Tag: GLOBAL ECONOMY

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Business Economy

Zoho CEO Warns of Gloomy Global Economy

Vembu said that Zoho has seen a slow down in growth across geographies in September…reports Asian Lite News

Sridhar Vembu, Co-founder and CEO of software-as-a-service (SaaS) company Zoho, warned on Monday that the global economy is likely taking a turn for the worse, urging companies to exercise caution.

In a post on X (formerly Twitter), Vembu said that Zoho has seen a slow down in growth across geographies in September.

“We saw a fairly pronounced slow down in growth in September across countries and across products,” he posted.

Vembu said that given the geographically and product-wise diversified nature of our revenue streams, “I suspect the global economy is taking a turn for the worse”.

“Caution ahead,” he added.

As IT companies gear up for the July-September period earnings, brokerage firm Nomura has predicted continued weakness in demand, saying sustained macro uncertainty will adversely impact their financials.

“We believe the void created by the lower number of small-sized and discretionary projects along with delays in client decision-making and ramp-up of won projects in certain cases will lead to both revenue and margin disappointments in the near term, given the ‘sticky’ nature of costs,” the firm said in its latest report.

Last month, Zoho surpassed 100 million users across its more than 55 business applications.

The growth came on the heels of the company reaching $1 billion in annual revenue last year.

Zoho said it has increased its traction from 1 million users in 2008 to 100 million 15 years later — with the last 50 million users added within the past five years.

“This is an impressive milestone for any organisation, but it’s particularly sweet for us as a bootstrapped company that has never raised external capital. And we are not done yet,” according to Vembu.

Zoho has more than 700,000 businesses across more than 150 countries. Headquartered in Chennai, Zoho is privately held and profitable with more than 15,000 employees.

ALSO READ: “Zoho’s Triumph

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Business Economy

‘21st century economic growth will be slower than expected’

economic.

Burgess and his colleagues used two economic models to project how much the global economy will grow over the next century…reports Asian Lite News

Global future economic growth will be slower than predicted, with developing nations taking longer to close the wealth gap and approach the income of wealthier nations, a new study has predicted.

Governments need to start planning for slower-growth scenarios, which may involve wealthier nations providing lower-income countries with financing for climate change adaptations, according to the study published today in the journal Communications Earth & Environment.

Graph. (File Photo: IANS)

“We’re at a point where we maybe need to significantly increase financing for (climate) adaptation in developing countries, and we’re also at a point where we might be overestimating our future ability to provide that financing under the current fiscal paradigm,” said Matt Burgess, assistant professor of environmental studies at University of Colorado Boulder who led the study.

Burgess and his colleagues used two economic models to project how much the global economy will grow over the next century and how quickly developing countries will approach the income levels of wealthier nations.

Both models found the global economy will continue to grow, but that growth will be slower than most economists expected and there will be a larger income gap between wealthier and poorer nations.

This means richer countries may need to help finance climate adaptations for poorer countries, and debt-ceiling crises, like what the United States experienced this spring, may become more common.

“Slower growth than we think means higher deficits than we expect, all else equal,” Burgess said. “That means debt would likely become more contentious and important over time, and could mean more frequent debt-ceiling fights.”

Still, many wealthy nations are accustomed to growing their way out of debt, but that may not be possible under the new scenario, according to Ashley Dancer, a graduate student at CU Boulder and co-author of the study.

“The next question is: what are some ways that we should be or could be helping [lower-income countries] adapt, if the expectation is that they’re not going to meet the level of wealth that would allow them to do that quickly and aggressively?” Dancer said. 

ALSO READ: Chip giant Micron sets eyes on India

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Business Economy World News

‘Global economy at risk from Banking turmoil’

IMF chief said it was clear that risks to financial stability had increased after the recent collapse of Silicon Valley Bank and the Swiss-government brokered rescue of Credit Suisse by UBS…reports Asian Lite News

International Monetary Fund (IMF) chief Kristalina Georgieva has warned that the global economy faces risks to its financial stability because of the turbulence in the banking sector.

Georgieva said rising interest rates had put pressure on debts, leading to “stresses” in leading economies, including among lenders, the Guardian reported.

She said the world economy would expand by just 3 per cent in this year as rising borrowing costs, combined with the war in Ukraine and scarring from the Covid-19 pandemic, would suffocate growth.

Adding to a growing chorus of warnings from economic leaders, the IMF chief said it was clear that risks to financial stability had increased after the recent collapse of Silicon Valley Bank and the Swiss-government brokered rescue of Credit Suisse by UBS.

bank.(https://pixabay.com/)

Investors will be watching shares in Deutsche Bank when European markets reopen on Monday after they led the sell-off in banking stocks on Friday.

“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” the Guardian quoted Georgieva as saying at a conference in Beijing.

Her stark comments came as the European Central Bank (ECB) said the recent turmoil in banking would have a real-world impact on business and growth.

The EU central bank fears problems in the banking sector will result in lower growth and dampen inflation, the ECB vice-president, Luis de Guindos, said in an interview with Business Post.

Meanwhile, bank shares across Europe have fallen sharply as worries over the financial strength of the sector return, media reports said.

Shares in Germany’s Deutsche Bank saw the biggest fall, dropping 13 per cent, and there was also a sharp jump in the cost of insuring against losses on its debt, BBC reported.

Investors have already been spooked by the collapse of two US banks and the rushed takeover of Swiss giant Credit Suisse by its rival UBS.

Stock markets in London, Germany and France were all lower, BBC reported.

Other banks to see hefty share falls included Germany’s Commerzbank, down 8 per cent, and France’s Societe Generale, which fell 7 per cent.

In the UK, Barclays and NatWest were both down by about 6 per cent, BBC reported

Russ Mould, investment director at AJ Bell, said the drop in Deutsche Bank’s share price was “indicative of a wider loss of confidence in the banking sector”.

“There’s a gathering fear that central banks may have overdone it with interest rate increases, having left them too low for too long,” he said.

With the possibility of recession, “banks will generally find it pretty hard going”.

He added that investors were pulling money from regional banks and banks with big investment arms, and investing in bigger traditional banks, BBC reported.

ALSO READ: Uncertainty to dominate last week of financial year’s trading

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-Top News India News

Derisking global economy a key concern of G20, says Jaishankar

He further said there would be 15 ministerial-level meetings of G20 this year besides the President and Prime Minister-level conclaves in September…reports Asian Lite News

The major concern of G20 would be to find ways of derisking the global economy, External Affairs Minister S. Jaishankar said on Sunday.

Delivering a talk here on India’s year-long G20 Presidency, Mr. Jaishankar said the Prime Minister Narendra Modi-led NDA government has tried to cushion the consumers as much as possible from petrol price increases and taken measures to keep inflation down.

“Today, the world has learnt a lesson that security means not only physical security, not only economic security. It also means health security, food security. So, today we have to find a way of derisking the global economy, the way we would derisk a sector, the way we would derisk a business. That is a very major debate and I would say a very major concern of what the G20 would be looking at,” he said.

He further said there would be 15 ministerial-level meetings of G20 this year besides the President and Prime Minister-level conclaves in September.

The COVID-19 pandemic has today left a very deep psychological scar in the world and there is a deep sense of anger that the developed countries looked after themselves during the outbreak, the Union minister asserted.

Barring India, very few countries have made efforts to think about the rest of the world, Jaishankar added.

ALSO READ-‘India will become $40-trillion economy by 2047’

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-Top News Economy World News

How Ukraine war changed global economy

economy.

The surge in global energy prices since the invasion has pushed inflation across advanced economies to its highest levels in decades…reports Asian Lite News

Russia’s invasion of Ukraine sent shockwaves through the global economy and now, a year on from the start of the attack, the world is fundamentally changed, the media reported.

Trends that were already in motion have accelerated, as the need to move away from fossil fuels to greener, renewable energy supplies became more urgent, The Guardian reported.

Food prices have soared, increasing hunger in the developing world, and forcing governments, businesses and people to adapt to lasting shifts, The Guardian reported.

The surge in global energy prices since the invasion has pushed inflation across advanced economies to its highest levels in decades, squeezing household incomes and weighing on economic growth.

War in Ukraine.(photo;Instagram)

The inflation surge led central banks to increase interest rates, which drove up borrowing costs for households and businesses. Mortgage costs in the UK and several other nations have risen sharply, stoking fears of a property crash.

Economists expect inflation to cool rapidly over the coming months, as the initial surge in energy prices drops out of the calculation for the annual increase in rising living costs. However, gas and electricity prices remain much higher than before the invasion, The Guardian reported.

Russia and Ukraine are, respectively, the world’s largest and fifth-largest exporters of wheat, accounting for almost a third of global exports. They are also significant producers of fertilisers and other essential commodities. As war disrupts these supplies, food prices have rocketed to unprecedented levels, The Guardian reported.

Economy.

While this has posed challenges globally, developing nations that are net food importers are particularly exposed. Countries in north Africa and the Middle East are among the biggest buyers of Russian and Ukrainian wheat.

But these poorer countries are facing a double whammy. Moves by the US Federal Reserve to raise interest rates in response to soaring inflation has pushed up the value of the dollar, making it more expensive for developing countries to import goods and borrow money on global markets denominated in the US currency.

International trade was already fragmenting before the Russian invasion, but the trend has been accelerated in the past year amid rising geopolitical tensions and concern over supply chain security. After the disruption caused by Covid, and with an eye on the conflict and shifting global relations, companies have pushed to reshore or “friendshore” production, bringing it closer to home, The Guardian reported.

Ian Stewart, chief economist in the UK at accountancy firm Deloitte, said: “The lure of cheap raw materials from Russia is spurring sanctions avoidance on a previously unseen scale. Russian oil shunned by the EU has found ready customers in China, India and Turkey,” The Guardian reported.

ALSO READ: Russia, Ukraine hold rivaling moments of silence at UNSC

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-Top News Economy

Global economy on brink of recession, warns World Bank

The World Bank chief noted at the press conference that world population growth is estimated at 1.1 per cent per year….reports Asian Lite News

The global economy is “dangerously close” to a recession, as inflation remains elevated, interest rates rise, and growing debt burden hits the developing world, World Bank President David Malpass said.

“We’ve lowered our 2023 growth forecast from 3 per cent to 1.9 per cent for the global growth, that’s dangerously close to a world recession,” Malpass said at a press conference during the IMF and World Bank annual meetings on Thursday.

“All of the problems that people have taken note of, the inflation problem, the interest rate rises, and the cutoff of capital flow to developing world hit the poor hard,” he said, highlighting the buildup of debt for developing countries.

“That’s a world recessions could happen under certain circumstances,” Malpass said.

In a study published in mid-September, the World Bank warned that as central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023, with a growth forecast of only 0.5 per cent, reports Xinhua news agency.

The World Bank chief noted at the press conference that world population growth is estimated at 1.1 per cent per year.

“So if you get much slower in terms of world growth, that means people are going backward,” Malpass said in response to a question from Xinhua.

Citing a recent World Bank report, Malpass said that the Covid-19 pandemic dealt the biggest setback to global poverty-reduction efforts since 1990, pushing about 70 million people into extreme poverty in 2020, and the war in Ukraine threatens to make matters worse.

According to the Poverty and Shared Prosperity Report, global median income declined by 4 per cent in 2020, the first decline since its measurements of median income began in 1990.

“So if we have a world recession now, that would also depress median income, meaning that the people in the lower half of the income scale are going down,” Malpass said.

The World Bank chief also noted that he has been concerned about the concentration of capital in the world in the top end of the advanced economies.

“So that’s, I think, one of the issues that the world has to deal with to allow capital to flow to new businesses and to developing countries, that would take a change in the direction of fiscal and monetary policies in the advanced economies,” said Malpass.

The world is facing very challenging environment from the advanced economies, and that has serious implications, dangers for the developing countries, he said.

“My deep concern is that these conditions and trends might persist into 2023 and 2024.”

ALSO READ: ‘China’s economy expands while global economic outlook looks dim’

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Business India News

In the era of markets expecting the unexpected

In fact, it is not just the military conflicts that have triggered innovations. The competitive spirit during the Cold War too led to rapid development of space technology which had a lasting impact on the world…writes Navneet Munot

Over the years, financial markets have grown used to expecting the unexpected. Almost any passage of time in the history of financial markets is replete with events which have taken market participants by surprise.

However, it would be fair to say that 2020s have just taken this to an altogether different level. In a lighter vein, one could wonder how the first quarter of last few years has made it a habit of making a mockery of beginning-of-year forecasts. While 2020 was a year which began under the looming threat of geo-political tensions between US and Iran; by the end of the first quarter, the thing that had turned the world upside down was, after all, a virus. At the start of 2022, while all eyes were on the spread of Omicron; by the end of the first quarter, the event that actually shook everyone was a geopolitical one (Russia-Ukraine war).

Indeed, one would want to turn back the clock or rather, the calendar, to the beginning of this year with a hope that diplomacy and good sense prevailed and the world avoided this human tragedy, still unfolding in Ukraine. While turning time back and forth can only be wishful thinking, it certainly does happen twice a year – in some countries. Yes, indeed, I am referring to ‘daylight saving time’, which basically involves the practice of setting ahead clock by an hour at the beginning of summer and setting it back by an hour at the beginning of winter in most western countries. Interestingly, while this idea was floated in the early twentieth century, it only took off during World War I as countries scrambled to save energy by making better use of daylight.

This wasn’t the only new idea to take off in the aftermath of a war. For instance, widespread manufacturing of antibiotics, like penicillin in US, took off only during World War II. Stainless steel rose to prominence during World War I as the British military sought an alternative to other metals, which were prone to damage from heat and friction.

While different forms of computers are used across all industries today, the world’s first large scale electronic computer was built during World War II. Rapid progress in radar technology during World War I paved the path for civil aviation industry to take off. This list goes on and on and includes wristwatches, synthetic rubber, Pilates etc.

In fact, it is not just the military conflicts that have triggered innovations. The competitive spirit during the Cold War too led to rapid development of space technology which had a lasting impact on the world.

Indeed, while wars do reflect the worst in humanity, the desperate circumstances surrounding them have historically triggered or kick-started many path-breaking innovations/developments, arising from ingenuity of the human mind. As the war drags on in Ukraine, there are jitters being felt across all walks of life. Scourge of inflation means that Central Banks have had to tighten monetary policies, even as global growth outlook is clouded by geo-political uncertainties.

However, what’s worth remembering is that if one goes by history, the world will not only find a way to tide over this crisis but would also come up with game-changing ideas along the way.

Looking back at Covid and its repercussions, as things stand, next few years could actually define the course of history for a prolonged period of time. First few months of this ongoing conflict have already shown that going forward there could be less reliance on physical warfare and more on the economic one.

This, in turn, could result in formation of newer economic blocs and change the course of globalisation as we know it. Supply chains disrupted due to the pandemic have been further strained owing to the conflict and countries around the world are increasingly averse to the idea of economic dependence on countries with divergent security interests and differing ideologies. In this regard, India stands out as one of the natural alternatives to fill the void left on the front of food security, by Russia and Ukraine, and in manufacturing, by the post-pandemic China+1 tilt.

Apart from the threat to food security, another major fallout from the war has been the threat to energy security. The sharp spike in energy prices has had a crippling effect on many economies. Consequently, this could compel everyone to rethink how energy is produced and consumed; and more importantly, lay emphasis on reduction of dependence on fossil fuels.

This, in turn, could accelerate tailwinds for renewable energy at a time when concern over climate change is already making the world sweat. Goes without saying that this change will not happen overnight as the immediate focus will be on energy security instead of clean energy.

For instance, the recent power crisis has made India turn once again to coal. Notwithstanding the recent softening of commodity prices; years of underinvestment may keep prices structurally elevated. Higher commodity prices, energy transition, supply chain re-alignment, along with the political desire for higher defence spending, by almost every country, could trigger a significant capex push.

In a side story of sorts, the fate of US dollar has become the cynosure of all eyes in the world of finance. Recent turn of events, coupled with the US’s declining share in global trade and changing geo-political equations have raised apprehension about dollar’s hegemony. However, the US dollar has benefited from the apparent lack of alternative at this point in time. The relative preference of most countries to politically align with US, instead of an alternative like China, along with relative ease of access to American capital markets and a hawkish US Fed have aided the dollar’s cause. All said and done, one may have to “reserve” one’s judgement on the world’s reserve currency for now.

India’s sizeable forex reserves should help stave off significant threat to rupee stability. While India won’t remain insulated from global developments, India continues to remain better positioned as compared to other emerging markets at this point. Rapid digitalisation, strong tax buoyancy (growth in tax collections nearly double that of Nominal GDP growth for FY22), Services exports at record high (FY22), healthy balance sheets of corporates and banking sector, policy reforms, formalisation of economy and push for privatisation & capex hold India in good stead.

On the flipside, key risks to watch out for happen to be the spike in commodity prices (particularly oil), impact of tightening global liquidity and increase in food and fertiliser subsidy bill.

For Indian equities, strong retail participation (63 per cent increase in demat accounts in FY22) and robust Mutual Fund flows have cushioned the downside from recent FPI selling spree. However, it’s equally noteworthy how last couple of years have been a baptism by fire for investors, as sharp gyrations in financial markets and numerous unforeseen events have kept investors on toes.

Considering rapidly evolving geo-political landscape, change in course of globalisation; and with Central Banks retreating into their role of reining in inflationary expectations instead of doing ‘whatever it takes’ to support asset markets, volatility is likely to remain elevated. Investors’ equanimity and patience will continue to be tested in the foreseeable future but don’t we know from history that the formula for wealth creation equates sound investment + time + patience.

In a world where new geo-political alliances are being formed and existing ones are being tested; sound financial plan and prudent asset allocation still continue to remain the best allies for investors to counter the formidable foe of volatility in financial markets.

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