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Yellen warns of possible US debt default by June 1

Yellen made the assessment after obtaining additional information on the latest data…reports Asian Lite News

In a letter to Congressional leaders, US Treasury Secretary Janet Yellen reiterated that the country could default on its debt obligations as early as June 1.

The Department of Treasury will likely no longer be able to satisfy all of the governments’ obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1, Yellen said in the letter sent on Monday.

She made the assessment after obtaining additional information on the latest data, and federal receipts, outlays, following her earlier letter of this kind on May 1, reports Xinhua news agency.

“Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the US,” warned Yellen.

“In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” she added.

If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm US global leadership position, and raise questions about U.S. ability to defend its national security interests, according to the Treasury Secretary.

The second meeting between President Joe Biden and congressional leaders on budget and debt ceiling will now take place on Tuesday.

Biden and congressional leaders discussed the budget issue for the 2024 fiscal year last Tuesday but failed to generate meaningful breakthroughs.

Though Biden has expressed optimism on prospects of the second meeting, Republican House Speaker Kevin McCarthy said on Monday that there’s been “no progress” on debt ceiling talks ahead of the meeting.

In January, the US hit its $31.4 trillion debt limit, set in December 2021, prompting the Treasury Department to use accounting maneuvers known as “extraordinary measures” to keep the government paying its bills, such as curbing certain government investments.

ALSO READ: Biden warns of catastrophe if US defaults

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De-Dollarisation: A paradigm shift in global monetary system

India’s rupee and China’s yuan are starting to gain global acceptance despite multiple teething issues… Mahua Venkatesh

With the US staring at a debt default, dominance of the American dollar on the world stage may soon be a thing of the past. The de-dollarisation exercise started as a mechanism to deal with alternative payment systems amid stringent sanctions on Russia but now with threats of the US debt default rising, countries are aggressively exploring solutions which are more permanent in nature. India’s rupee and China’s yuan are starting to gain global acceptance despite multiple teething issues. Policymakers said that such “issues” are natural to emerge.

“These are problems real issues, we don’t deny and in the case of rupee, we will have to resolve them to make the Indian currency more acceptable,” a senior government official told India Narrative.

The US dollar is the most traded currency in the foreign exchange market.

Globally on an average, the US dollar makes up for about $6.6 trillion of daily trade, Forex.com said. The currency also accounts for the largest share of foreign exchange reserves held by central banks around the world.

“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” US Treasury Secretary Janet Yellen told CNN last month.

If the US debt ceiling – the maximum amount that a country can borrow — is not increased immediately, the US could actually default.

Meanwhile American lawmakers are yet to reach a consensus on the issue of raising the debt ceiling.

The total national debt as of January 2023 stood at $31.4 trillion. The debt to GDP ratio was 129 per cent in 2022, as per Trading Economics. The Republican members are vehemently opposed to increasing the debt ceiling until Washington approves massive cuts in spendings.

“We’ve not reached the crunch point yet but there’s real discussion about some changes we all could make,” US President Joe Biden said on Saturday. “But we’re not there yet,” he added.

While dedollarisation has been on the radar for many countries, the US currency continued its dominance in the global economy for decades. “But with the sanctions on Russia and then the shift in global order along with US debt crisis have now made it amply clear to the countries including the emerging economies that they need to have alternatives in place to mitigate risks,” the government official said.

Take the example of the BRICS (Brazil, Russia, India, China and South Africa) bloc. The bloc– now set to expand with several other countries coming in, has indicated that it will work on creating its own currency system. The imminent expansion of the BRICS bloc is an indication of a shift of geopolitical power play and the steady erosion of US dominance.

While the world is closely watching the developments in the US, analysts said that irrespective of whether or not Washington defaults, the dedollarisation exercise is a reality.

ALSO READ: Potential US naval base in Papua New Guinea to offset China

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Biden warns of catastrophe if US defaults

Alarm bells are ringing over the possibility of a first-ever US default, with uncertainty over the actual date the government would stop being able to pay its bills…reports Asian Lite News

President Joe Biden’s administration again warned Sunday of “catastrophic” consequences for the US economy if the country defaults, as negotiations with Republicans over a debt deal are expected to resume in the week ahead.

Alarm bells are ringing over the possibility of a first-ever US default, with uncertainty over the actual date the government would stop being able to pay its bills.

Congressional Republicans are demanding budget cuts in exchange for lifting the so-called debt ceiling, while the White House has insisted for months that the nation’s credit should not be up for negotiation.

The two sides have remained at an impasse despite weeks of warnings from government officials and bankers that a default could unleash drastic consequences, including a possible recession and likely global financial contagion.

Treasury Secretary Janet Yellen has warned a default could occur by June 1, while the nonpartisan Congressional Budget Office forecast on Friday the date of June 15.

“We shouldn’t be here,” Deputy Treasury Secretary Wally Adeyemo said Sunday on CNN’s “State of the Union. If Congress failed to raise the debt limit by the time of default, we would go into a recession and it’d be catastrophic,” he warned.

“The United States of America has never defaulted on it’s debt — and we can’t.”

Biden has stated he wants a “clean” hike of the debt ceiling, but Republicans are insisting any extension of the country’s borrowing authority, currently capped at $31.4 trillion, come with substantial curbs on spending.

“It’s time to bring spending levels back to pre-Covid, and then we can talk about raising the debt ceiling,” Byron Donalds, a Republican representative from Florida, told FOX News on Sunday.

“If Joe Biden brings nothing to the table, if all he does is sit there with his hands in his pockets… then he’s the one leading our nation into default.”

Former president Donald Trump has encouraged Republican lawmakers to hold out for default if Biden doesn’t agree to “massive cuts.”

A much-anticipated new round of debt-ceiling talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, were postponed until the coming week.

Adeyemo acknowledged “constructive” negotiations were ongoing at the staff level, while pushing back on assertions that Biden does not want to address ballooning US debt.

“The president’s laid out a plan that includes $3 trillion in debt relief over 10 years,” Adeyemo said, referring to Biden’s budget request unveiled in March, which featured tax increases on the wealthy and businesses.

Congressional leaders should address ways to hammer out a deal on fiscal policy, “but as we have that conversation, there is no reason we shouldn’t raise the debt limit and prevent default in this country, a default that could lead to a massive recession that would cost us millions of jobs,” he said.

Lael Brainard, director of the White House’s National Economic Council, maintained that a deal would be reached.

“Our expectation is that Congress will do what is necessary” to avoid a default, Brainard, a former Federal Reserve vice chair, told CBS Sunday show “Face the Nation.”

Biden addressed the issue on Saturday in Delaware, where he talked briefly to reporters.

“They’re moving along,” he said of the talks. But while there was “real discussion,” he added the two sides were “not there yet.”

ALSO READ: Potential US naval base in Papua New Guinea to offset China

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Al Kaabi: UAE promotes collective efforts for better future

The Forum saw the participation of ministers from the European Union, in addition to government officials and experts from the Indo-Pacific region…reports Asian Lite News

Noura bint Mohammed Al Kaabi, Minister of State, participated in the European Union’s Ministerial Forum for Cooperation in the Indo-Pacific, which was held in the Swedish capital, Stockholm, on Saturday, May 13.

The Forum saw the participation of ministers from the European Union, in addition to government officials and experts from the Indo-Pacific region and representatives from a number of regional and international organisations.

The Forum follows the meeting held in the French capital Paris last year, which was focused on enhancing cooperation between the European Union and countries in the Indo-Pacific region in a number of priority sectors, such as sustainability, climate change, comprehensive development amongst others, particularly as the Indo-Pacific region is of strategic importance to the EU and its member states.

In her speech during the opening session of the Forum, Al Kaabi stressed that the world is experiencing many unprecedented challenges, which are creating opportunities for international cooperation and growth.

She emphasised that the UAE is keen to strengthen cooperation with countries, governments and organisations, as it is committed to collective action to ensure a better future for humanity and future generations.

Al Kaabi highlighted the growing importance of the Indo-Pacific region, particularly as it represents approximately two-thirds of the world’s population and most of the global GDP, and has some of the busiest and most prosperous maritime trade routes, making it an economic hub of the world.

She also highlighted that the region faces geo-economic challenges, which require cooperation with all sides to address.

She emphasised that the UAE shares a vision with the European Union to achieve comprehensive economic prosperity in the Indo-Pacific, which is reflected in the increasing number of cooperation agreements and economic partnerships concluded by the UAE with countries in the region, an indication of the country’s commitment to continue a policy of integrated cooperation to achieve comprehensive and sustainable development in many key sectors.

Al Kaabi concluded by stating that the UAE is ready to collaborate with partners in the European Union and the Indo-Pacific region to achieve more sustainable and inclusive growth in various sectors, stressing the country’s keenness to develop cooperative relationships that allow for effective bilateral partnerships with different countries and governments in order to share knowledge and experience.

Al Kaabi also participated in a panel discussion focused on cooperation to achieve more sustainable and inclusive growth, where she outlined the UAE’s experience in a number of key sectors, including the economy, energy, climate change, and technology, as well as its continued cooperation with all relevant parties, including with the European Union and its member states, to achieve sustainable growth.

Al Kaabi said, “The United Arab Emirates has always seen climate action as an opportunity. We have used our ambitions around climate progress to grow and diversify our economy, creating knowledge, skills, and jobs for our young people, while contributing practical solutions to a global problem that affects us all. The UAE is a major global supporter of green infrastructure and clean energy projects worldwide, and has provided more than USD 400 million in aid and soft loans for clean energy projects.”

She highlighted the UAE’s efforts to support global climate action by hosting the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28) in November 2023 in Dubai Expo City, which will focus on implementing climate commitments and pledges, cooperating to take concrete actions, and finding solutions that help address challenges and seize opportunities to ensure a sustainable future for current and future generations.

Al Kaabi met on the sidelines of the Forum Olivér Várhelyi, Commissioner for Neighbourhood and Enlargement, and discussed with him the development of bilateral relations, the joint agenda between the UAE and the European Union, and the main global challenges in light of the Forum’s agenda.

On the sidelines of the Forum, Her Excellency Al Kaabi also met with Tobias Billstrom, Minister of Foreign Affairs of the Kingdom of Sweden, and Gordan Grlić Radman, Minister of Foreign Affairs of the Republic of Croatia, and Hina Rabbani Khar, Minister of State for Foreign Affairs of the Islamic Republic of Pakistan, to discuss collaboration, investment and opportunities for enhancing cooperation at the economic and trade levels, particularly between the European Union and the Indo-Pacific region.

ALSO READ: Dubai Chambers introduces EU to UAE Corporate Tax Law

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Pakistan asked to arrange $8b for successful IMF bailout review

IMF’s demand comes despite receiving confirmation from Saudi Arabia and the United Arab Emirates (UAE) further eroding chances for the revival of the USD 6.5 billion bailout package….reports Asian Lite News

The International Monetary Fund (IMF) on Saturday asked Pakistan to arrange USD 8 billion in fresh loans to back the external debt repayments during the next seven months for the successful completion of the long-stalled ninth review bailout package, reported The Express Tribune.

IMF’s demand comes despite receiving confirmation from Saudi Arabia and the United Arab Emirates (UAE) further eroding chances for the revival of the USD 6.5 billion bailout package. A staff-level accord to release a USD 1.1 billion tranche out of a USD 6.5 billion IMF package has been delayed since November, nearly 100 days since the last staff-level mission to Pakistan.

The IMF’s demand to seek its approval on the upcoming budget for the fiscal year 2023-24 has also not been met yet, further minimising the prospects of early completion of the pending 9th review of the Extended Fund Facility (EFF), according to the government sources, reported The Express Tribune.

Sources say that the IMF has raised the demand for additional financing from an earlier unmet condition of USD 6 billion to USD 8 billion to ensure debt repayments coming up for May-December 2023.

The lender has worked out the USD 8 billion needs by considering all projected inflows and outflows for this period, reported The Express Tribune.

Meanwhile, on Thursday Finance Minister Ishaq Dar said that Pakistan will not make tough decisions on the demand of the International Monetary Fund (IMF) anymore.

While informally talking to the journalists, Ishaq Dar said that it is completely up to the International Monetary Fund (IMF) to sign a staff-level agreement or not.

He clarified that the government will not make tough decisions on IMF’s demand anymore. “We have already implemented pre-conditions of the IMF but not anymore.”

Sources have said that the IMF’s focus is now more on ensuring that Pakistan does not default by arranging funds to the extent of external debt repayments. It is no longer emphasising increasing the extremely low foreign exchange reserves, reported The Express Tribune.

In a scheduled press conference on Thursday, IMF spokesperson Julie Kozack said Pakistan needed “significant additional financing” to successfully complete the ninth review. She said the economy was facing stagflation, had very large financing needs and had also been affected by a series of shocks, including severe flooding. (ANI)

ALSO READ: Afghanistan reports first polio death of 2023

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UK economy grows by 0.1% in the first quarter

UK growth has been muted so far this year, coming in at 0.4% in January and flat in February, after the economy narrowly avoided a technical recession in 2022…reports Asian Lite News

The UK economy grew by 0.1% in the first quarter, following an unexpected contraction in March, official figures showed.

Economists polled by media had forecast the same growth figure for the first three months of the year, but expected stagnation in March, versus the 0.3% fall recorded.

The construction sector expanded by 0.7%, while manufacturing performance went up by 0.5% in the first quarter, with 0.1% growth logged in services and production. On a monthly basis, services dropped by 0.5% in March, particularly because of declines in wholesale and retail trade and motor repairs.

The national statistics agency said there was no growth in real household expenditure, as incomes remained under the squeeze of higher prices.

“I think the U.K. is back, and those are numbers that no one would have predicted even three months ago,” UK Finance Minister Jeremy Hunt said at a G-7 summit in Niigata, Japan.

“But I think we are aware there is still a long way to go. We still have inflation that is too high, growth is still not as high as we would like it to be, and when I talk to my fellow finance ministers we all talk about the same thing. Labor supply, productivity, how we are going to increase our long-term growth rates so that we can pay for the increasing number of things that tax payers want governments to do,” Hunt continued.

Ruth Gregory, deputy chief U.K. economist at Capital Economics, said in a note that the quarterly figure “suggests that low real income and high interest rates, as well as the unusually wet weather, are dampening activity,” also citing widespread strike action this year. She assessed that declines in government consumption and net trade made for “gloomy reading.”

″There’s still no recession, but with the full drag from higher interest rates yet to be felt it is too soon to sound the all-clear,” Gregory added.

UK growth has been muted so far this year, coming in at 0.4% in January and flat in February, after the economy narrowly avoided a technical recession in 2022.

Inflation remains a more severe blight on the U.K. than on other major economies, with the March reading still above 10%.

The Bank of England on Thursday raised interest rates by 25 basis points to 4.5% making its twelfth consecutive hike in an attempt to combat stubbornly high prices. More optimistically, the central bank said it no longer expects the U.K. to enter a recession this year, despite previously forecasting its longest-ever recession.

The Bank of England now forecasts the U.K. GDP will be flat over the first half of this year, growing 0.9% by the middle of 2024 and 0.7% by mid-2025.

“It may be the biggest upgrade we’ve ever done,” BoE Governor Andrew Bailey told CNBC on Thursday, defending the revision as the result of a changing picture from conditional data, including financial markets, commodity prices and government policy.

“The level is still quite low though, let’s be honest,” Bailey added.

The euro zone recorded just 0.1% growth in the first quarter of the year, with Germany — the bloc’s biggest economy — stagnating.

ALSO READ-Abu Dhabi fastest-growing economy in MENA

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IMF staff team due in Lanka

On Tuesday, Sri Lanka had requested 17 countries which had formally formed an official creditor committee for debt treatment…reports Susitha Fernando

An IMF staff team comprising Krishna Srinivasan, Director of the Asia and Pacific Department is to visit Sri Lanka from May 11 to 23.

Visiting as part of regular consultations ahead of the first review mission later this year, the team also comprised of Peter Breuer, Senior Mission Chief for Sri Lanka, Asia and Pacific Department, IMF and Sarwat Jahan, IMF Resident Representative in Sri Lanka.

Meanwhile, on Tuesday, Sri Lanka had requested 17 countries which had formally formed an official creditor committee for debt treatment.

Co-chaired by India, Japan and France, the committee includes Paris Club creditors and other official bilateral creditors.

“This first meeting occurred after the successful launch of the debt restructuring process for Sri Lanka led by the co-chairs on April 13,” the Paris Club said in a statement.

“The Sri Lankan authorities attended the meeting and formally presented their request for debt treatment. They reiterated their commitment to transparency and comparability of treatment towards their official bilateral creditors. The IMF and World Bank representatives presented the latest macroeconomic developments regarding Sri Lanka and the current status of their relationship with the country,” the Paris Club stated.

“The creditor committee takes note of the open letter addressed by the President of Sri Lanka to all its official bilateral creditors on March 14, 2023 assuring transparency and comparability of treatment for all external creditors and ensuring that no side arrangements inconsistent with comparability of treatment will be made with any creditor. The committee welcomes passage of the resolution for implementation of the IMF-supported programme by the Sri Lankan Parliament on April 28,” the Paris Club added.

The creditor committee for Sri Lanka had given an undertaking to pursue its work to find an appropriate solution to Sri Lanka’s external debt vulnerabilities, consistent with the parameters of the IMF programme.

It stresses the importance for private creditors and other official bilateral creditors of Sri Lanka to provide a debt treatment on terms at least as favourable as the ones agreed by this creditor committee, in line with the comparability of the treatment principle.

It reiterates its invitation to other bilateral official creditors to formally join the creditor committee.

Sri Lanka’s biggest bilateral lender, China and Paris Club members with no eligible claims, Saudi Arabia and Iran attended the meeting as observers, while the representatives of the IMF and the World Bank Group also attended the meeting as well.

Going through the worst ever economic crisis since Independence, the IMF has approved a $2.9 billion Extended Fund Facility (EFF) for the Indian ocean island nation to help come out of the crisis.

ALSO READ: Pakistan: Rush to break IMF deadlock before fiscal budget

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Biden chairs debt meet

Biden described the talks as “productive” even though House Speaker Kevin McCarthy said “didn’t see any new movement”…reports Asian Lite News

President Joe Biden and congressional leaders confronted each other on the debt limit impasse Tuesday, ending their meeting with no breakthrough but agreeing to meet again this week to try to avert the looming risk of an unprecedented government default.

Speaking at the White House, Biden described the talks as “productive” even though House Speaker Kevin McCarthy said after the high-stakes Oval Office meeting that he “didn’t see any new movement” toward resolving the stalemate.

Lawmakers and their staffs were to continue discussions on the annual federal budget at Biden’s encouragement. Biden and the congressional leaders are to meet again Friday.

After the hourlong discussion in the Oval Office, Biden said he was “absolutely certain” that the country could avert a default, declaring that failure to meet America’s obligations “is not an option.”

Still, time is short. The government is bumping up against its legal limit for borrowing and will not be able to pay all of its bills as soon as June 1 if Congress doesn’t agree to raise the debt ceiling. That failure would send the country into default with wide-reaching economic impact at home and around the world.

Republicans came to the White House hoping to negotiate sweeping cuts to federal spending in exchange for allowing new borrowing to avoid default. Biden, on the other hand, reinforced his opposition to allowing the country’s full faith and credit to be held “hostage” to negotiations — while affirming his willingness to hold talks on the budget only after default is no longer a threat.

“I told congressional leaders that I’m prepared to begin a separate discussion about my budget, spending priorities, but not under the threat of default,” Biden said.

Outside the White House, McCarthy said, “I asked the president this simple question: Does he not believe there’s any place we could find savings?”

As the president welcomed McCarthy, House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell, he quipped to reporters, “We’re going to get started, solve all the world’s problems.”

Biden later described the meeting’s tone as “very measured and low-key,” adding, “Occasionally there would be a little bit of an assertion that maybe was a little over the top from the speaker.”

He especially took issue with McCarthy’s branding as a lie the Democrats’ assertion that the Republicans’ budget restraints would hurt veterans.

Still, Biden added, “I trust Kevin will try to do what he says.”

There seemed to be at least a bit of daylight between McConnell, who has let his House counterpart take the lead in negotiations and backed him up ahead of the White House meeting, and McCarthy.

The Senate leader said: “The United States is not going to default. It never has and it never will.” The speaker, though, simply said, “I’ve done everything in my power to make sure we will not default.”

Democrats said there is room to “come together” on spending cuts as part of the budget process, but quickly jumped on McCarthy’s refusal to rule out the possibility of default, with Schumer saying the Republican is “greatly endangering America.”

“To use the risk of default, with all the dangers that has for the American people, as a hostage and say it’s my way or no way, are mostly my way or no way, is dangerous,” Schumer said.

McCarthy said Biden had directed their staffs to continue discussions, and said the leaders themselves would convene again in person Friday at the White House.

While Biden ruled out default, he also all but dismissed trying to unilaterally prevent it. He said he didn’t believe invoking the 14th Amendment of the U.S. Constitution, which says the validity of the federal debt shall not be questioned, was a solution to the current impasse.

White House lawyers will pursue the idea further, he added, but “the problem is it would have to be litigated.”

Before the White House meeting, both McCarthy and White House press secretary Karine Jean-Pierre insisted it would be simple to avert default — if only the other side capitulated.

The chasm between these opposite postures had fomented uncertainty that is roiling financial markets and threatens to turn into a tidal wave that swamps the country’s economy. Default, officials say, threatens to disrupt Social Security payments to retirees, destabilize global markets and tilt the nation into a potentially debilitating recession.

Last month, House Republicans passed a sweeping bill to slash spending, an opening offer in negotiations. But that legislation has no chance in the Democratic Senate and the White House has threatened to veto it. Republicans hope that bill would achieve $4.5 trillion in deficit savings through cuts in spending, eliminating tax breaks for investing in clean energy, and reversing Biden’s plans to reduce the burdens of student loan debt.

ALSO READ: Biden agrees to meet with Republicans to prevent default disaster

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Business Economy Tech Lite

Bosch eyes more goals

Bosch is realigning its mobility business to changed market and customer requirements. The aim is to be able to serve existing and new customer needs even better and faster with customized solutions from a single source…reports Asian Lite News

In 2022, Bosch exceeded its business targets in what was a challenging year. The supplier of technology and services increased its total sales to 88.2 billion euros, following 78.7 billion euros the previous year. This is an increase of 12.0 percent, or an exchange rate-adjusted 9.4 percent. At 3.8 billion euros, EBIT (earnings before interest and taxes) from operations is also higher than the previous-year figure of 3.2 billion euros. The EBIT margin from operations rose from 4.0 to 4.3 percent. Presenting the company’s annual figures, Dr. Stefan Hartung, the chairman of the board of management of Robert Bosch GmbH, said: “We rose well to the challenges of 2022 – both our sales and our margin were higher than expected. And even if the economic and social environment remains demanding, we want to grow significantly faster.”

In the years ahead, given normal rates of inflation, the aim is for annual sales to grow by 6 to 8 percent on average, and for margin to reach at least 7 percent. “Our aim is to grow in every region of the world and to be among the leading three suppliers in our relevant markets,” Hartung said.

The fight against climate change is causing considerable upheaval in business and society, and also accelerating technological change. “This technological transformation is opening up growth opportunities that we want to seize, both in our existing business and in related and new areas,” Hartung said. “In this context, our ‘Invented for life’ ethos is ideal – not only when it comes to the major trends of electrification, automation, and digitalization, but more than ever also with respect to software and artificial intelligence.”

Investments in the future: innovative strength needs financial strength

“Despite the challenging environment, we can look back on solid results in 2022. On top of that, we have prepared the ground for Bosch’s success in the markets of the future,” said Dr. Markus Forschner, the CFO of Robert Bosch GmbH. All in all, the company spent more than 12 billion euros last year on securing its future. Expenditure on research and development rose to 7.2 billion euros (from 6.1 billion euros in 2021), or 8.2 percent of sales (7.8 percent in 2021). Capital expenditure also increased by 1 billion euros to 4.9 billion euros. The equity ratio rose slightly to 46.6 percent (2021: 45.3 percent). Apart from upfront investments, ensuring outstanding ability to deliver in times of great uncertainty tied up funds. This resulted in a negative free cash flow of 4.0 billion euros last year. “Even if Bosch does have the necessary funds and a very sound financial position, we have to maintain a difficult balancing act between investments and cost discipline,” he added.

Outlook for 2023: cost pressure, inflation, and a cooling economy

Despite the after-effects of the Covid-19 pandemic, the Bosch Group was able to increase its sales by 3.5 percent in the first quarter of 2023. North America developed especially favorably, with double-digit growth of 18.0 percent. In Europe as well, the company grew by a strong 7.7 percent. “The first few months of the new business year have shown that 2023 will also be a challenging year,” the CFO said. He explained that he expects prices on the raw materials and energy markets, as well as inflation, to remain high. For 2023, Bosch expects global economic output to grow just 1.7 percent, and thus to cool by a further considerable degree year on year. Despite the modest economic outlook, Bosch is aiming for sales growth of between 6 and 9 percent in 2023. Its target for EBIT margin from operations is in the region of 5 percent. “In this way, we want to come one step closer to our long-term target of at least 7 percent margin,” Forschner said. “We have set ourselves an ambitious roadmap.”

Mobility business: growth through realignment

Bosch is realigning its mobility business to changed market and customer requirements. The aim is to be able to serve existing and new customer needs even better and faster with customized solutions from a single source. “We want to remain a leading supplier of technology and the preferred partner for our customers in the mobility industry. We’re preparing the ground for this,” Hartung said. What has up to now been the Mobility Solutions business sector, with some 230,000 associates at more than 300 locations in 66 countries worldwide, will now be known as the “Bosch Mobility” business sector. Within the company, it will be responsible for its own business and have its own leadership team. Effective January 1, 2024, the individual divisions will be redrawn in some cases and given horizontal responsibilities as well. The Bosch chairman announced that the aim is for the newly restructured mobility business to grow annually by an average of roughly 6 percent up to 2029, when it will achieve annual sales of more than 80 billion euros. One pillar of its future growth will be the market for automotive software, which is expected to triple by the end of the decade. In this market, Bosch Mobility will provide its customers with software solutions for operating systems and domain-specific applications for software-defined vehicles. Bosch is also significantly expanding its automotive electronics business: to serve the growing demand for silicon-carbide chips, the company plans to take over parts of the business of the U.S. chipmaker TSI Semiconductors. Over the next few years, Bosch wants to invest more than 1.4 billion euros in the U.S. company’s Roseville location in California, and to retool its manufacturing facilities. Starting in 2026, the first chips are to be produced there on 200-millimeter wafers based on the innovative material silicon carbide (SiC).

Energy and Building Technology: growth with the move to alternative heating

Hartung believes that the overhaul of global energy systems in particular is a source of additional business potential: “Growth won’t just be found on our roads, even if we are very successful there,” Hartung said. “When it comes to the electrification of heating systems, our heat pumps are very much in demand.” At Bosch, this field is just as much a driver of above-average growth as electrical powertrains for vehicles. The company is expanding its heat-pump capacity and wants to invest more than 1 billion euros in total in Europe by the end of the decade. Following the start of volume production in Eibelshausen, Germany, at the start of the year, Bosch recently announced the construction of a further plant in Dobromierz, Poland. To make it affordable for homeowners to modernize their heating systems, Bosch is promoting hybrid solutions as well; the use of an existing gas-fired boiler in combination with a smaller-scale heat pump often rules out the need for extensive refurbishment. Compared with a heat pump-only solution, this can reduce modernization costs by as much as 30 percent. Bosch expects the European heat-pump market to grow 20 percent in 2023 – with sales related to this growing more than twice as fast at Bosch. This rapid growth is expected to last until the middle of the decade. Bosch is also benefiting from the move to make commercial buildings more energy- and cost-efficient. In acquiring Hörburger AG, the company recently extended its portfolio to include building automation.

Industrial technology and consumer goods: ambitious growth targets

In its industrial technology and consumer goods businesses as well, Bosch is on a growth path. In the Industrial Technology business sector, for example, sales have now climbed to nearly 7 billion euros. “The target for sales revenue in 2028 is 10 billion euros – this is important in order to be among the frontrunners in industrial technology,” the Bosch chairman said. He added that the recent acquisition of HydraForce, with its roughly 2,100 associates, will play a central role here: “The takeover of this U.S. specialist has not only tripled our sales of compact hydraulics,” he said. “In addition, HydraForce’s dealer network will also give us better access to the U.S. market.” Bosch Rexroth is also entering a new field – the electrification of mobile machinery. The division has very recently launched its eLion program, a complete product portfolio for this field. It also has a large number of orders from makers of off-highway vehicles. “The electrification of tractors, concrete mixers, and excavators is just what the industry has been waiting for.”

The Consumer Goods business sector also has ambitious growth targets: Bosch Power Tools, for example, aims to more than double its sales by 2030, and to surpass the 10-billion-euro mark. To bring this about, the division already invested some 300 million euros last year in programs such as expanding its accessories business. Further nine-figure investments are planned for this year. One of their focal points will be North America, which on its own represents more than 40 percent of the global power-tool market. BSH Hausgeräte is also strengthening its position there: from 2024, for example, it will manufacture cooling appliances for the North American market in a new factory in Mexico.

Business year 2022: Development by business sector

Mobility Solutions, the company’s biggest business sector, significantly increased its sales by 16.0 percent (12.1 percent after adjusting for exchange-rate effects) to 52.6 billion euros. The margin from operations was better than expected, rising from 0.7 to 3.4 percent. “Despite chronic chip shortages and only weak growth in automotive production, we were able to considerably increase our mobility-related sales,” Forschner said. “And we too were forced to adapt our prices to increased costs.” The Industrial Technology business sector benefited from the robust machinery market. Its sales grew by 13.9 percent (11.0 percent after adjusting for exchange-rate effects) to 6.9 billion euros. Its EBIT margin increased to 9.8 percent. The Consumer Goods business sector suffered from the steep drop in demand for home appliances and power tools. Nonetheless, its sales rose 1.5 percent (1.6 percent after adjusting for exchange-rate effects) to 21.3 billion euros. In addition, the phasing-out of its Russia business put a strain on earnings. Its EBIT margin from operations came to 4.5 percent, following 10.2 percent the previous year. The Energy and Building Technology business sector grew significantly in 2022, by 17.4 percent (15.9 percent after adjusting for exchange-rate effects), to 7.0 billion euros. One of the drivers of this demand was the heavy demand for climate-friendly heating technology. The EBIT margin was 6.0 percent (2021: 5.1 percent).

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Millions face job losses in Pakistan

Around 100,000 people out of the 500,000 in the Site area had lost their livelihood in different categories of industries, mainly from October 2022 till date, official said…reports Asian Lite News

Millions of jobs in formal and informal sectors of the economy across Pakistan have been lost due to a massive decline in industrial production so far this fiscal year, state media reported.

The ongoing restrictions on the import of raw materials, the foreign exchange crisis and rising costs caused by surging power and gas bills have severely hampered production activities.

In four industrial sectors of Karachi and the countrywide auto vending units, stakeholders claimed that “over 500,000 people have faced joblessness,” Dawn reported.

Passengers get on a train at a railway station ahead of the Islamic Eid al-Fitr festival in Lahore, Pakistan, April 30, 2022. (Photo by Sajjad/Xinhua/IANS)

However, an official from the Sindh government’s Directorate of Manpower Labour Human Resource, who requested anonymity, said that the businessmen are exaggerating the figures.

Site Association of Industry (SAI) President Riazuddin said except for the food sector, around 100,000 people out of the 500,000 in the Site area had lost their livelihood in different categories of industries, mainly from October 2022 till date, Dawn reported.

He added that industrial activities in the area had dropped by 30-40 oer cent with some industries either closed or suspending their one shift during the current fiscal year.

“I think 50 per cent more industries will close down after the withdrawal of the Rs 19.99 power tariff and $9 per mmBtu gas tariff,” he feared.

Riazuddin said that the federal government’s departments, like the Sindh Bureau of Statistics (SBS) and various departments of the Sindh government, have become active since July 2022 in seeking unemployment data from industries. Businessmen are reluctant to provide any job loss data fearing any harassment from these departments, while listed firms might be presenting their workers’ data every month.

North Karachi Association of Trade and Industry (NKATI) Chairman Faisal Moiz Khan said the area comprises nearly 5,000-6,000 small and medium-sized units, of which 60 per cent are export-oriented, providing working opportunities to five to six million workers.

Amid an unfavourable economic situation, around 25 per cent of the industries have shut down their units rendering more than 100,000 contractual employees unemployed while 75 per cent of the industries scaled back their production, he said, Dawn reported.

“Nearly 30-50 per cent of the textile Industry in Sindh have partially shut down and their numbers will increase,” he added.

Korangi Association of Trade and Industry (KATI) President, Faraz Ur Rahman said, “Over 50,000 workers have lost their jobs directly and indirectly of which 10,000 are only in pharmaceutical sectors in the Korangi industrial area due to raw material shortage as a result of import restrictions.”

Senior Vice-President of the Pakistan Association of Auto Parts Accessories (PAAPAM), Usman Aslam Malik, said that the countrywide vending industry has experienced the loss of around 250,000-300,000 direct and indirect jobs due to frequent auto plant shutdowns since August 2022, Dawn reported.

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