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Economy UK News

UK to boost defence spending to 2.5% of GDP

Last month, Sunak faced calls from three former defence secretaries to pledge an increase to 3% of GDP on the armed forces in the Tory election manifesto…reports Asian Lite News

Britain will boost its defence spending to 2.5% of national output by the end of the decade, Rishi Sunak has announced on a visit to Poland, as he warned the UK had to be equipped to meet the challenges of an increasingly dangerous world.

The prime minister’s plan, under which the UK would steadily increase defence spending to £87bn a year by 2030, comes after months of pressure from Tory MPs, including the defence secretary, Grant Shapps, to increase military spending to help counter the threat from Russia.

The military commitment, described by Sunak as the “biggest strengthening of our national defence in a generation”, means the UK would spend a cumulative extra £75bn on core defence funding over the next six years.

In a speech alongside the Nato secretary general, Jens Stoltenberg, in Warsaw, Sunak said Europe was at a turning point as he urged allies to step up to match the commitment of the UK, which will become the second largest contributor to Nato after the United States.

“In a world that is the most dangerous it has been since the end of the cold war, we cannot be complacent. As our adversaries align, we must do more to defend our country, our interests, and our values,” he said.

“Today is a turning point for European security and a landmark moment in the defence of the United Kingdom. It is a generational investment in British security and British prosperity, which makes us safer at home and stronger abroad.”

Downing Street said the plan was fully funded, moving from an aspiration to spend 2.5% by an unspecified date, when the economic circumstances allowed, to a costed commitment to do so in 2030. The UK currently spends 2.32% of gross domestic product on defence.

It is unclear whether an incoming Labour government would stick to Sunak’s commitment. Keir Starmer said last week that Labour would aim to raise the UK’s defence spending to 2.5% of GDP “as soon as resources allow” if it won the election.

Boris Johnson pledged at a Nato summit in June 2022 to increase UK military spending to 2.5% of gross domestic product by the end of the decade as part of a strengthening of Nato defences in response to the threat from Russia.

Last month, Sunak faced calls from three former defence secretaries – Michael Fallon, Gavin Williamson and Ben Wallace – to pledge an increase to 3% of GDP on the armed forces in the Tory election manifesto.

Government sources said the funding would be used to put the UK’s defence industry on “a war footing” and deliver cutting-edge technology to equip the west to stand up to autocratic states such as Russia, Iran and China, which were working together to undermine democracies.

It includes an additional £10bn over the next decade on munitions production, further pledges to reform defence procurement and the creation of a new defence innovation agency with at least 5% of the defence budget to be committed to R&D.

It would also cover an additional £500m in military funding for Ukraine from Treasury reserves, which was announced by Sunak before the trip and takes the total to £3bn this financial year.

Earlier, the prime minister appointed Gen Gwyn Jenkins, a former special forces commander who is vice-chief of the defence staff, as his new national security adviser.

He will be the first armed forces veteran to serve in the role and replaces Tim Barrow, who is expected to become the next UK ambassador to Washington at the end of this year.

Labour, however, has warned it could reverse Barrow’s appointment if it wins the election, arguing that the next UK government should make decision over who takes on Britain’s most senior diplomatic posting.

The chancellor, Jeremy Hunt, also on the trip with Sunak and Shapps, said: “It speaks to Britain’s global role that, with an improving economy, we are able to make this commitment to peace and security in Europe.

“It also sends the clearest possible message to Putin that as other Nato European countries match this commitment, which they will, he will never be able to outspend countries that believe in freedom and democracy.”

Earlier, on the flight to Poland, Sunak said: “It’s important that we continue to support Ukraine and the UK has always led in that. Again we’re stepping up because that is what the situation demands and requires.

The prime minister welcomed the decision by the US House of Representatives, after months of stalling, to finally approve a US $61bn package of new military aid for Ukraine.

But he added: “That doesn’t take away from the need for Europeans to invest in their security. I am very proud that the UK has always led in that regard.”

Sunak, who will visit Germany later on his first visit as prime minister, is expected to be asked for assurances on British defence spending from the German chancellor, Olaf Scholz, after decades of real-terms cuts.

Berlin is expected to finally meet its Nato target to spend 2% of GDP on defence after Russia’s invasion of Ukraine, with Germany’s weapons commitments to the war now almost twice the size of Britain’s, and Scholz regularly urging European states to ramp up their military spending.

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Business Economy India News

India’s Earnings-to-GDP Ratio Rebounds Since FY20

On aggregate, net earnings were 4 per cent higher than street expectations…reports Asian Lite News

The corporate earnings momentum has improved significantly since FY20.

Earnings have surprised on the upside in the recent past, driven by an improvement in margins, foreign brokerage Nomura said in a research report.

“We think, from hereon, margin levers are limited and growth will be largely dependent on volume growth,” it said.

“We are constructive on earnings growth in the medium term supported by government policies and its impact on macro factors. The earnings-to-GDP ratio can continue to improve,” it added.

The corporate earnings-to-GDP ratio, which has recorded a consistent decline since the Global Financial Crisis (GFC), has rebounded since FY20. Most segments, particularly the commodity-consuming manufacturing sector, have recorded strong growth since FY20, Nomura said.

In an analysis of a set of 232 companies (referred as BSE 200+), which are part of the BSE 200 index and coverage universe, net earnings recorded 30 per cent y-o-y earnings growth.

Excluding financials, commodities and telecom, where earnings tend to be volatile, the aggregate earnings growth was strong at 22 per cent y-o-y. The earnings momentum has improved in the recent past as the four-year CAGR between 3QFY20-24 is at 32.3 per cent, vs 2.9 per cent between 3QFY16-20.

On aggregate, net earnings were 4 per cent higher than street expectations, the research said.

The year-on-year growth was particularly strong in cement, autos, and infrastructure/transport/logistics (including airline). The growth was muted in IT services and consumer staples, but on aggregate the earnings were ahead of consensus estimates.

The market expects the Nifty 100 index to record 28.4 per cent earnings growth in FY24E aided by strong profits in the oil and gas sector and financials.

For FY25E and FY26E, earnings growth expectations are modest at 12.1 per cent and 13.3 per cent y-o-y, respectively.

Financials will contribute 38 per cent to the incremental earnings of the Nifty 100 over FY24-26E, as per consensus estimates. Earnings growth is expected to moderate across most sectors over the next two years vs FY24 owing to a high base, the research said.

The growth will be driven by increase in volumes as margin levers have already played out. Slowdown in economic growth and higher commodity prices are the key risks to the market’s current earnings estimates.

“We think capex, along with domestic manufacturing, will lay the foundation for earnings growth in the medium term,” the report said.

India Dedicated Funds Continue 49-Week Inflow Streak

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India dedicated funds have now seen the 49th straight week of inflows, Elara Securities said in a report.

The inflows include $712 million this week after $766 million in the previous week. Largecap funds continued to see the biggest portion of this flows ($631 million).

Some revival is also seen in smallcap funds where a total $280 million has come in the past nine months. India flows continue to be strongest from US investors ($215 million), followed by Ireland ($177 million) and Japan ($124 million) investors, the report said.

Countries where both domestic and foreign inflows are strong include the US, Japan and India, the tracker said.

On the other hand, China is witnessing strong domestic inflows, but foreign flows are still weak. Over the past month, the pace of inflows by domestic investors into Chinese equity was strongest since 2015.

Overall, the global liquidity situation continues to remain benign with most markets witnessing strong domestic flows, it added.

“China funds have started showing strong outperformance over India funds, finally. Similar outperformance was seen in May 2022 after which we saw a round chasing into this trade. Likewise, the second big leg was from November 2022 to February 2023 with an outperformance of 40 per cent,” the report said.

With the strong domestic flows and beginning of outperformance, it will be key to see if foreign flows start shifting there, though there is no signs of this trade as of now, the report said.

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-Top News Africa News

‘Climate change to slash Africa’s GDP by 7.1%’

In Africa, more than 200 million people could face extreme hunger and undernourishment in the long run as extreme weather events impact crop yields and farmland value…reports Asian Lite News

Extreme weather conditions are expected to have severe repercussions on the economy, agricultural productivity, water resources, and energy security across the developing world, a new study has found.

Published by the Center for Global Development (CGD), the report looks at the socioeconomic impact of rising temperatures and rapidly shifting weather patterns and extreme events in the Global South and particularly in Africa in the coming decades. According to the analysis, even small temperature increases – much lower than 2C – could have significant repercussions on socioeconomic indicators in the developing world.

In Africa, more than 200 million people could face extreme hunger and undernourishment in the long run as extreme weather events impact crop yields and farmland value. Indeed, agricultural production in Africa could experience losses of up to 2.9% by 2030 and 18% by mid-century, the study suggested, while the value of farmland to drop anywhere between 36% and 61%. While estimates are not conclusive for other developing regions, researchers say rain-fed crops will suffer the most.

Besides food security, climate change is also expected to deepen poverty in the world’s poorest regions. In Africa, the average per capita gross domestic product (GDP) is projected to drop by 7.1% in the long term, while country-level losses are much higher, estimated between 11.2% and 26.6% of GDP. Across the continent, poverty is expected to affect households that work in the agricultural sector the most, with revenue from crops likely to drop by 30% and poverty expected to rise anywhere between 20% and 30% when compared to a no-climate-change scenario.

As altered rainfall patterns impact the quality and spatial distribution of global water resources, regions vulnerable to droughts and flooding are also expected to see increased displacement rates and water shortages. In Africa alone, these changes are likely going to push more than 50 million people into water distress.

“If the menace of climate change is not addressed, the socioeconomic problems of developing countries, particularly in Africa, will deepen and erode the gains made in development in the last decades,” wrote Philip Kofi Adom, the study’s author.

The analysis follows months of record-breaking temperatures worldwide, with 2023 dubbed the hottest year in history and characterised by unprecedented extreme weather events that have brought about loss and devastation around the world.

Developing countries, historically the ones most affected by these events despite being those contributing the least to the issue, have long fought to hold industrial nations accountable. At last year’s UN COP28 climate summit in Dubai, delegates from nearly 200 countries approved a framework for the Loss and Damage Fund instituted at COP27 to help developing countries deal with the harm stoked by global warming. The framework, brought forward last month by the 24-member Transitional Committee (TC), a board tasked with the operationalisation of the fund, contains recommendations on how the fund would operate, including who would get the money, and who would pay.

The final text invites “financial contributions with developed country parties continuing to take this lead to provide financial resources for commencing the operationalisation of the Fund.” It also assures the World Bank as the fund’s host on a four-year interim basis – despite the US pushing to make this permanent. Developing nations initially expressed opposition to the idea of the Bank hosting the Fund due to their lack of confidence in the institution’s significant shift towards promoting climate action.

Pledges for the fund exceeded US$700 million, including $300-400 million from the European Union (EU) collectively, $100 from the United Arab Emirates (UAE), $50 million from the UK, $17.5 million from the US, and $10 million from Japan.

Nevertheless, critics pointed out that contributions to the Fund represent less than 0.2% of the economic and non-economic losses developing countries face every year from global warming, adding pressure to developed nations to enhance their contributions and provide additional pledges in line with their historical responsibility for loss and damage.

February on course to break many global heat records

February is on course to break a record number of heat records, meteorologists say, as human-made global heating and the natural El Nino climate pattern drive up temperatures on land and oceans around the world, media reported.

A little over halfway into the shortest month of the year, the heating spike has become so pronounced that climate charts are entering new territory, particularly for sea-surface temperatures that have persisted and accelerated to the point where expert observers are struggling to explain how the change is happening, The Guardian reported.

“The planet is warming at an accelerating rate. We are seeing rapid temperature increases in the ocean, the climate’s largest reservoir of heat,” said Dr Joel Hirschi, the associate head of marine systems modelling at the UK National Oceanography Centre. “The amplitude by which previous sea surface temperatures records were beaten in 2023 and now 2024 exceed expectations, though understanding why this is, is the subject of ongoing research.”

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-Top News UK News

UK Slides into Recession Ahead of General Election, GDP Shrinks

Prime Minister Rishi Sunak speaks with Chancellor the Exchequer Jeremy Hunt during the Cabinet meeting in 10 Downing Street. Picture by Simon Dawson / No 10 Downing Street

A recession is commonly defined as two consecutive quarters of contraction…reports Asian Lite News

The UK has slipped into recession just months ahead of a general election, official figures showed on Thursday, derailing Prime Minister Rishi Sunak’s pledge to generate economic growth, the media reported.

The GDP fell 0.3 per cent in the final three months of 2023, following a 0.1 per cent contraction in the July to September period, the Office for National Statistics (ONS) said.

A recession is commonly defined as two consecutive quarters of contraction.

“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery,” ONS director of economic statistics Liz McKeown said in a statement, CNN reported.

The ONS estimates that the UK’s GDP increased by a meagre 0.1 per cent in 2023. That’s the worst performance since 2009 when the economy was still reeling from the global financial crisis, if 2020, which was affected by the pandemic, is excluded.

Last year’s weak rise in output follows growth of 4.3 per cent in 2022.

“Across 2023 as a whole the economy has been broadly flat,” McKeown added.

The news will come as a disappointment to Sunak, whose ruling Conservative Party is contesting two local elections in England on Thursday.

It could also widen the already commanding lead the Opposition Labour Party enjoys in opinion polls ahead of the national election expected this year, CNN reported.

“Though the shallowness of this recession provides comfort, these figures also confirm that our economy remained locked in a cycle of persistent stagnation throughout 2023,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.

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-Top News Economy India News

India’s Stock Market Surpasses Hong Kong in Global Ranking

GDP.

The past 12 months have been stellar for investors who parked their money in Indian stocks. Though there has been some turbulence, the calendar year 2023 gave handsome monetary dividends to stock market investors…reports Asian Lite News

Firm GDP growth forecasts, inflation at manageable levels, political stability at the central government level and signs that the central bank is done with tightening its monetary policy have all contributed to painting a bright picture for the Indian stock market.

India pipped Hong Kong to become the fourth-highest equity market globally, Bloomberg reported. The combined value of shares listed on Indian exchanges reached USD 4.33 trillion as of Monday’s close, versus USD 4.29 trillion for Hong Kong, according to data compiled by Bloomberg. India’s stock market capitalization crossed USD 4 trillion for the first time on December 5, 2023, with about half of that reportedly coming in the past four years. The top three stock markets are those of US, China, and Japan.

Cumulatively, the past 12 months have been stellar for investors who parked their money in Indian stocks. Though there has been some turbulence, the calendar year 2023 gave handsome monetary dividends to stock market investors. In 2023 itself, Sensex and Nifty gained 17-18 per cent, on a cumulative basis. They gained a mere three to four per cent each in 2022. Hong Kong’s benchmark Hang Seng Index cumulatively declined 32-33 per cent over the past year, data showed.
Notably, foreign portfolio investors have again trained their sight towards India, becoming net buyers in the country’s stock market. In the process, it helped Indian benchmark stock indices taste their all-time highs recently.

According to the Bloomberg news report, India, which last year became the most populous country has positioned itself as an alternative to China, attracting fresh capital from global investors and companies alike, due to its stable political setup and a consumption-driven economy that remains among the fastest-growing of major nations.
As Indian stocks rallied, it coincided with a historic slump in Hong Kong, where some of China’s most influential and innovative firms are listed.

According to the news report, stringent anti-COVID-19 curbs, regulatory crackdowns on corporations, a property-sector crisis and geopolitical tensions with the West have all combined to erode China’s appeal as the world’s growth engine. New listings have dried up in Hong Kong, with the Asian financial hub losing its status as one of the world’s busiest venues for initial public offerings (IPOs). Here are some of the views of analysts and experts on India surpassing Hong Kong stock market in capitalisation terms: Sneha Poddar, AVP, retail research, Broking and Distribution, Motilal Oswal Financial Services:
India remains the fastest-growing country among the top 10 global economies.

The strong post-pandemic recovery and resilient performance amid global headwinds demonstrate the inherent strength of the economy. Strong growth, prudent policy reforms, government’s focus on infrastructure and capex, healthy corporate books, comfortable forex reserves, and lower commodity cost inflation could protect India from any external shocks and position it to outpace other countries in the coming decade.

Thus, we remain firm believers in the medium term India story and expect the overall trend to strengthen with multiple themes at play – financialization of savings, private capex revival, rising discretionary consumption, strengthening of real estate cycle, and the massive creation of digital and physical infrastructure. That being said, we believe the journey will not be linear and will be combined with regular bouts of volatility as valuations are full. Palka Arora Chopra, Director, Master Capital Services:

A rapidly expanding retail investor base, consistent inflows from foreign institutional investors (FII), robust corporate profitability, and bullish investor sentiments drove Indian equities to new highs. Investor confidence has increased due to the anticipated rate reduction by international central banks in 2024, which has further fuelled the surge in the Indian market.

The positive macroeconomic conditions, predictions of interest rate decreases, and optimistic attitude before the election, have helped the Indian equities markets see gains for eight years running and are expected to continue growing.

India has positioned itself as an alternative to China, attracting fresh capital from global investors and companies alike. The economic slowdown in China and the pressure on American investors to reduce their exposure to Chinese companies are causing the Hong Kong markets to decline. Sunil Nyati, Managing Director, Swastika Investmart:

A stark contrast has emerged between the Indian and Hong Kong markets in recent years. This can be attributed to several converging factors. Firstly, India’s economic resurgence has propelled it to the top of the global growth charts, while China and Hong Kong grapple with slowing momentum.

Political and policy stability, coupled with improved corporate governance practices, further bolster India’s appeal. Conversely, China and Hong Kong face investor anxieties due to policy uncertainties. Consequently, foreign institutional investors (FIIs) are increasingly shifting their focus towards India, seeking refuge from the turbulence in the Chinese and Hong Kong markets. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services:

A significant trend in global economic growth now is the underperformance of China and the outperformance of India. This is getting reflected in the stock market. Since the important Chinese stocks listed in Hong Kong have crashed, the Hang Seng index is near 19-year low. This trend is likely to continue since the prospects for the Chinese economy and stock market appear bleak for now.

However, if the Chinese economy stages a comeback the Chinese stocks will bounce back since their valuations are very low. Nirav Vakharia, a Delhi-based analyst: Economic reforms taken up over the past decade since 2014, production-linked incentives to put thrust on manufacturing sector, has helped Indian stock market.” The journey is long; this is just a phase. The US and Chinese markets are more open, and ours is a bit tightly controlled. It is not yet fully open as it should have been. I expect this will gradually happen in the coming 10-15 years, with reforms at macro levels.

Dhirendra Kumar, CEO of Value Research: India’s steady rise in the economy and it becoming an island of growth when other countries are struggling to grow or seeing a nominal rise is a positive. China’s relative decline over the past 3-4 years since the Covid has hurt Hong Kong, as several Chinese companies are listed in Hong Kong. The Hong Kong stock market has various Chinese companies listed on it, and we have seen that they have steadily declined and are going out of prominence. While the Indian market is gaining prominence, backed by foreign portfolio investors’ investments, domestic investors are also steadily trying to mark it up.

India now has huge potential…Once the purchasing power of Indians improves further, they will save more and invest more in the market. (ANI)

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-Top News Asia News India News

India Tops Asia Again

Pakistan faces daunting task of 7-8% growth to lift economy from doldrums.

The Morgan Stanley report highlights India’s attractiveness within Asia, emphasizing its strong potential from a domestic demand perspective…reports Sanjeev Sharma

India’s nominal GDP growth will accelerate to 11.6 per cent this year versus 9.2 per cent in 2023, making it the third consecutive year that the country’s nominal GDP growth will be the strongest in Asia, according to a Morgan Stanley report.

Within Asia, India offers a compelling opportunity from a domestic demand alpha standpoint, the report said.

India’s contribution to Asian and global growth will rise to 30 per cent and 17 per cent, respectively, up from 28 per cent and 16 per cent in 2023. Over the medium term, real GDP growth will average 6.3 per cent until F32.

The report pointed to initial signs of rural consumption improving. There are now some signs that the broader consumption recovery in volume terms picked up pace in 4Q23, helped in part by firming rural demand.

Consumer durable goods production growth has strengthened to a 17-month high of 5.3 per centY during the October-November festive period.

Passenger vehicle sales growth accelerated to 27 per centY in Oct-Nov, vs. 22 per centY in 3Q. Importantly, two-wheeler sales growth has picked up to 26 per centY in Oct-Nov (vs. a weak -2 per centY in 3Q), indicating that rural demand is now joining in the recovery. This is also corroborated by fast-moving consumer goods (FMCG) sales volume data which shows rural volume growth has accelerated to 6.4 per centY in 3Q23, vs. 4.0 per cent%Y in 2Q23 and just 0.3 per centY in 1Q23.

The effects of the policy push on supply side reforms have already been reflected in very strong outturns in public capex so far.

“We see the next phase of the capex cycle and indeed the expansion to be sustained by a pickup in private capex which will uplift and sustain productivity growth,” the report said.

Capex is accelerating as real GFCF growth has already accelerated to 11 per centY in 3Q23, much higher than the 2019-22 average of 6.2 per centY and also above the pre-covid 2017-18 average of 9.6 per centY.

In terms of the high frequency data that we have been monitoring, the incoming data continues to paint a positive picture on the current trends in capex.

Public capex has been strong with the Central government’s capex to GDP ratio rising to 3 per cent, an 18-year high.

Moreover, state-level capex data for 19 states show a renewed acceleration in state capex growth. On a 4Q trailing sum basis, private projects under implementation data is also rising to 18.5 per centY in 4Q23, up from an already strong 16.8 per cent in 3Q23.

FDI data has also risen in Oct-23.

“Finally, our India economics team’s proprietary capex indicator shows that the count of capex mentions by companies continued to accelerate for five consecutive quarters, rising to its all-time high in 2Q23,” Morgan Stanley said.

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-Top News Economy UAE News

S&P: UAE’s GDP to Grow Over 5% in 2024


Tatiana Leskova explained that there will be ongoing growth in Dubai from 2024 to 2025, driven by strong momentum in the hospitality, wholesale and retail, and financial services sectors…reports Asian Lite News

The UAE’s GDP is expected to expand by over 5 percent in 2024, exceeding the 2.8 percent growth expected for the global economy, according to Standard and Poor’s Global Ratings projections.

Tatiana Leskova, Associate Director of Corporate Ratings at Standard and Poor’s Global Ratings, told the Emirates News Agency (WAM) that “while the global economy remained subdued operating at subpar growth levels, we estimate that UAE GDP expanded at over 3 percent in 2023, including close to 6 percent growth for the non-oil sector”.

“In Dubai, we expect continued strong momentum in the hospitality, wholesale and retail, and financial services sectors to drive growth in 2024-2025,” she explained.

Asked about the performance of the UAE’s real estate sector in the face of global economic changes, Leskova said, “So far, the UAE and Dubai more specifically have remained relatively immune to the global economic headwinds, thanks to the limited sensitivity to interest rates and contained inflation. Despite higher interest rates, the number of mortgage transactions continued to grow in Dubai, where over 80 percent of real estate transactions are completed on a cash basis. In contrast, the European real estate market has been marked by weakened purchasing power since 2022 due to high interest rates and relatively higher inflation. The China market also remains challenging for its leveraged developers, with margins tightening as prices drop, pressuring profitability. The picture has become a little brighter in the U.S., where demand picked up at the start of 2023 after a slowdown.”

“The profile of buyers evolved slightly since 2022, with a sharp increase in Russian buyers becoming one of the largest investor groups in Dubai,” she went on to explain, “We expect this to be temporary, with Indians, Europeans and GCC buyers remaining the largest investors as per the historic trend. Dubai still remains far more attractive as an investment opportunity than other emirates despite news of gaming hotels in RAK, and general economic growth in the country overall.”

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Economy UAE News

World Bank Predicts 3.8% Growth for UAE by 2025

GDP.

Growth in oil importers also slowed somewhat last year, reflecting anemic private sector activity, the report said, adding that growth is expected to edge up to 3.2 percent this year and 3.7 percent in 2025…reports Asian Lite News

The World Bank expected the UAE’s real GDP to grow by 3.4 percent in 2023, rising to 3.7 percent in 2024 and to 3.8 percent in 2025.
According to the Global Economic Prospects report released today, the World Bank forecast the growth in the Gulf Cooperation Council (GCC) countries to rise to 3.6 percent in 2024 and 3.8 percent in 2025, noting to last year’s robust non-oil sector activity.

The report said that the growth rate in the Middle East and North Africa (MENA) region slowed down sharply to 1.9 percent in 2023, as the region faced multiple headwinds, including oil production cuts, elevated inflation, and weak private sector activity in oil-importing economies. The report also expected the growth rate in the MENA region to pick up to 3.5 percent in 2024 and 2025.

Growth in oil importers also slowed somewhat last year, reflecting anemic private sector activity, the report said, adding that growth is expected to edge up to 3.2 percent this year and 3.7 percent in 2025.
According to the report, the growth in Saudi Arabian is projected to grow by 4.1 percent this year, rising to 4.2 percent next year, while the Kuwaiti economy is expected to grow by 2.6 percent by the end of this year, rising to 2.7 percent next year. The Bahraini economy is expected to grow by 3.3 percent in 2024 and 3.2 percent in 2025.

The report expected Qatar’s economy to grow by 2.5 percent this year, rising to 3.1 percent next year, while the economy of Oman is estimated to grow by 2.7 percent in 2024 and 2.9 percent in 2025.(ANI/WAM)

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Business Economy India News

S&P Upgrades India’s GDP Outlook

GDP.

S&P’s higher projection for the current financial year (2023-24) is in line with other agencies, but still lower than the government and Reserve Bank of India projection of 6.5 per cent…reports Asian Lite News

S&P Ratings has raised its forecast for India’s GDP growth during the current financial year to 6.4 per cent from the earlier 6 per cent.

“We have revised upwards our projection for this fiscal as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports,” S&P Global Ratings chief economist for Asia-Pacific Louis Kuijs said in a research note on the outlook for the region.

However, the rating agency has lowered its outlook for growth in the next financial year (2024-25) to 6.4 per cent from 6.9 per cent earlier, taking into account a higher base impact and subdued global growth.

S&P’s higher projection for the current financial year (2023-24) is in line with other agencies, but still lower than the government and Reserve Bank of India projection of 6.5 per cent.

The IMF, World Bank, ADB and Fitch expect India’s GDP to expand 6.3 per cent in the current fiscal.

The Indian economy grew 7.2 per cent in the 2022-23 financial year and 7.8 per cent in the April-June quarter.

The second quarter GDP data will be released later this week.

Economists expect the GDP growth to slow down in July-Sept quarter due to the erratic monsoon this year.

On inflation, S&P said the surge during the second quarter is unlikely to have an impact on overall inflation.

“Still, headline inflation remains above the RBI’s target of 4 per cent, suggesting it will be a while before the rate cycle turns,” S&P said.

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Business Economy

Household Liabilities Rise to 5.8% of GDP in FY 2023

This could lead to sluggish overall consumption demand in the medium term unless the government steps up spending to revive consumption before the elections….reports Asian Lite News

The net financial savings of Indian households have fallen to a multi-decade low of just 5.1%, while their net financial liabilities have risen to 5.8% of GDP in FY 2023, up from 3.8% in FY 2022, Kotak Alternate Asset Managers said in a research report.

“This could be attributed to higher inflation eroding savings, as well as the financially weaker section of society borrowing more to make ends meet, in our view,” the report said.

This could lead to sluggish overall consumption demand in the medium term unless the government steps up spending to revive consumption before the elections.

“On the other hand, a surge in government spending ahead of the elections, higher tax collections, a solid revival in the housing market, a spike in premium consumption, and improving credit penetration could lead to slightly better-than-consensus GDP growth in FY 2024, in our view. Furthermore, the festive season sales, wedding-related spending, along with the cricket world cup may help to revive certain pockets of consumption,” the report said.

Relative risk-reward is favourable in large-caps versus mid and small-caps in the near term, Kotak Alternate Asset Managers said.

“We continue to maintain our neutral stance on Indian equities from a portfolio context and believe any further sell-off in Indian equities could offer a good buying opportunity”, the note said.

Export-oriented and commodity-linked sectors such as chemicals, IT, textiles, and metals could underperform. In contrast, domestic-focused sectors such as cement, banks (including PSUs), real estate, and defense could attract buying interest on corrections. We maintain our positive view on the pharma sector, it said.

From macros perspective, festive season and the cricket world cup could have a positive impact on economic activities and tax collections.

“We expect the ongoing geopolitical developments to have a limited impact on India’s macroeconomic fundamentals unless they deteriorate materially in the next few weeks. We expect yields and the INR to remain well anchored,” it added

ALSO READ: Fitch Raises India’s GDP Growth Forecast to 6.2%