Conjoncture
    Conjoncture - 30 April 2019
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    The economic convergence of member states lies at the heart of thjavascript:void('Automatique')e initial project to create the eurozone, but it has followed a jagged path over the past twenty years. Convergence is a multifaceted concept that covers not only the criteria stipulated in the Maastricht Treaty but also growth dynamics and income dispersion. In the period before the Great Financial Crisis, nominal convergence was relatively complete, but progress towards real convergence was much more mixed. There are several major obstacles to a sustainable convergence within the European Monetary Union, including the lack of eurozone’s optimality, possibility of currency devaluations and macroeconomic stabilisation mechanisms.
    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.
    Conjoncture - 04 April 2019
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    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. This edition of Conjoncture aims to sketch out the main lines of the changes to the regulatory framework that financial institutions will have to address because of Brexit, and to identify the main challenges.
    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. That could make it harder to implement reform and weaken the public finances.
    View document
    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. This edition of Conjoncture aims to sketch out the main lines of the changes to the regulatory framework that financial institutions will have to address because of Brexit, and to identify the main challenges.
    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. That could make it harder to implement reform and weaken the public finances.

On the Same Theme

United Kingdom: Financial services strengthen trade surplus vis-à-vis the European Union 5/2/2019
The United Kingdom has had positive trade balances with the rest of the world since 1966 and the European Union (EU) since 2005. The financial services sector is a major contributor. As far back as the Office of National Statistics (1966) statistics of foreign trade in financial services show, the sector has always had a trade surplus. The same has been true for the EU since 1999, for which this surplus even increased fivefold until 2011 (GBP 21.5 bn). The decline observed between 2012 and 2014 was almost erased between 2015 and 2018 (GBP 20.4 bn). The UK financial services sector has a surplus vis-à-vis each of the major EU economies, starting with France, the EU market with the largest surplus in the EU since 2014 (GBP 4.5 bn in 2018). The situation, however, is likely to be weakened by Brexit.
False start 4/19/2019
By opting to leave the European Union (EU) without any exit plan, the United Kingdom has come face to face with an impossible choice. Week after week, the Brexit impasse has revealed the British Parliament’s incapacity to make decision, starting with the ratification of the divorce terms, the fruit of 2-years of negotiations by Prime Minister Theresa May. In the end, the Brexit was simply postponed. First set for 29 March, then 12 April, the deadline for exiting the EU has now been extended to 31 October (a Halloween treat?). This date could be moved forward if the UK finally manages to ratify the withdrawal agreement, which it has rejected time and again. But the most probable scenario is that the UK will extend its participation to the EU, at least for a while…
Brexit update 1/24/2019
On 15 January 2019, UK MPs rejected the proposed Brexit agreement reached by EU Heads of State two months earlier. With 432 of the 634 votes going against the deal, this result has significantly weakened Prime Minister Theresa May in future discussions with the EU and with Members of Parliament. Today almost anything looks possible, starting with a delay in the official date of the UK’s departure, currently scheduled for 29 March.
Brexit, the cost of uncertainty 1/18/2019
Market reaction suggests that the parliamentary vote, with a wide majority, against the Brexit deal which had been negotiated with Europe, has reduced the likelihood of a no-deal Brexit. Whether this feeling of relief lasts will depend on how the discussions on possible outcomes evolve. The economic headwind which comes with this prolonged uncertainty, for the UK but also for the companies in the EU which trade with the UK, will not go away soon.
Brexit: after the vote 1/18/2019
As widely expected by markets and political commentators, Prime Minister’s May Brexit deal was defeated in parliament last Tuesday. She then survived a no confidence vote and has to present her plan B to parliament on Monday. The challenge is huge.
Large UK banks could withstand a major shock under certain conditions 12/21/2018
In 2018, the Bank of England (BoE) brought forward the publication of its stress test results so that MPs could have enough time to consider them before voting on the draft Brexit deal, which was initially scheduled to happen on 11 December 2018 . Evaluated banks started the 2018 BoE’s stress test with an aggregate Common Equity Tier 1 (CET1) 3.5 times higher than the level seen before the 2008 crisis according, to BoE estimates. It has been rising constantly since 2014, which means that UK banks have been strengthening their capital positions.  The BoE is satisfied with the 2018 results since each of the seven banks assessed would keep its CET1 capital above the minimum requirement even in the event of a shock deemed to be more severe than the 2008/09 crisis, and sufficiently severe to cover a disorderly Brexit scenario. Based on these results, along with other data, the BoE’s Financial Policy Committee maintained the level of its countercyclical capital buffer for the whole banking system – on top of regulatory prudential requirements – at 1%.  
Remortgaging rises again in the United Kingdom 12/19/2018
Remortgaging is a mechanism allowing creditors to reuse a mortgage initially registered in support of a first loan, usually a real estate loan, in order to take out a new loan. Now banned in France on behalf of individuals, this market represents nearly GBP 104 billion (over a 12-month period) in the United Kingdom according to the latest figures from the Bank of England for the month of October 2018. After fading in 2008, the market is on an upward trend since 2013, but avoids the runaway seen in the early 2000s. The increasing unbinding between volume and value data observable since 2013 can be attributed to the housing price growth (+17% according to ONS between January 2013 and October 2018). Remortgaging now accounts for more than a third of personal loan growth.
Update on Brexit 10/18/2018
On 29 March 2019, the European Union and the United Kingdom will officially separate. Yet the terms of the separation have yet to be worked out. The Withdrawal Agreement, which is indispensable for a smooth exit, calls for a transition period of a little less than two years, through the end of 2020. It will to be discussed at the 18 October European Council meeting. Agreement on the divorce terms has always run up against the Northern Ireland question. Assuming the European heads of state and governments can solve this issue and a deal is finally reached, it would then be up to the UK Parliament to give its consent. This surely poses the greatest threat to a smooth Brexit.
Things are not going well 7/11/2018
Growth suffered from harsh winter weather at the start of the year and may have caught up slightly in the second quarter. However, the UK growth could slow down further because of the prospect of trade conflict with the United States, along with Brexit uncertainties. The UK is still struggling to turn the agreement in principle about the terms of its exit from the European Union into practical legal provisions. In the circumstances, it is very hard to predict exactly when the upcoming rate hike will take place, despite high inflation and a very low unemployment rate.

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