy Agency said.
Oil demand will increase by 14 percent between now and 2035 to reach 99.7 million barrels a day, the OECD-linked energy watchdog said in its annual assessment of the energy markets of tomorrow, Arab News wrote.
This was 700,000 bpd more than the IEA forecast a year ago and signals that the world is still figuring out how to put the global energy system on a more sustainable path, the IEA said.
Oil prices will rise too, it said, reaching $125 barrels by 2035 ($215 in nominal terms), from about $107 this year, and instead of the $120 forecast earlier.
“Growth in oil consumption in emerging economies, particularly for transport in China, India and the Middle East, more than outweighs reduced demand in the OECD, pushing oil use steadily higher,” the IEA said.
S. Korea’s Banking Sector Faces Bumpy Road
South Korea’s banking sector is expected to suffer setbacks in performance in the next few quarters, dented by a sustained high level of household debts and a corporate slowdown, Moody’s Investors Service Inc. warned on Tuesday.
“The operating environment for Korean banks will be weakened over the next 4-6 quarters as the industry faces a high level of household debts, falling property prices in metropolitan towns and a slowdown in construction and shipbuilding,” Choi Young-gil, the vice president and senior credit officer at Moody’s, told reporters at a press meeting in Seoul, Yonhap reported.
With the eurozone risks lingering and a hard-landing scenario for China emerging, such subdued conditions remain as “tail risks” that could have a negative impact on the credit ratings of local banks, Choi said.
Gold Prices Up
Gold demand in India, the world’s biggest buyer of bullion, rose on as key festivals and the wedding season helped the yellow metal hit its highest level in intra-day trade since September 20.
At 03:37 pm IST, the most active gold for December delivery on the Multi Commodity Exchange (MCX) was 0.77 percent higher at 31,887 rupees per 10 grams, after hitting a high of 31,937 rupees, Reuters reported.
The rupee, which fell to a two-month low on Monday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.
“Gold prices are moving up due to higher demand in the physical markets. Imports will resume in the next few days due to the higher demand in the festival and wedding seasons,” said Aurobinda Prasad, the head of research at Karvy Comtrade.
Portugal’s Currency Rating
Ratings agency Fitch has affirmed Portugal’s long- and short-term foreign and national currency standings as respectively at BB+ and –B with a negative outlook.