1 Saudi GDP growth slows (Khaleej Times) Saudi
Arabia's economy expanded at its slowest rate in three years during the first
quarter of 2016 as low oil prices forced the government to cut spending and
raise costs for industry, official data showed.
Some analysts said the data pointed to a risk of
growth in the world's top oil exporter slowing to near zero this year, which
would be its worst performance since the global financial crisis of 2009.
Gross domestic product, adjusted for inflation, grew
1.5 per cent from a year earlier between January and March, down from a revised
growth rate of 1.8 per cent in the fourth quarter of 2015, the state statistics
office said. It was the slowest growth since 0.3 per cent in the first quarter
of 2013.
The oil sector expanded 5.1 per cent in the first
quarter of this year as the world's biggest oil exporter increased its
production of crude and exported more refined products. But the non-oil sector
shrank 0.7 per cent, its worst performance in at least five years.
If the economy slows excessively, the government
still has the option of spending more to stimulate growth; the central bank
holds $573 billion of net foreign assets, and Riyadh has begun borrowing abroad
this year to finance some expenditure.
But if it eases up on its austerity programme too
much it may increase pressure on the Saudi riyal's peg against the US dollar,
fuelling concern among some foreign investors about the long-term
sustainability of its economy.
2 Yen’s surge may wipe out three years of stimulus
(Straits Times) A dash for the relative safety of Japanese assets by domestic
and foreign investors alike spurred the yen to a 17 per cent gain in 2016, its
best first half of a year since 1995. The currency strengthened as far as 99.02
per US dollar last month for the first time since 2013, leaving it as the
year's second best-performing major currency.
That's a concern for Japan's policy makers because
it threatens to wipe out the effects of more than three years of central-bank
stimulus, which a year ago sent the currency to its weakest level since 2002.
Bank of Japan Governor Haruhiko Kuroda remains on the wrong side of his 2
percent inflation goal as a key measure of consumer prices fell for a third
month in May.
Fragile global growth and a Federal Reserve that's
now seems unlikely to raise rates until 2018 are also supporting Japan's
currency. While speculation has mounted that the BOJ will expand stimulus at
its policy meeting this month, analysts see limited scope for this to push down
the yen. The adoption of a negative deposit rate this year failed to curb its
gains - and may have contributed to its strength.
3 Anarchic global politics (Andrew Wainer in The
Guardian) According to the realist school of political science, the global
political system is essentially anarchic; there is no ultimate global legal
authority. “Realists” see a world governed by the law of the jungle.
We have the United Nations, but it has limited
enforcement power. The US sometimes assumes the role of global cop, but
enforces global norms selectively. For those who grew up in the western
middle-class, the world can seem a well-ordered environment where the
rule-of-law prevails. But revelations from the Panama Papers pulled back the
curtain on what can be a lawless international tax system, and one in which
some western elites are deeply implicated.
The lack of a cohesive, comprehensive international
tax system is an excellent example of the essential lawlessness of the global
system. And illegality is only part of the problem. As President Obama said
recently: “The problem is that a lot of this stuff is legal, not illegal.” The
lack of a coherent global tax infrastructure allows some global elites to avoid
paying taxes, without breaking the law. When there are Panama, Luxembourg, and
Nevada-size holes in international tax law, there’s no need to act criminally.
The International Consortium of Investigative
Journalists (ICIJ) state that Mossack Fonseca, the Panama-based firm at the
center of the scandal, is hardly scorned by respectable society. ICIJ points
out that “more than 500 banks, their subsidiaries and branches have worked with
Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS
set up more than 1,100 offshore companies through Mossack Fonseca. HSBC and its
affiliates created more than 2,300.”
While most of us get on with the dull but necessary
job of filling out forms or visiting accountants during tax season, prime
ministers, princes, and presidents in rich and poor nations fortify their
off-shore companies and shift money to their preferred tax haven.
The good news is that, in spite of the volatile
international context, ideas and campaigns on this subject are beginning to
converge at last. Save the Children is part of this convergence committed to
addressing IFFs. The recently launched Every Last Child campaign includes fair
finance as a central component in reaching the world’s excluded and vulnerable
children.
For its part, Save the Children is committed to
making finance fairer so that the world’s vulnerable children are able to
survive, thrive, and enjoy secure lives. The Panama Papers revealed that the
weakness of the global tax infrastructure, but the outrage it sparked could
lead global tax policy to be less like the “Wild West” and more like tax
season.
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