Thursday, April 6, 2017

Low interest rate a global financial risk, says IMF; Kuwait best off among oil exporters; Norway to build world's first ship tunnel

1 Low interest rate a global financial risk, says IMF (Larry Elliott in The Guardian) A prolonged period of low interest rates will tempt banks to take greater risks and sound the death knell for final salary pensions, the International Monetary Fund has warned.

A new study from the IMF said a continuation of the cheap borrowing environment seen since the global financial crisis a decade ago would pose a “significant challenge” to financial institutions and force them to make fundamental changes to their business models.

Although interest rates have recently started to rise in the US, the IMF said Japan’s experience suggested an imminent and permanent end to the current low interest rate environment could not be guaranteed. Some economists, such as the former US treasury secretary Larry Summers, say the global economy is gripped by so-called secular stagnation, in which excessive savings and weak investment lead to weaker growth and lower interest rates.

The IMF, in a chapter from its forthcoming Global Financial Stability Review, said the decline in real (inflation-adjusted) interest rates since the mid-1980s had been caused by slow-moving structural factors such as weaker growth and the desire of an ageing population to save more for their retirement.

Japan has had ultra-low interest rates for almost three decades, while other developed countries cut borrowing costs aggressively in response to the deep financial and economic crisis that began almost a decade ago.

The Bank of England held borrowing costs at 0.5% for more than seven years before cutting them to 0.25% last August, the lowest level in its 323-year history. The European Central Bank has adopted a similar approach and its president, Mario Draghi, has said there would be no early rate rise for the eurozone.

2 Kuwait best off among oil exporters (Gulf News) Kuwait’s in the best position of major oil exporting nations in the Middle East, Africa and parts of Europe to have a balanced government budget this year with oil forecast to average $52.50 a barrel, according to Fitch Ratings.

Nigeria is worst off, needing an oil price of $139 a barrel to balance its budget, Fitch said. Even after cuts in government subsidies and currency devaluations, 11 of them won’t have balanced government budgets this year, including Saudi Arabia, it said.

Only Kuwait, Qatar and the Republic of Congo have estimated break-evens that are below Fitch’s oil price forecast for this year.

3 Norway to build world’s first ship tunnel (San Francisco Chronicle) Norway plans to build the world's first tunnel for ships, a 1,700-meter (5,610-feet) passageway burrowed through a piece of rocky peninsula that will allow vessels to avoid a treacherous part of sea.

Construction of the Stad Ship Tunnel, which would be able to accommodate cruise and freight ships weighing up to 16,000 tons, is expected to open in 2023. It will be 36 meters (118 feet) wide and 49 meters (162 feet) tall and is estimated to cost at least 2.7 billion kroner ($314 million).

Norwegian Transportation Minister Ketil Solvik-Olsen had said that sea currents and underwater topography in this part of the country's southwestern coast "result in particularly complex wave conditions."

"We are pleased that the ship tunnel now becomes reality," Solvik-Olsen said, adding that travel time between Norwegian cities and towns in the area would be reduced. Over the years, plans for a ship tunnel in Stad had been floated but now a project with a financing is ready, he said.

Under the plan, passenger traffic will be given priority but leisure boats and other vessels can also use the tunnel. It will be free of charge for vessels measuring less than 70 meters (230 feet), and vessels longer than that would have to be led. Vessels sailing through the tunnel likely will get slot times from a traffic center — like planes at an airport — to avoid congestion.

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