WB upgrades East Asia”s growth forecast

BEIJING: The World Bank has raised its forecast sharply for economic growth in East Asia to reflect reviving global demand, sustained fiscal and monetary stimulus in the region and a rapid rebound in consumer spending.

The developing economies of East Asia will grow by 8.7 per cent in 2010, the bank said in a semi-annual economic update published on Wednesday. In November, it had projected 7.8 per cent growth.

Stripping out China, growth will spurt to 5.5 per cent in 2010 from 1.3 per cent in 2009, the Washington-based lender said.

Vikram Nehru, World Bank chief economist for the East Asia Pacific region, said policymakers needed to plan for slower growth in developed countries, tighter global financial conditions, rising concerns about developed countries” debt levels, and a more difficult environment for global trade.

“In that setting, the developing countries of East Asia will need to carefully manage the withdrawal of fiscal stimulus measures in the short term while returning to their structural reform agendas to promote growth in the long term,” he said in a statement.

For China, structural reform means rebalancing the economy, including a larger role for the service sector and private consumption and moving away from investment-heavy export-led growth as well as encouraging environmental sustainability.

For middle-income countries, such as Indonesia and Thailand, the emphasis should be on investment in human and physical capital.

In a slower-growing world, pursuing economic integration and engineering a massive shift to green technologies and energy efficiency will be imperative for all countries in the region, the bank said.

Two Dead, One Missing in British Floods

Two Dead, One Missing in British Floods, Structural engineers and military experts begin an urgent safety review of hundreds of bridges in Britain as fears grow that Calva bridge in Workington, Cumbria is on the brink of being swept away in floods. Two people have died and one is missing as a result of the inundations.
Engineers and emergency workers checked hundreds of bridges for flood damage in Cumbria, fearful some could collapse and isolate villages, as heavy rain lashed northwest England. Five bridges have already collapsed in the area, including one in Workington which resulted in the death of Police Constable Bill Barker.

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Two Dead, One Missing in British Floods was first posted on November 23, 2009 at 8:57 pm.

Inflation May Increase Due To Oil and Powers Rising

PAKISTAN, KARACHI: The moderation in aggregate demand pressures is likely to further contribute to decline in average inflation. However, likely increases in oil and electricity prices and upward revision of public sector wages may lead to renewed inflationary pressures in current fiscal year, said the State Bank of Pakistan in its monetary policy statement for July-September 2009.

The SBP said that during the current fiscal year the moderation in aggregate demand pressures is likely to continue, contributing towards further decline in average inflation, expected to be around 10 percent, and macroeconomic stability. More importantly, the decline in inflation could be accelerated if the structural reasons of inflation persistence are addressed diligently.

“The benefit will not only be in terms of improved inflation expectations but also for the real economic activity. However, likely increases in the oil prices and upward revision of public sector wages may lead to renewed inflationary pressures,” the SBP said.

Inflationary pressures eased further since March 2009 with CPI inflation (YoY) declining by 7.9 percentage points to 11.2 percent in July 2009. In fact, the pace of decline in inflation increased noticeably in Q4-FY09 compared to the previous quarter and in the first month of FY10.

Similarly, the YoY non-food non-energy (NFNE) and 20 percent trimmed measures of core inflation also declined from their peak levels to 14.0 and 13.9 percent. However, core inflation is still at a relatively high level and recent trends in monthly inflation indicators are showing a degree of stickiness in inflation. Despite the significant decline in inflation in recent months, average CPI inflation of 20.8 percent for FY09 is much higher than the initially announced target of 11 percent.

Moreover, the average inflation during Q4-FY09 turned out to be 14.9 percent, which is higher than the 14 percent projected in the last MPS. Smaller than expected decline in the House Rent Index (HRI) inflation and imposition of fixed Petroleum Development Levy (PDL) on administered oil prices in June 2009 explain this deviation.

A number of factors explain persistence in inflation. First, the benefits of falling international commodity prices, in particular oil prices, were not fully transferred to the domestic economy. Second, even when the domestic administered prices were adjusted, other prices did not respond accordingly due to structural downward rigidities in the system.

Third, nominal exchange rate depreciation during the first four months of FY09 diluted some of the gains of falling international commodity prices. Fourth, fiscal consolidation measures, such as elimination of subsidies, adjustment in power tariffs, revisions in GST and import duties, added to the existing price pressures.

Fifth, loss in productivity due to severe electricity and gas shortages is another reason why the gains of contracting demand pressures could not be fully realised. While solutions for structural impediments develop in the backdrop, monetary policy will maintain its oversight of inflation and its role in improving macroeconomic imbalances, simultaneously supporting real economic activity.

A 7.9 percentage point decline in CPI inflation (YoY), from 19.1 percent in March ‘09 to 11.2 percent in July, is reassuring and validates the direction of economic policy. The YoY non-food non-energy (NFNE) and 20 percent trimmed measures of core inflation have also declined to 14.0 and 13.9 percent in July. In fact, the pace of decline in inflation increased noticeably in Q4-FY09, compared to the previous quarter, and continued through into the first month of FY10.

Five more US bank closures

WASHINGTON: US regulators have shut down five more regional banks, bringing the total number of US bank failures to 77 this year, the US government announced.

The Federal Deposit Insurance Corporation (FDIC) said Colonial Bank of Montgomery became the largest US bank to fail this year after it was declared bankrupt and had the bulk of its assets taken over by rival BB&T.

All of Alabama-based Colonial’s 346 branches will reopen Saturday “and operate as branches of BB&T,” the FDIC said.

The list of closed banks also included the Community Bank of Nevada in Las Vegas that was closed by order of the Nevada Financial Institutions Division, which appointed the FDIC as receiver.

As of the end of June, the bank had total assets of 1.52 billion dollars and total deposits of about 1.38 billion.

Also shut down was the Community Bank of Arizona in Phoenix, which will be taken over by MidFirst Bank from Oklahoma City.

The bank had total assets of 158.5 million dollars, most of which will be purchased by MidFirst Bank, the FDIC said.

The Oklahoman bank will also assume all of the deposits of Union Bank of Gilbert, another Arizona institution shut down by regulators.

The closed financial institutions also include the Dwelling House Savings and Loan Association of Pittsburgh, Pennsylvania.