Growth to rebound, tips top Japan banker

Bank of Japan Gov. Haruhiko Kuroda said the global economy is ‘stabilising somewhat,’ but warned of risks from the US-China trade war. (Reuters)
Updated 09 June 2019

Growth to rebound, tips top Japan banker

  • Bank of Japan governor sees global economy recovering in the latter half of this year
  • Widening fallout from the US-China trade war will test the resolve of G20 finance leaders

FUKUOKA, Japan: Bank of Japan Gov. Haruhiko Kuroda on Saturday maintained his view the global economy will recover in the latter half of this year, but warned that uncertainties remain as fallout from the Sino-US trade war deepens.

Kuroda said the global economy is “stabilizing somewhat” from its weakness late last year, as central banks maintain supportive policies and China takes stimulus measures to prop up growth.

“There’s no change to the view the global economy will pick up in the latter half of this year,” Kuroda told reporters ahead of the Group of 20 finance leaders’ meeting to be held in the southern Japanese city of Fukuoka. “But uncertainties remain, particularly those regarding trade,” he added.

Kuroda’s view on global risks is important because the BOJ’s forecast on the Japanese economy is based on the assumption global growth will rebound in the latter half of this year.

Global investors’ hopes for a pick-up in the second half of the year have been thrown into doubt by last month’s sudden escalation in the US-China trade war and a slew of weak data from major economies that threaten to further weigh on business and consumer confidence.

Widening fallout from the US-China trade war will test the resolve of G20 finance leaders to show a united front at their two-day gathering ending on Sunday, as investors worry if they can avert a global recession with dwindling policy ammunition.

The BOJ is among major central banks that could come under pressure to ramp up its already massive stimulus program, as the trade dispute raises fears of a global recession.

Kuroda praised US President Donald Trump’s decision to put off imposing tariffs against Mexico after the two countries reached a deal to contain the migration of immigrants crossing the southern US border.

“It’s a very good outcome not just for the US and Mexico, but for the global economy,” Kuroda said.

Easy credit poses tough challenge for Russian economy minister

Updated 8 min 28 sec ago

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.