1 Fitch eyes South Africa downgrade (BBC) Credit
ratings agency Fitch has warned South Africa that its credit rating may be
lowered following a five-month platinum strike in the country. Fitch was
followed by Standard & Poor who also downgraded their rating. Fitch changed
the country's outlook from stable to negative, citing poor economic prospects
and rising public debt.
Its economy contracted by 0.6% in the first quarter,
in part because of a fall in platinum production. A negative outlook can
indicate that a country's credit rating could be downgraded. A downgrade can
influence a country's borrowing costs, as some investors are restricted from
lending to borrowers that do not have a high rating.
South Africa's Treasury said that it was committed
to the plans laid out in the country's budget. Fitch kept South Africa's credit
rating at BBB, but raised concerns about a poor economic growth outlook and
persistent budget shortfalls.
The strike by up to 80,000 platinum miners has been
going on since late January and is the longest in South Africa's history. The
stoppage has affected about 40% of the global supply of platinum, which is used
in jewellery and vehicle catalytic converters.
2 Perils of please-all economics (Andy Mukherjee in
Straits Times) Singapore is confronting the perils of please-all economics.
Ageing citizens are pushing the Government for bigger nest eggs and more
subsidised health care and housing. There is also popular resentment against
letting more foreigners in, and not much appetite for increasing the 7 per cent
consumption tax. Squaring this fiscal circle will be a long-term challenge.
People protested last year when the Government
unveiled a plan to boost the resident population by 30 per cent to 6.9 million
by 2030, with immigration compensating for a drooping birth rate. The
multifaceted discontent puts Singapore's fiscally conservative Government in a
quandary. Expanding the economy - and the tax base - with less foreign labour
will mean improving the productivity of the local workforce. That's a long
shot.
Another way to pay for everything people want is to
tax companies more heavily. But Singapore's business costs are already quite
high. A third strategy could be for the city-state to try to earn more on its
substantial sovereign wealth by buying riskier assets. That could backfire,
leaving less money for welfare. Alternatively, the Government could skimp on
investing.
Slowing the pace might be a mistake, however. Pricey
real estate would swoon if Singapore loses its urban buzz and stops attracting
investors and tourists. That will make Singapore's property- loving citizens
less wealthy and more miserable. The trade-offs are difficult. But Singapore
has some advantages.
Rival Hong Kong is facing an existential threat as
China tightens its grip on the former British colony and boosts alternatives
like Shanghai. By contrast, Singapore offers investors proximity to India and
Indonesia, neither of which will boast a global city soon. For all the
grumbling, the majority of Singaporeans are too pragmatic to opt for unbridled
welfarism at the next elections, which will take place by 2016. Still,
please-all economics is scratching at the door. If it finds a way in,
prosperity could be in jeopardy.
3 Counting the wealthy (Khaleej Times) The growth of
private wealth has accelerated across most regions in 2013. As in 2012, the
Asia-Pacific region (excluding Japan) represented the region in which such
private wealth has grown fastest — and this means not only that the ‘ultra high
net worth’ households have become richer, but that there are more of them
crowding into what used to be, two generations ago, a small and fairly quiet
club.
Looking ahead to 2018, wealth project global private
wealth to post a compound annual growth rate of 5.4 per cent. What this means,
for the rest of a world which ponders the question of income inequality and the
soaring cost of living, is that global private wealth is expected to reach around
$198 trillion in 2018 (half of this will be in the Asia-Pacific region). When that
happens, global private wealth will be more than three times as large as the
combined GDPs, in 2018, of the world’s ten largest economies.
Such wealth-watching brings with it curious
factlets. The highest density of millionaire households is in Qatar (175 out of
every 1,000 households), followed by Switzerland (127) and Singapore (100). The
US has the largest number of billionaires, but the highest density of
billionaire households is in Hong Kong (15.3 per million), followed by
Switzerland (8.5 per million). In terms of growth rate India will show the
highest rise, as the wealth of the richest households is forecast to grow 129
per cent, to go up from $ 2 trillion to $ 5 trillion.
For the private bankers and wealth managers, the
latest in a growing number of ‘rich list’ studies shows yet again that all’s
well that spends well.
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