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Russian economy will not return to pre-war levels until 2030 – Scope

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BERLIN – Russia’s economy is not likely to return to pre–war levels before the end of this decade as the Ukraine war and stricter sanctions worsen long-standing economic deficiencies, Scope Ratings said in a report seen by Reuters on Friday.

By the end of 2023, gross domestic product (GDP) will be about 8% below where output was in 2021, according to the credit rating watchdog’s forecast.

The Russian economy expanded by 4.7% in 2021, according to federal statistics service Rosstat. Read full story

After 2023, potential growth will drop to 1.0-1.5% a year from the 1.5-2.0% achieved before the war, the agency said.

“The Russian government, helped by the Bank of Russia, has used windfall export revenues to mitigate the immediate domestic economic impact of the war in Ukraine and sanctions, but the longer-term outlook has worsened,” said Scope analyst Levon Kameryan.

Accelerating capital outflows, limited access to Western technology and negative demographic trends will continue to hamper growth and compound the effects of the war and sanctions in the absence of any significant economic restructuring, according to the report.

About four times as much private capital – $64.2 billion – flowed out of Russia in the first quarter of 2022 alone compared with the same quarter last year, said the report.

The Scope report predicts that the private sector will withdraw more capital from Russia this year than the $152 billion pulled out in 2014, when Russia annexed the Crimea. – Reuters

Norway to help ease the power price pain for businesses

STOCK PHOTO | Image by Alexandra von Gutthenbach-Lindau from Pixabay

OSLO – Norway‘s government on Friday presented a long-awaited package of loans and subsidies to reduce the impact of sky-high power prices for businesses, joining other European countries seeking to ease the energy crunch.

Governments across the region have been racing to present measures to protect consumers and industry from more expensive energy bills. Read full story

The subsidy scheme will cover companies with power costs exceeding 3% of revenue in the first half of 2022, costing a total of 3 billion Norwegian crowns ($292.5 million), industry minister Jan Christian Vestre told a news conference.

“On the one hand, we must avoid creating further pressure on the Norwegian economy, while at the same time we want to give electricity-intensive companies help to adapt,” Mr. Vestre said.

Norway‘s NHO business lobby, which took part in negotiations on the measures, said it backed the plan.

The subsidy presented by the center-left government will compensate 25% of power rates above a threshold of 0.70 Norwegian crowns per kilowatt hour and will be capped at 3.5 million crowns per company.

In addition, companies can borrow up to 50 million crowns, he said.

The scheme is intended to last until the end of the year, with the government planning tax changes from January to simplify and provide incentives for fixed-price, long-term power supply deals at less than current elevated levels.

Wholesale power prices in southern parts of Norway have soared by 700% over the past year from 0.50 crowns/kWh to 4 crowns/kWh owing to a combination of high European gas prices and a dry year in the hydropower-dependent country. Read full story

Norway is already subsidizing household electricity bills and has also provided help to agriculture and greenhouses. However, other businesses with relatively high power consumption, such as bakeries, butchers and dry-cleaners, have had to absorb price spikes in full. – Reuters

EU regulator backs wider use of AstraZeneca COVID therapy

LONDON – Europe’s medicines regulator has backed using AstraZeneca‘s preventative COVID-19 therapy as a treatment for the disease and also endorsed another medicine as preventative option for another common virus.

The regulator‘s recommendations are usually followed by the European Commission when it takes a final decision on drug approvals.

AstraZeneca said on Friday the European Medicines Agency (EMA) had backed Evusheld as a treatment for adults and adolescents with COVID who do not need supplemental oxygen and who are at increased risk of their disease worsening.

Last month, Japan became the first country to approve the long-acting antibody as a treatment for COVID – making Evusheld the first such therapy authorised for both prevention and treatment of the viral disease.

Evusheld had previously had largely secured global approvals, including in Europe, as a preventative therapy for people with compromised immune systems who see little or no benefit from COVID vaccines.

AstraZeneca is leaning on Evusheld to help offset tepid sales of its COVID vaccine that has rapidly lost ground to mRNA shots in the fight against the rapidly evolving virus.

Evusheld, first launched in December, generated $914 million in the first half of 2022 for the Anglo-Swedish drugmaker.

Separately on Friday, the EMA also endorsed AstraZeneca and partner Sanofi’s SASY.PA experimental long-acting therapy Beyfortus for the prevention of lower respiratory tract infections caused by respiratory syncytial virus (RSV).

RSV causes thousands of hospitalizations and deaths globally each year in toddlers and the elderly, but the complex molecular structure of the virus and safety concerns have stymied efforts to develop a vaccine since the virus was first discovered in 1956.

But there is one therapy, Synagis, also developed by AstraZeneca but sold by Swedish Orphan Biovitrum in the United States.

It is designed to prevent lower respiratory tract infections caused by RSV in high-risk infants and requires up to five injections to cover a typical RSV season.

Meanwhile, if Beyfortus were approved, it would be the first single-dose preventative RSV therapy for the broad infant population – including those born healthy or are deemed high-risk – during their first RSV season. – Reuters

Pound falls to 37-year low as poor retail sales lift economic woes

STOCK PHOTO | Image by Stefan Schweihofer from Pixabay

LONDON – The pound on Friday tumbled to a fresh 37-year low on the U.S. dollar, and a 17-month trough on the euro, after weaker-than-expected figures of retail sales added to worries about the health of Britain’s economy.

The pound fell more than 1% against the dollar GBP=D3 to 1.1351, its lowest since 1985, its fall accelerating once it passed through the then 37-year low hit last week.

The euro rose to as high as 87.66 pence, its highest level since Feb 2021, and was last up 0.39% at 97.52 pence.

Retail sales volumes dropped 1.6% in monthly terms in August, the Office for National Statistics said on Friday – the biggest fall since December 2021 and worse than all forecasts in a Reuters poll of economists that had pointed to a 0.5% fall. Read full story

But this was just the latest bad news for the British currency.

“The grinding backdrop of everything that’s going on is weighing on sterling, with the UK running these massive external deficits and the risks around the new prime minister’s policies adding to that,” said John Hardy, head of FX strategy at Saxobank.

Britain’s new leader, Liz Truss, last week announced a cap on soaring consumer energy bills for two years to cushion the economic shock of war in Ukraine with measures likely to cost the country upwards of 100 billion pounds ($115 billion). Read full story

British finance minister Kwasi Kwarteng is due to make a fiscal statement this month to explain how this will be funded, and also is expected to say how he will deliver the tax cuts promised by Ms. Truss during her campaign for leadership of the Conservative Party. Read full story

“In addition, markets are “risk-off” following Fedex’s withdrawing its forecast, and US equities dropping below a key support level. In a risk-off environment, sterling is like a worse euro,” said Foley.

FedEx Corp. on Thursday withdrew the financial forecast issued just three months ago, sending its shares plunging and weighing on markets more broadly. Read full story – Reuters

Philippines antitrust body orders more firms to report takeovers, mergers

MANILA – More merger and acquisition deals in the Philippines will be required to secure prior approval, its competition watchdog said on Friday, as it seeks to expand its reviews of transactions to better protect consumers.

Dozens of companies in the past two years were exempted from notifying the antitrust body and seeking approval for takeovers and mergers, as part of a government effort to encourage and fasttrack deals during the pandemic.

But effective Friday, mergers and acquisitions above P2.5 billion ($43 million) are subject to review, the Philippine Competition Commission (PCC) said in a statement.

Companies with more than P6.1 billion ($106.35 million) in assets or revenues engaging in such deals must also seek PCC approval.

Those compare to a much larger deals threshold of above P50 billion ($871 million) that was introduced for a two-year period from September 2020.
During that time, the PCC exempted 55 corporate deals from a mandatory review and approved six transactions.

The Philippines launched operations of the anti-trust body in 2016, to encourage foreign investment and increase competition in sectors where consumers have long complained of high costs and bad services.

It has since received 227 notifications and approved 205 transactions with a combined value of P4.63 trillion ($80.73 billion).

“Parties who know of mergers and acquisitions that did not meet the thresholds in the last two years but which may have led to monopolies or adverse effects in the market may report these,” the PCC said in its statement. — Reuters

Sri Lanka’s economy shrinks 8.4% amid fertilizer, fuel shortages

JALITHA HEWAGE-UNSPLASH

COLOMBO – Sri Lanka’s economy shrank 8.4% in the quarter through June from a year ago in one of the steepest declines seen in a three-month period, amid fertilizer and fuel shortages during the nation’s most severe financial crisis in more than seven decades.

An acute dollar shortage, caused by economic mismanagement and the impact of the COVID-19 pandemic, has left residents struggling to pay for essential imports including food, fuel, fertilizer and medicine.

The state-run Census and Statistics Department said agriculture shrank 8.4% in the second quarter and industries by 10%, while services dropped 2.2%, compared to a year ago.

A shortage of chemical fertilizers during the quarter impacted agriculture production, especially the country’s staple rice, while restrictions imposed on fuel imports reduced manufacturing activity, the government said.

In the first quarter, the island of 22 million people saw its growth contract by 1.6%. Sri Lanka’s central bank estimates the economy to contract by about 8% in 2022. Read full story

“This is the second steepest contraction we have ever seen. The last was when Sri Lanka posted negative growth of 16% in the Q2 of 2020 due to COVID-19 pandemic lockdowns,” said Dimantha Mathew, head of research at First Capital.

“We are expecting Q3 and Q4 growth to be negative as well and for overall growth to contract by 10% to 12%. Inflation has continued to grow in the Q3 and has hit private sector consumption, which will likely spill over into the fourth quarter.”

Sri Lanka reached a staff-level agreement for a $2.9 billion bailout with the International Monetary Fund (IMF) earlier this month, but it has to restructure its debt with private bondholders and bilateral creditors before getting disbursements.

Reuters reported on Thursday that India, the biggest provider of aid this year to its southern neighbor, does not plan to provide fresh financial support on top of the nearly $4 billion it has extended to Sri Lanka in 2022. Read full story – Reuters

Japan PM’s support tumbles as anger over state funeral grows

Japanese Prime Minister Fumio Kishida — KYODO/VIA REUTERS

TOKYO – Support for Japanese Prime Minister Fumio Kishida tumbled to its lowest level since he took office, hit by growing anger over a state funeral for slain former leader Shinzo Abe and his ruling party’s ties to a controversial church, an opinion poll showed.

Mr. Kishida’s support fell to 32.3% from 44.3% a month before, according to the survey by Jiji news agency conducted at the weekend – approaching what is widely seen as a “danger level” of 30% that signifies a government may run into trouble carrying out its political agenda.

Those who did not support his government climbed to 40%, a rise of 11.5 points, Jiji added.

Links to the Unification Church, founded in South Korea in the 1950s, have become a growing headache for Mr. Kishida since July 8, when Abe was killed by a suspect who blamed him for supporting the church, which he said had bankrupted his mother.

Revelations following Mr. Abe’s assassination of ties between the ruling party and the church, which has faced criticism over the years, have fed into anger about the cost of the Sept. 27 funeral, paid for solely by state funds, and how Mr. Kishida decided to hold it.

Mr. Kishida defended his decision in parliament last week, the same day his ruling party announced the results of its investigation into party ties to the church, but the poll found that 62.7% of respondents did not approve of his handling of the church matter, while 51.9% were against the state funeral.

Recovery from such steep falls in support may be difficult, analysts said.

“Even once the funeral‘s past, the problem with the Unification Church will continue. He’ll probably face harsh questioning in parliament once it opens in October,” said commentator Atsuo Ito.

“With the economy under stress as well, I’m not sure what will help him regain support.” – Reuters

IMF sees further global economic slowdown in third quarter

REUTERS

WASHINGTON – Downside risks continue to dominate the global economic outlook and some countries are expected to slip into recession in 2023, but it is too early to say if there will be a widespread global recession, IMF spokesman Gerry Rice said on Thursday.

Rice told reporters that high-frequency data pointed to a further loss of momentum in the third quarter, given continued high inflation, supply chain problems and tighter financial market conditions, but gave no details on any further revisions to the International Monetary Fund’s outlook.

The IMF in July revised down global growth to 3.2% in 2022 and 2.9% in 2023. It will release a new outlook next month.

“Clearly what we had characterized as a global economic slowdown has only intensified in recent weeks and months,” Rice said in a virtual news briefing.

He said a continuing COVID-19 lockdown and real estate issues were weighing on economic activity in China, while the strengthening dollar had implications for many countries.

“Downside risks continue to dominate the outlook with just a tremendous amount of uncertainty that needs to be taken into account,” he said. “We do expect some countries to face recession in ’23. It’s too early to say whether that would be a widespread global recession.”

Even if some countries were technically not in recession, it would feel like a recession for many people around the world, Rice said.

He noted that in Africa alone, hunger had soared by one-third over the last two years, affecting 123 million people.

“Whatever you want to call it, it’s a horrendous situation for those people.” – Reuters

EU lawmakers condemn China’s live-fire exercises in Taiwan Strait

REUTERS

BRUSSELS – Members of the European Parliament backed a resolution on Thursday that condemned China’s live–fire military exercises in the Taiwan Strait and called for closer ties between the European Union and Taipei.

The EU assembly said in a statement that the resolution, backed in a vote by 424 lawmakers with 14 against and 46 abstentions, also demanded that Beijing refrain from measures that could destabilize the Taiwan Strait and regional security.

China deployed scores of planes and fired live missiles near Taiwan last month after U.S. House of Representatives Speaker Nancy Pelosi made a solidarity trip to the self-ruled island.

Taiwan’s Foreign Ministry welcomed the resolution and expressed its thanks for the support, saying the move demonstrated high-level and cross-party concern for peace and stability in the Taiwan Strait.

China, which sees Taiwan as one of its provinces and has long said it reserves the right to take the island by force, says its differences with Taipei are an internal affair.

Taiwan’s democratically-elected government strongly objects to China’s sovereignty claims, and says only the island’s 23 million people can decide its future.

Noting Taiwan‘s strategic trade position and its leading role in the global supply chain of key high-tech sectors, including for semiconductors, the European Parliament resolution called on the EU to strengthen its relations with the island.

It welcomed Lithuania’s plan to open a trade representation office in Taipei and said EU countries without a trade office there should follow its example.

With the addition of Lithuania, 16 EU member states now have offices in Taiwan.

The EU also has representation in Taipei through the European Economic and Trade Office which operates as a de facto embassy in the absence of formal diplomatic ties. – Reuters

China’s retail, factory sectors unexpectedly perk up in August

REUTERS

BEIJING – China’s economy showed surprising resilience in August, with an unexpected pickup in factory output and retail sales growth shoring up the recovery from the crippling effects of COVID curbs, heatwaves and a deepening property slump.

The better-than-expected figures show the world’s second-largest economy is gaining some steam, after narrowly escaping a contraction in the June quarter and lifting recovery prospects slightly for the rest of the year.

Industrial output grew 4.2% in August from a year earlier, the fastest pace since March, according to the National Bureau of Statistics (NBS). The figure beat a 3.8% increase expected by analysts in a Reuters poll and the 3.8% expansion in July.

Retail sales rose 5.4% from a year ago, beating forecasts for 3.5% growth and the 2.7% gain in July and hitting the highest this year.

The upbeat set data lifts some of the gloom hanging over the sluggish recovery, which had been clouded by weak trade data and slow credit growth. Read full story

Fixed asset investment grew 5.8% in the first eight months of 2022 from the same period a year earlier, above a forecast 5.5% rise and up from January-July’s growth of 5.7%.

However, property investment in January-August fell 7.4% year-on-year, extending a 6.4% decline in January-July and raising pressure on the already challenged sector.

Amid weak consumer and business confidence, companies are wary of expanding and hiring more workers. The nationwide survey-based jobless rate eased slightly to 5.3% in August from 5.4% in July. Youth unemployment stayed high at 18.7%, after reaching a record 19.9% in July.

Policymakers have announced over 50 policy measures since late May to bolster the economy and stressed this quarter was a critical time for policy action. Read full story

A cabinet meeting chaired by Premier Li Keqiang on Tuesday announced extended tax relief for small firms and an additional 200 billion yuan relending quota for manufacturing and social services industries. Read full story

Analysts expect more disruptions from tighter COVID-19 controls in September before the ruling Communist Party’s Congress that starts Oct. 16, where President Xi Jinping is poised to break with precedent and secure a third leadership term.

A new leadership team would inherit a range of challenges, including questions on how to unwind what many see as an unsustainable zero-COVID policy to a property crisis and rising tensions with Washington. Read full story

Uber says responding to ‘cybersecurity incident’ after report of network breach

STOCK PHOTO | Image by freestocks-photos from Pixabay

Uber Technologies Inc. said on Thursday it is responding to a cybersecurity incident, after a media report that its network was breached with the ride-hailing company taking several internal communications and engineering systems offline.

A hacker compromised an employee’s workplace messaging Slack app and then used it to send a message to Uber employees announcing that it had suffered a data breach, according to a New York Times report on Thursday, citing an Uber spokesperson.

It appeared that the hacker was later able to gain access to other internal systems, posting an explicit photo on an internal information page for employees, the report added.

“We are in touch with law enforcement and will post additional updates here as they become available,” Uber said in a tweet without providing further details.

The Slack system was taken offline on Thursday afternoon by Uber after employees received the message from the hacker, according to the Times report, citing two employees, who were not authorized to speak publicly.

“I announce I am a hacker and Uber has suffered a data breach,” the message read, and went on to list several internal databases that were claimed to be compromised, the report added.

The staff at the company was instructed to not use Slack, which is owned by Salesforce Inc., according to the report. Other internal systems, too, were inaccessible. – Reuters

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