Annual flows of money market fund shares/units held by non-financial corporations (NFCs) in France were positive throughout 2023, having been negative from the second quarter of 2021 to the fourth quarter of 2022. This trend reversal was due most notably to the increase in key ECB interest rates on 27 July 2022, which pushed up money market returns.
The Federal Reserve releases the Summary of Economic Projections (SEP) following the last meeting of the quarter. These forecasts are closely scrutinized as they include the “dot plots”, i.e. the median trajectory of the medium-term policy rate by the members of the Committee. The Q4 2023 projections included three rate cuts (of 25 bps each) in 2024, for a rate target of 4.6% at year-end. At the same time, the Fed Chair, Jerome Powell, noted progress on the inflation front (CPI at +3.2% y/y in Q4 2023, v. +7.1% y/y a year earlier), but refused to declare victory.
Intermittent, cumbersome and... expensive: while the criticisms levelled at renewable energies are still numerous, they are increasingly unfounded.
Oxford Insights’ AI 2023 preparedness index offers a great starting point to harness the digital divide across the region with Brazil and its vibrant Fintech sector on one end of the spectrum and Haiti on the other, lacking basic infrastructure. To that point-in-time snapshot, however, we can add a backward-looking component (investment rate over the past decade) and a forward-looking one (projected fiscal space) to get a more complete picture of some of the challenges lying ahead as the region furthers its digital transformation.
Since June 2022, the US Federal Reserve (Fed) has scaled back its balance sheet, by limiting the reinvestment of maturing debt in its securities portfolio. The scale of the effects of this quantitative tightening (QT2) will depend in particular on the nature of buyers of newly issued securities.
After the youth unemployment rate (15-24 years old) hit its lowest level for more than 30 years at the end of 2021, standing at 16.4% of the working population, it has risen slightly since then, with a figure of 17.5% in Q4 2023 (compared to 16.7% in Q1 2023). Despite being almost 3 points above the Eurozone average, this rate is still substantially lower than the 2019 one (20.8%).
To achieve its climate goals, the European Union (EU) should cut by 90% its greenhouse gas emissions by 2040 (compared to 1990 levels), according to a recent recommendation by the European Commission. This means rapidly increasing investment in renewable energies, electricity grids, transport infrastructure and thermal renovation of buildings. The result is a substantial financial burden (estimated at between 58 and 66 billion euros per year in France), but also a heightened quest for technological and human resources. For its ecological transition, the Old Continent is looking for computer scientists, civil engineers, electromechanics, building and public works managers, plasterers, electricians, roofers and more.
Tunisia is going through a serious economic crisis. Real GDP contracted again in the fourth quarter, falling by 0.2% year-on-year after a decline of0.3% in the previous quarter. Estimates suggest that full-year growth was 0.4%, its lowest level for more than a decade (barring the Covid crisis).
Net issues of debt securities, cumulated over 12 months, by non-financial corporations (NFCs) were positive in December 2023 (EUR 8.3 bn) for the fourth consecutive month.
Less active on the environmental front, European policy to combat climate change continues to score points in terms of decarbonization.
While euro area inflation peaked at 10.6% y/y in October 2022, Swiss inflation has never exceeded 3.3% y/y, in July-August 2022. This favourable gap can be explained by the country's structural characteristics, particularly its energy mix, but also by the strength of its currency.
More than 18 months after defaulting on its external debt payments, Sri Lanka’s macroeconomic position has improved, but remains very fragile.
After the historic peak in the first quarter of 2021 (“Covid savings”), financial investments and the household savings rate fell in step with each other through to the second quarter of 2022.
It's official: with an average of 15 degrees Celsius, 2023 will have been the hottest year ever experienced on Earth, not only since temperature readings began, but perhaps also for the entire Holocene, which is the planet's current interglacial period, which began approximately 10,000 years ago.
The Bank of Japan’s latest Tankan survey, published in December, highlights the country’s significant labour shortages and recruitment challenges. These are affecting all sectors and are even reaching record levels in almost a quarter of them. In order to facilitate the interpretation, the data in this table are converted in Z-score, which measures the number of standard deviations separating each index from its long-term average (1974-2023 period).
According to the World Bank’s report published last week, the external debt stock of all low- and middle-income countries (LMICs) contracted in 2022, for the first time since 2015. However, this observation does not apply to sub-Saharan Africa (consisting exclusively of LMICs with the exception of the Seychelles): the region’s external debt continued to rise in 2022, reaching USD 832.8 bn, a figure up 2.1% compared to 2021.
The net short position of hedge funds in the US Treasury futures market has expanded considerably over the course of the year. At the end of November, it stood at an unprecedented level of almost USD 800 billion. Asset managers, eager to hedge against interest-rate risk, increased their net long positions.
Business insolvencies continued to rise in October and are now 10% higher than their pre-COVID level (2019 figures) in cumulative terms over the last three months, according to data from Banque de France.
Whether one likes it or not, China has a key role in the “green” industrial revolution that will take economy to climate neutrality. In the transition to all-electric, particularly as it is happening in Europe, it is even strengthening its positions. The planned ban on the sale of new petrol and diesel cars will bring the end of a technological barrier that has thus far allowed European manufacturers to excel, whilst keeping Chinese-made vehicles away from their markets.
In 2023, for the second consecutive year, Malaysia’s external accounts have deteriorated slightly, but are still strong. Over the first nine months of the year, the current account surplus decreased by 18.3% compared to the same period last year. The strong rebound in tourism has not been enough to offset the decline in the trade surplus caused by the global economic slowdown and the sharp contraction in demand for semiconductors and electronic products, which account for 36.3% of the country’s exports.
Last October, an average of over USD 1,500 bn was traded daily on the Treasuries repo markets through the Fixed Income Clearing Corporation (FICC), USD 500 bn more than in October 2022. While transactions between FICC clearing members remained relatively stable, sponsored repo loans rose sharply.
The significant rise in American households’ mortgage rates prompted a depletion of housing inventories on the existing real estate market. This “freezing” situation on the existing home segment enabled some demand redirection towards newly built houses.
Faced with the urgency of climate change, many countries have begun their ecological transition, with the war in Ukraine only accelerating the movement. After soaring in 2022, investment in “clean” energies is set to reach a new record in 2023: around USD 1,800 billion worldwide, or 1.7 points of GDP, according to estimates by the International Energy Agency (IEA). Although the search for new fossil fuels has not yet come to a halt, it is now mobilizing less capital (around USD 1,200 billion).
In Central Europe, capital flows (foreign direct investments, portfolio flows and bank lending flows) have resisted rather well despite geopolitical uncertainties. Similarly, they do not seem to be affected, for the time being, by the weakening of economic activity in the region.
The impact on financial expenses of rising interest rates - the result of the European Central Bank tightening its monetary policy - is very mixed, depending on the euro zone country. The impact depends on the proportion of variable-rate loans in outstanding amounts, and also on levels and changes in the amounts borrowed.
Weekly charts highlighting points of interest in the world economy
