Kenya’s real GDP growth was subdued last year and it will come under stress in 2020 due to coronavirus outbreak effects. The lower GDP growth will further constrain the fiscal policy space whereas the country’s forex receipts are also weakened by adverse climatic conditions. While political rivalries continue to complicate the implementation of fiscal policy, failure to reduce budget deficits will challenge the sovereign’s debt solvency in the medium term. Meanwhile, monetary policy easing and emergency measures in the banking sector could hamper banking sector prospects, which had started to improve following the recent removal of the interest-rate cap law.
An example of successful economic transition, Poland still enjoys fairly favourable prospects despite the expected slowing of growth against a background of less favourable international conditions. Over the medium to long term, there are factors that will weigh on potential growth and weaken a Polish economic model based on competitiveness and low labour costs. The first section of this article analyses the impact of institutions on productivity, which is a major determinant of the differences in standard of living between countries, as illustrated through the example of Poland. The second section examines the question of Poland’s estimated medium-term potential growth, after an analysis of its pathway since the 1990s.
For the first time since 2010, the five major Portuguese banks returned to profitability in 2018. The main factors behind this swing into profits were a faster decline in interest expense than in interest income, and tight control over operating expenses and the cost of risk. The widening of the net interest margin offset the decline in the outstanding amount of bank loans, increasing net interest income. Other things being equal, the decrease of the interest rates also contributed to the reduction in the cost of risk and the clean-up of bank balance sheets. Although the non-performing loan ratio and outstanding amount were halved, they remain at high levels
The slowdown in economic activity in the Eurozone and inflation structurally below the target rate have raised the spectre of “Japanification”. This would mean effective growth running below potential, very low interest rates and negative inflation. In Japan, this combination of factors resulted from the bursting of the financial and real estate bubbles of the early 1990s. There is a range of factors that could cause “Japanification”. Faced with the challenges of an ageing population and slowing productivity gains, the Eurozone will need to focus its efforts on boosting its potential growth and its resilience to shocks. Short- and medium-term economic policy choices will therefore be crucial in limiting, as far as possible, the risk of “Japanification”.
The financial crisis of 2008 left its mark on the macroeconomic, regulatory and legal environments in the United Kingdom. It was followed by a long period of consolidation in the banking sector. Although the major British banks have managed to improve their performances recently, they are now faced with fresh challenges, starting with the uncertainty surrounding Brexit. For the banks, this uncertainty will not be resolved immediately by the conclusion of the Brexit as they will still need to adjust to the loss of their European passporting rights and potentially to address a contraction in demand in their domestic market.
Private consumption has played a greater role in the Chinese economy in recent years, but this growth engine remains fragile. At a time when the export sector is hurt by US protectionist measures and weak global demand, China is seeking other solid sources of growth. Yet private consumption growth is slowing and is likely to be disappointing in the short and medium terms. A catching-up dynamic should continue, supported by urbanization, an ageing population and action of the government, which strives to reduce income inequality, improve housing affordability and further strengthen the social protection system. owever, these structural changes will take time
The sub-Saharan Africa’s largest economy is having hard time to recover. External rebalancing has showed some progress. But imports remain well below pre-crisis levels. In addition, the rebuilding of FX reserves is being accompanied by increased financial vulnerability, which puts pressure on monetary policy as the authorities give the priority to exchange rate stability. Weak public finances are an additional constraint. In the short term, and despite its strong potential, the economy is expected to grow more slowly than the population. As well as improving macroeconomic stability, the authorities will have to address the deep-seated factors that are holding back the economy as a whole.
Through economic consolidation measures implemented since 2016, Egypt has corrected its macroeconomic imbalances and regained the confidence of international investors. Foreign currency liquidity has returned to satisfying levels, the public account deficit is narrowing, although debt service is maintaining the fiscal deficit at a high level. Inflation is still relatively high but easing. Economic prospects are favourable. So far, the macroeconomic recovery has failed to trigger new momentum capable of accelerating growth and creating jobs. The weight of public sector and a large informal sector reduce the economy’s responsiveness to positive macroeconomic signals. Structural reforms are necessary to preserve the achievements of ongoing reforms.
Brexit started as a surprise, with the majority Leave vote in the UK referendum on June 23, 2016. In the financial sphere, more specifically, Brexit implies a loss of European passporting rights for the UK and thus less integration between the European Union and the leading financial centre of London. The trade in financial services between the two zones will now have to meet the requirements of two separate sets of regulatory and supervisory authorities, rather than just the requirements of a single regulatory framework as at present. At the very least, this will hold operational uncertainty for some time to come
Narendra Modi’s term as India’s prime minister has been broadly positive economically. In the last five years, he has pushed through some important reforms, taking advantage of his majority in the lower house of Parliament. However, to achieve a significant increase in GDP per-capita and reduce India’s vulnerability to external shocks, it is necessary to carry out further reforms in order to create a more conducive environment for domestic and foreign investment. The latest polls suggest that no party could win a majority in the lower house of Parliament in the general election scheduled for April and May. Mr Modi’s party still looks likely to win the most seats, but could be forced to govern alongside the Congress Party
In recent years, Germany has posted substantial current account surpluses, well above the level justified by economic fundamentals. This can be attributed to a substantial increase in savings of the government and the corporate sector. Many observers consider Germany’s current account surplus as a threat to the eurozone economy and urge the German authorities to reduce it by boosting wages and investing in infrastructure. These demands have largely been ignored. Supported by model simulations, the German authorities argue that these measures would be detrimental to the German economy, while having hardly any effect on the other eurozone countries. They call for more structural reforms in the European Union, such as a further opening of the services sector.
The first year in office of the new president Joao Lourenço’s reveals a rather positive shift in economic policies, given his determination to clean up politics and the scope of the economic reforms engaged so far. The abandon of the currency peg has eased some pressures on the fx market though they still remain important. The financing package recently signed with the IMF will help to implement structural reforms aimed at diversifying the economy by fostering the development of the private sector. Nevertheless, the overall near-term economic outlook remains embedded in international oil price developments due to the lack of economic diversification. Additionally, the still ailing banking system keeps on straining the private sector
The election of Mexico’s new president, Andres Manuel Lopez Obrador, raises numerous questions. Although the new president and his team enjoy strong popular support, investors are worried about the policies he is proposing for the next six years. Some of the proposals do not seem to be compatible with his promise to maintain fiscal discipline, central bank independence and economic pragmatism in general. Several existing reforms are being called into question, notably in the energy sector. Given Mexico’s strong economic fundamentals, these contradictions are unlikely to have much of a short-term impact
