1 IMF warns of gloomy Eurozone outlook (Katie Allen
in The Guardian) The International Monetary Fund has warned the eurozone faces
a gloomy economic outlook thanks to lingering worries over Greece, high
unemployment and a banking sector still battling to shake off the financial
crisis.
The IMF’s latest healthcheck on the eurozone found
it was “susceptible to negative shocks” as growth continues to falter and
monetary policymakers run out of ways to help. It called for an urgent
“collective push” from the currency union to speed up reforms or else risk
years of lost growth.
Near-term fillips such as the European Central
Bank’s (ECB) massive money-printing programme, low oil prices and a weak euro
could only spur the economy for so long, IMF staff said after its annual
discussions with eurozone policymakers. In the Fund’s view the medium-term
looks subdued because of “a chronic lack of demand, impaired corporate and bank
balance sheets, and deeply rooted structural weaknesses”.
The IMF’s review said: “The recovery is
strengthening, underpinned by lower oil prices and the ECB’s expanded asset
purchase programme. But the medium-term outlook remains weak, weighed down by
the legacies of insufficient demand, lagging productivity, and weak bank and
corporate balance sheets.
It urged the ECB to stand ready to expand its
quantitative easing (QE) programme, where it buys eurozone governments’ bonds
using electronically created money, if financial conditions get significantly
tighter and also said the scheme might need to go beyond September 2016,
currently pencilled in as the end-date. The IMF is forecasting eurozone GDP
growth of 1.5% this year and 1.7% next year.
2 China keeps buying shares as markets tank again
(BBC) In an effort to prop up its stock market, Chinese regulators said they
are continuing their purchase of shares. The move by China Securities Finance
Corporation (CSFC) was made to dispel "rumours that the national margin
trading service provider has backed off from stabilizing the stock market."
Chinese stocks tumbled 8.5% earlier. That was their
biggest drop in a single day since February 2007. The decline followed weak
economic data on profit at Chinese industrial firms on Monday and a
disappointing private factory sector survey on Friday. Investors were also
worried by reports the CSFC had started to return - ahead of schedule - money
it borrowed to stabilise the stock market.
China's government's rescue plan to keep the value
of stocks, or equities as they are also known, has included a police crackdown
on short-selling - betting on the decline of shares' values - and a six-month
ban on big shareholders selling stocks.
3 UAE moves to subsidy-free oil regime (Haseeb
Haider in Khaleej Times) A high-powered committee is meeting at the Ministry of
Energy in Abu Dhabi today to review and determine new oil prices, which will be
implemented from August 1 in line with the government's policy of zero subsidy
on petroleum products.
Moody's Investors Service and Bank of America
Merrill Lynch, meanwhile, have welcomed the introduction of subsidy reforms in
the UAE. In its credit report, Moody's Investors Service said government
finances - dented by the downturn in global oil prices - will receive a boost.
The Abu Dhabi government's subsidies and transfers
likely stood at Dh48 billion in 2014 or 5.8 per cent of GDP, but this largely
represents the Abu Dhabi Water and Electricity Authority's water and
electricity tariff support, as the latter represented a third of total
on-budget subsidies in 2011.
The remainder of the subsidies was accounted for by
housing support, Northern Emirates support, industrial, social and other
support. The fiscal benefits are therefore indirect, the research said. Energy
subsidies and rapid domestic energy consumption growth pushed the fiscal
breakeven oil price higher as Adnoc profit taxes remitted to the budget have
been lower than otherwise.
"Despite progress in diversification,
hydrocarbon revenues comprised 75 per cent of the UAE's consolidated revenues
in 2014," said Mathias Angonin, an analyst with Moody's Investors Service
in Dubai. Moody's expects a 27 per cent drop in consolidated government
revenues, in line with a forecast for Brent crude prices to average $60 per
barrel in 2015, versus $101 in 2014,
In 2015, the UAE will likely face a fiscal deficit
of 2.3 per cent of GDP, its first deficit since 2010, and a decline from a 10.3
per cent surplus in 2014. Phasing out fuel subsidies will partly offset the
negative effect of lower oil prices. Increases in gasoline prices will reduce
the economic cost of subsidies the UAE public sector has provided to domestic
consumers.
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