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India’s economic growth slows to 7% in 2022/23, according to a government forecast by Reuters

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© Reuters. FILE PHOTO: People shop for shoes at roadside shops at a market in Mumbai, India August 30, 2016. Photo taken August 30, 2016. REUTERS/Danish Siddiqui/File Photo

By Aftab Ahmed and Nikong Ori

NEW DELHI (Reuters) – India’s government expects economic growth to slow in the fiscal year ending in March as distortions eased from the pandemic and demand for commodities picks up as 2023 approaches.

Gross domestic product is likely to rise 7% this fiscal year, compared to 8.7% a year earlier, the statistics department said in its first estimate for the period that put manufacturing growth at just 1.6%.

The preliminary aggregate forecast is lower than the previous government’s forecast of 8%-8.5%, but higher than the central bank’s 6.8%.

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The government uses these estimates as the basis for its growth and fiscal projections for the next budget, due on February 1. It will be the last full budget before Prime Minister Narendra Modi runs for a rare third term in elections scheduled for the summer. 2024.

Graphics: Growth on the Cards – https://www.reuters.com/graphics/INDIA-ECONOMY/GDP/znvnbzdzxvl/chart.png

India’s economy rebounded after easing COVID-19 restrictions in mid-2022, but the war in Ukraine spurred inflationary pressures, prompting the central bank to reverse the ultra-loose monetary policy it adopted during the pandemic.

It has raised key interest rates by 225 basis points since May to 6.25%, the highest level in three years, and another modest hike is expected early this year.

Since September, economists have lowered their 2022/23 growth forecasts to around 7% due to slowing exports and the risk of high inflation hampering purchasing power.

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Construction was expected to grow by 9.1%, electricity by 9%, and agriculture by 3.5%. Manufacturing and mining growth was expected at 1.6% and 2.4%.

Madan Sabnavis, an economist at Bank of Baroda, said growth in manufacturing has been disappointing with corporate profits shrinking in the second quarter.

India’s nominal growth, which includes inflation, is forecast at 15.4% for 2022/23, up from a previous estimate of 11.1%.

“Nominal GDP growth is higher, which means that the government’s fiscal deficit target will be met,” said Sabanavis.

India remains a relative “bright spot” in the global economy, an International Monetary Fund official said on Friday, but it needs to build on its existing strength in services exports and expand it into job-rich industrial exports.

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It is expected to remain the second fastest growing economy – trailing only Saudi Arabia – among the G20 countries, according to the Organization for Economic Co-operation and Development (OECD).

India’s growth potential is likely to moderate in the fiscal year starting April 1, due among other factors to weak exports, said economist Prangul Bhandari at HSBC Securities and Capital Markets in a note to clients.

“Buoyant, albeit mixed, domestic consumption should help stave off some of the pain caused by weak exports during this period,” said Aditi Nayar, economist at ICRA.

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Economic

“Mortgage Lottery” to test the finances of middle-income earners in the UK

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Subprime borrowers face falling on the wrong side of a growing debt gap if they are forced to refinance a fixed-rate home loan this year, with younger homeowners expected to be the hardest hit.

With millions of borrowers about to be offered a fixed rate of interest Mortgage Through 2023, the “lottery” of higher costs could plunge more middle-income families into financial hardship, according to a measure of financial resilience by Oxford Economics and Hargreaves Lansdown.

Nearly 90 percent of lowest-income households have poor or very poor financial resilience, but nearly a third of middle-income households now also fall into this category, showing how rising mortgage costs are pushing pressure even higher. in the income range.

“Younger borrowers are particularly at risk, as they are most likely to have extended themselves to buy when rates were higher,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

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“Making matters worse, at this point in life they’re also unlikely to have as much savings to fall back on, so increasing mortgage payments could mean they end up building up a mountain of short-term debt.”

Some lenders are set to scale back mortgage rates This week as the housing market has slowed, it nonetheless remains at much higher levels than it was a year ago.

The average rate for a two-year fixed loan was 5.8 percent at the end of 2022, according to price comparison site Moneyfacts, up from 2.4 percent at the end of 2021.

The difference would add nearly £500 to monthly costs based on a typical repayment mortgage of £250,000, according to the Financial Times’ calculations.

Although the headline inflation rate is expected to start declining in 2023, economists warn that the cost-of-living crisis is far from over as low-income households remain less financially secure than they were before the pandemic.

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The last quarter of 2022 is expected to be the peak of cost-of-living pressure with nearly 40 per cent of households in the UK having to cut back, cut into savings or borrow to maintain usual spending levels, according to Oxford Economics.

By the end of 2023, this figure is expected to drop to 24 percent of households. However, the report’s authors warned that families without reliable savings were at greater risk of falling into bad debt.

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Chinese real estate corporate financing jumps 33% year-on-year in December by Reuters

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© Reuters. FILE PHOTO: Unfinished apartment buildings stand in a residential complex developed by Jiadengbao Real Estate in Guilin, Guangxi Zhuang Autonomous Region, China on September 17, 2022. REUTERS/Eduardo Baptista/

BEIJING (Reuters) – Chinese real estate firms raised a total of 101.8 billion yuan ($14.9 billion) in December, up 33.4 percent year-on-year, driven by more government support for the debt-laden sector, according to market researcher CRIC.

CRIC surveyed one hundred companies. It added that the figure for 2022 was 824 billion yuan, down 38 percent year on year.

The Central Bank said on Thursday that for cities where new home sales prices decline on a monthly basis and on an annual basis for three consecutive months, minimum mortgage rates for first-time home buyers in Egypt can be lowered or eliminated. stages.

Bloomberg News reported on Friday that China also plans to ease borrowing restrictions for real estate developers by calling its “three red lines” policy.

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In November and December, Chinese regulators began a series of measures to boost liquidity in the sector, including China’s largest state-owned banks pledging at least $162 billion in new credit to ease the sector’s liquidity crunch.

The real estate sector, which accounts for a quarter of China’s economy, was hit hard last year as many developers were unable to finish construction projects which led to some mortgage buyers boycotting. Lockdowns and motion control measures to control the spread of COVID-19 have also hurt buyer sentiment.

($1 = 6.8370 renminbi)

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Monetary independence is overrated, and the euro is on the rise

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Shortly after the latest bout of the eurozone debt crisis — Greece’s battle with the rupture of the single currency in summer 2015 — a colleague bet that within a decade the euro would lose at least one member. So far, it’s been quite the opposite: the monetary union just got a member, with Croatia joining at the start of the new year.

This force of attraction is not a one-off. Remember that during the most difficult years of monetary union, one Baltic country after another stepped forward and joined. The next Bulgaria will no doubt be allowed to adopt the euro soon. (A number of smaller and poorer European jurisdictions also use the euro either through unilateral adoption or as a result of the informal private sector euro process.)

One could say that there is nothing to see here – that it would be surprising if small, open economies did not want to participate in monetary policy making for the currency that dominated their trading relationship. But the notion is such that the euro in its current form is so doomed – especially among Anglo-American economists – that some reflection on its recent expansion is timely. Because old misgivings are becoming increasingly unconvincing, while ongoing changes in how money works speak to the advantage of the euro.

In recent years it has become – or should have been – increasingly clear that monetary ‘independence’ in the sense of having one’s own floating currency is not all it has to be. The advantage is supposed to be that a depreciating currency can offset negative shocks by boosting exports. As the fall of the pound sterling in 2016 after Britain’s EU referendum showed, however, in a world of long and complex supply chains across borders, currency depreciation could make your population poorer by raising the price of imports, with no support for export volumes. .

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Meanwhile, the benefits of monetary integration are being demonstrated by the energy price crisis in Europe. Take Slovakia. Yes, it has to deal with similarly high inflation as its non-euro neighbours. But it does so while enjoying a much lower interest rate (2.5 percent for the European Central Bank) than the Czech Republic and Poland, where borrowing costs are three times higher, or 13 percent in Hungary.

Size matters in a global economy whose rhythm is still set by the US financial cycle, and only the monetary union of euro economies gives the European Central Bank a degree of independence from the US Federal Reserve.

Second, it is now easy to see the vulnerabilities that emerged during the eurozone crisis as a type of crisis that could hit anyone, including economies with independent floating currencies, rather than a unique weakness in the euro.

Italy remains the country where pessimists believe the combination of high debt and low growth should eventually cause the euro’s demise. However, last summer it was not Italy, but the new populist government in the United Kingdom that severely shook the markets with its irresponsible policymaking. In the end, the Bank of England had to step in to contain the sovereign yields.

While the ECB may still be tested in this regard, it has the advantage of being more independent of its political masters than any national central bank. If anything, the Bank of England has more reason to fear monetary finance charges – which it was evidently keen to disprove – and which complicated its message when it turned from selling gold bonds to buying them in the market’s fright in the fall. By contrast, the European Central Bank created a permanent tool to deal with similar events last summer, with little controversy.

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All this suggests that the euro will become more, not less attractive over time. The appeal of different currencies will be further altered by how they manage the next big leap in central banking: the introduction of an official digital currency. So far, only peripheral economies like the Bahamas and Nigeria have gone all the way — although China is clearly primed for its capacity to expand the digital renminbi it has been experimenting with.

Among the rich economies, the European Central Bank has quickly moved to the top spot. Finance ministers swung defensively behind the digital euro after Facebook’s move in 2019 to create a private global digital payment system. But their support has now been bolstered by looming business opportunities in an economy of “programmable” safe money.

Formally, the digital euro is still only in the exploration phase. But politically, it has reached a point of no return. After Croatia, future entrants to the monetary union will enjoy having a developing digital currency in the bargain.

martin.sandbu@ft.com

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