- This weekly roundup brings you the latest stories from the world of economics and finance.
- Top economic news: US nears default on debt ceiling deadlock. In the wake of the banking crisis, the G7 will focus on the resilience of the financial system. Debt problem worsens in North Africa.
1. US Close to Default as Debt Ceiling Stalls
Political impasse over US $31.4 trillion debt ceiling hike It threatens to send the country into an unprecedented debt default by June 1 if Congress doesn’t act.
President Joe Biden says he’ll be in big trouble if he fails to raise debt ceiling plunge the U.S. economy into recession and wipe out thousands of jobs. Treasury Secretary Janet Yellen went further: Debt default will cause a global economic downturn And there is a risk of undermining US global economic leadership.
Biden and rival Republican lawmakers met on May 9 to discuss the issue. He calls for an unconditional increase in the federal government’s voluntary borrowing ceiling. But Republican House Speaker Kevin McCarthy said the House would approve the deal only if Biden agreed to retroactively cut government spending to address the growing deficit.
of March budget deficit hits $378 billion, up from $193 billion a year earlierBecause expenses exceeded income. That brings the year-to-date budget deficit to $1.1 trillion, up 65% from a year earlier.
Senate Republican leader Mitch McConnell said, “There should be at least some restraint on spending related to the debt ceiling, which is not uncommon.” “We’ve been here before. Debt ceilings were often accompanied by other measures. It’s time for the president to get serious and it’s time to sit down with the chair and find a solution. .”
But Mr. Biden argues that budget cut demands are driven by fossil fuel interests and that oil and gas companies are asking the government to remove tax credits for individuals and companies that install energy-saving equipment.
another A meeting on the debt ceiling with Biden and lawmakers scheduled for May 12 has been postponed to the following week.. The president has not ruled out invoking the 14th Amendment to declare the debt limit unconstitutional. This is an untested approach and would require litigation, he said.
2. Banking Crisis Triggers G7 Focus on Financial System Resilience
Strengthening the global financial system It is on the agenda of the G7 financial leaders, who will meet in Niigata on May 11-13. The recent failure of First Republic Bank exacerbated concerns about the stability of the U.S. banking sector.
This and other recent US bank failures have heightened calls for increased global regulatory oversight of emerging risks to the financial sector, such as digital bank runs.
“The financial environment has changed dramatically with the advent of social media and internet banking,” said Japanese Finance Minister Shunichi Suzuki, who chairs the G7 financial summit. “Responding to such changes has become a common challenge for countries around the world.”
As a result of the recent turmoil, US banks have cut lending, Private lenders eyeing new lending opportunitiesReuters reports. Blackstone, one of the world’s largest private financiers, said it believes the “perfect moment” has arrived to expand its credit business.
About 46% of banks surveyed by the Federal Reserve said they would tighten lending standards in the second quarter of 2023, compared with 39% in the fourth quarter of last year.
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G7 fiscal talks will also consider measures such as curbing inflation and reducing the debt of poor countries.According to Bloomberg, how to build more resilient supply chains and how to thwart Russia’s efforts to circumvent sanctions.
and US debt ceiling highlightedJapan’s central bank governor Kazuo Ueda said, “I believe the US authorities will do everything in their power to prevent such a thing from happening.” US President Joe Biden has suggested he may have to cancel his attendance at next week’s G7 summit if the debt dispute is not resolved in time.
3. News Brief: Economic Stories Around the World
Tunisia and Egypt appear to be approaching massive debt crises It could affect the entire North African region. Shortages of essential goods and dysfunctional financial markets plague countries. Egypt is North Africa’s largest economy and has long been considered too big to afford bankruptcy. Tunisia is significant as the birthplace of the Arab Spring uprising a decade ago.
US annual inflation falls below 5% for the first time in two years. The consumer price index (CPI) rose 4.9% in the 12 months to April, down from 5.0% in March. But rental costs and a rebound in gasoline and used-car prices have kept inflation still high, which could dash hopes of a rate cut this year.
China faces the opposite problem. Deflationary pressure weighs on the economy. CPI rose just 0.1% year-on-year in April, the slowest pace in more than two years, and more stimulus is needed to spur a patchy COVID-19 recovery. suggests that there is a possibility China’s imports shrunk significantly in Aprila 7.9% drop strengthens signs of weak domestic demand.
Australia’s new budget includes: A$14.6 billion ($9.8 billion) relief for family and business living expenses. It has insisted its four-year spending plan will not spur inflation, which, although easing in the first quarter, is still hovering near a 30-year high of around 7.0%.the country has a record First fiscal surplus in 15 years Income tax revenues are rising while welfare payments are curtailed, thanks to mining’s huge profits and a strong job market.
of The Chinese yuan has overtaken the dollar to become the most widely used currency for cross-border transactions in China. I did so for the first time in March. According to Reuters, this is the result of China’s dramatically increasing use of the yuan to buy Russian goods. However, according to SWIFT, the yuan’s share of global payments remains small at 2.5%, compared to 39.4% for the dollar and 35.8% for the euro.
of Future rate hikes from the European Central Bank will be ‘more limited’bank policymaker François Villeroy de Galhau told the newspaper group EBRA. The central bank last week slowed the pace of rate hikes to 25 basis points and kept the rate at 3.25%, aiming to bring inflation down to 2% by 2025.
of Bank of England raises key interest rates It fell by a quarter of a percentage point to 4.5%.It was the 12th consecutive rise, and the bank’s governor said it would “keep it on track” in an attempt to contain it. Inflation is 10.1% – fastest among major economies.
The Philippines’ first-quarter GDP growth fell to 6.4%, the lowest level in two years., raging inflation and high interest rates slowed consumption. However, good data in areas such as the unemployment rate still point to a bright outlook for 2023, with the country still on track to meet its growth target of 6.0-7.0% this year.
cryptocurrency exchange Binance Temporarily Suspends Bitcoin Withdrawals This Week Amid a spike in pending transactions. The suspension was attributed to not providing bitcoin miners with high enough rewards to record their transactions on the blockchain. Binance also suspended deposits and withdrawals in March, citing technical issues.
4. Further Financial and Economic Agendas
What’s next for the global economy? From recession prospects to structural challenges, here are the highlights from the Chief Economists’ Briefing at the World Economic Forum’s 2023 Growth Summit.
Following the release of the World Economic Forum’s latest Chief Economist Outlook, World Economic Forum Digital Editor Spencer Feingold believes a new era of industrial policy is ushered in by governments playing a more active role in the economy. I wrote that I did. These policies include tax credits, trade protection regulations and public direct investment, often aimed at supporting key industries such as heavy industry, military production, energy and advanced technology.
We know that an increase in research and development (R&D) spending relative to GDP reduces the country’s unemployment rate. The World Economic Forum’s Global Future Council on the Future of Job Creation looks at how research and development can help countries prioritize, encourage and invest in jobs.