On 1 February, Senate Banking Commission Chairman Mike Crapo outlined his proposal for reforming the US mortgage market. The proposal starts from the widely held position that although public guarantees are essential in ensuring a liquid and stable mortgage market, the Federal government should not be the sole party exposed to payment default risk. The Ginnie Mae securitisation model of multiple originators and multiple issuers* would be widely replicated, but only the private sector would participate in credit enhancement. Ginnie Mae would provide its guarantee (the government guarantee) to securitisations backed by loans covered by approved private guarantors. Credit risk transfer programmes would be reinforced for “non-extreme” credit risk
Japanese economic growth was particularly volatile in 2018. All in all, it decreased sharply in full-year 2018 to 0.7%, from 1.9% in 2017. The country was hit by a typhoon in the third quarter of 2018 that weakened most of the components of demand, and thus growth (-0.7% q/q). In the fourth quarter, activity picked up mildly (+0.3% q/q). Investment regained vigour after a particularly morose third quarter, while private consumption began supporting growth again. Inversely, external trade continued to strain growth. At a time of reinvigorated domestic demand, the sharp upturn in imports was only partially offset by higher exports. Japan’s growth dynamics will face several challenges in 2019 and beyond
Morocco’s goods exports increased by more than 10% for a second year in a row in 2018, thanks to the good dynamics of phosphates exports and, above all, thanks to the rapid growth in the automotive industry. Since the launch of Renault’s factory in Tangier in 2012, exports of cars have doubled. They are now the largest source of exports and outlook is promising since several projects are in the pipe. The move to higher-value added export products improves the resiliency of the Moroccan economy to external shocks. However, spill-over effects remain limited notably due to a shortage of highly skilled labour force. Expected at 3% in 2019, the economic growth will be insufficient to reduce unemployment, especially for young people living in urban areas.
Annual flows of household savings into cash and deposits on the one hand (primarily sight deposits, passbook savings accounts and homebuyer savings plans), and life insurance products on the other are evolving in opposite directions. In an environment of low opportunity cost of holding banking deposits, nets flows towards savings deposits have surpassed those towards life insurance and retirement savings since third-quarter 2016. They have begun to come together again since the second half of 2017: the net collection of life insurance products has increased slightly while inflows of savings deposits have eased. Unit-linked contracts are the exclusive beneficiary of this trend and their gross inflow1 reached in 2018 its highest level since 2000
Geared towards the wealthiest households, President Trump’s tax cuts have not exactly matched the America First agenda. A famous foreign car brand, which can be identified by the small statue on the front hood, has just announced record high US sales for the year 2018. And it is not the only winner. By fuelling demand at a time when the economy was already operating at its potential, American policy resulted in a widespread increase in imports and a huge trade deficit. It is now at a record high at almost USD 900 billion. Higher trade barriers did not really help, as the deficit widened primarily with China. *Read also Chart of the Week published on 10 October 2018
Hungary’s Prime Minister Victor Orban, who intends to lead a eurosceptic, sovereigntist and anti-immigration front in European elections next May, can boast of a favourable macroeconomic situation. Economic growth continued to accelerate in 2018 thanks to a mix of expansionist economic policies, European structural funds and an upturn in domestic lending. GDP growth is estimated at an average of 4.5% in 2018, the highest level since 2004 and above its long-term potential. It is expected to slow in 2019. The “Orban model” is striking a fragile balance between interventionism and pro-business measures. A small open economy, Hungary is highly integrated in European and global supply chains and then is dependent on the global business cycle
In 2014, the Securities and Exchange Commission (SEC) adopted reforms to limit the scope of US constant net asset value money market funds. Money market funds that until then were invested in private debt (prime funds) had to abandon this model while funds that were invested in public debt (government funds) retained the ability to provide a guarantee to investors that they would recover all of their original investment*. Starting in October 2015, the reforms have led to a massive reallocation of cash from prime funds to government funds. Foreign banks, traditional borrowers of prime funds, were deprived access to US dollars while the US Treasury and federal agencies attracted fund inflows. Part of these fund inflows has been lent to US banks
The European parliamentary elections in May 2019 will mark the start of a major process of renewal for European institutions. After Brexit, the European parliament will have only 705 seats, from 751 at present. Aggregating national polls can help produce projections for the make-up of the new parliament, although naturally these need to be treated with some caution. According to current projection by Poll of Polls, a weakening position for the dominant conservative and social-democrat groupings may be on a sufficient scale to prevent the PPE and S&D alliances from taking a majority in the European parliament. The liberal/centrist ALDE group, if its rising poll numbers feed through into the ballot boxes, hopes therefore to become a supportive force able to forge compromises
Weekly charts highlighting points of interest in the world economy