Australia’s central bank maintained its forecast of accelerating growth in response to easy policy, even as risks around key trading partner China cast a shadow over the regional economic outlook.
The Reserve Bank of Australia trimmed its inflation forecast for the year through June 2016 and its 2017 growth projections in a quarterly monetary policy statement Friday but it kept most of its estimates unchanged.
“A further increase in growth in household incomes and demand is anticipated, supported by rising employment, low interest rates and lower” gasoline prices, it said “The outlook for China’s growth is a significant uncertainty for the outlook for the Australian economy.”
Australia is benefiting from a depreciating local dollar that helps insulate the economy from shocks abroad and increases the competitiveness of local industries, whereas jurisdictions like Europe and Japan are struggling with their currencies. Local policy makers kept rates unchanged Tuesday for a ninth month as they gauge the impact of recent financial market turbulence on global and domestic growth.
The Australian dollar fell and was quoted at 71.87 U.S. cents at 11:32 a.m in Sydney after December retail sales were lower than anticipated.
The market upheaval in part reflects “concerns about the evolving balance of risks in China and the ability of the Chinese authorities to manage a challenging economic transition,” the central bank said today. “Any sharp slowing in economic activity or increase in financial stresses in China could spill over to other economies in the region.”
China devalued its currency in August and then undertook an eight-day stretch of weaker yuan fixings through Jan. 7, roiling global financial markets and fueling concern it was favoring depreciation to revive the slowest growth in a quarter century.
China’s central bank has at the same time been burning through its currency reserves to support the yuan amid record capital outflows.
At the same time, Australia recorded its biggest quarter of employment growth on record at the end of last year and unemployment fell to 5.8 percent, even as the economy was on course to expand at a below-trend pace.
“It is possible that the strength in the labor market data contains information about the economy not apparent in the national accounts data,” the RBA said. “In part, employment growth appears to have reflected the relatively strong growth of output in the more labor-intensive sectors of the economy, such as household services.”
The RBA is trying to orchestrate a transition away from mining investment to other industries in the economy, using low rates and a weaker dollar as a tailwind for industries. In some areas this is working: rising house prices have fueled a residential construction boom and conditions for business are above average. Yet there is still no sign of an uptick in investment outside the mining industry it is seeking.
Resource firms are about half way through the unwinding of investment programs, and reflecting lower global commodity prices, the central bank today lowered its forecast for the terms of trade, or the ratio of export prices to import prices, by about 4 percent compared with its November estimate.
Given inflation is low and the central bank expects little upturn, it reiterated that there may be “scope for easier policy, should that be appropriate to lend support to demand.”
While global central banks are struggling with disinflation or outright deflation that an open economy like Australia’s will be exposed to, one of the curiosities to date is the lack of pass through of higher import prices from a falling currency.
The RBA said today that based on history, the direct effect of the depreciation since early 2013 should add about half a percentage point to underlying inflation over each year of the forecast period. It indicated this time may be a bit different.
“Heightened competitive pressures, including from new entrants into the Australian retail market, and greater efforts by retailers to reduce their costs and improve efficiency, are continued to limit the extent to which higher import prices are evident in final retail prices for some time,” the RBA said.
That’s a boon for consumers. The central bank also said its forecast for better household consumption and income growth — reflecting higher employment and the plunge in gasoline prices – – indicate the nation’s savings ratio is likely to decline less than previously expected.
The RBA said its liaison with retailers “suggests that trading conditions improved in the Christmas and post-Christmas sales period.”
CBN Pursues Expansionary Monetary Policy to Boost Output and Moderate Inflation
CBN Says it Lowered Interest Rates to Use Expansionary Monetary Policy Boost Output and Moderate Rising Inflation
Following the shocking reduction in the monetary policy rate by 100 basis points to 11.5 percent, the Central Bank of Nigeria has explained the reason for such a decision after months of saying no.
The Governor of the apex bank, Godwin Emefiele said the central bank is pursuing an expansionary monetary policy to abate pressure, up economic productivity and then use expected improved in aggregate supply to moderate the rising inflation rate.
Emefiele said this was necessary to address likely recesssion and contain the rising inflation rate.
He said, “The committee was therefore of the view that to abate the pressure, it had no choice but to pursue an expansionary monetary policy using development finance policy tools, targeted at raising output and aggregate supply to moderate the rate of inflation.
“At present, fiscal policy is constrained and so cannot, on its own, lift the economy out of contraction or recession, given the paucity of funds arising from weak revenue base, current low crude oil prices, lack of fiscal buffers and high burden of debt services.
“Therefore, monetary policy must continue to provide massive support through its development finance activities to achieve growth in the Nigerian economy.”
According to the governor, Monetary Policy Committee members were confronted with a policy dilemma after the economy contracted by 6.10 percent in the second quarter and expected to dip again into recession in the second quarter.
“It is, therefore, of the view that, if a recession occurs in Q3, the committee would be confronted with proposing policy options in a period of stagflation,” he added.
Unity Bank Projects Loss After Tax of N1.80 Billion for Q4, 2020
Unity Bank Predicts N1.80 billion Loss After Tax and N1.66 Billion Pretax Loss for Q4, 2020
Unity Bank Plc said it is expecting to lose N1.80 billion in loss after tax in the fourth quarter of 2020.
While the lender said it is targeting N4.98 billion in gross earnings for the quarter, it is projecting a pretax loss of N1.66 billion, according to a recent earnings forecast released on the Nigerian Stock Exchange’s website.
In its fourth-quarter earnings forecast, the bank said it was also targeting N3.36 billion in interest income.
Unity bank earnings rose by 11 percent to N22.8 billion in the first half of 2020, up from N20.55 billion recorded in the same period of 2019.
In the first half, the bank grew profit before tax by seven percent to N1.12 billion from N1.05 billion in the corresponding period of 2019. While profit after tax also rose by seven percent from N967.51 million in H1 2019 to N1.03 billion in H1 2020.
Similarly, Unity Bank posted earnings of N11.01 billion in the first half, representing a 5 percent increase from the N10.50 billion recorded in the same period of 2019.
The bank asset expanded by 48 percent from N293.05 billion in H1 2019 to N445.95 billion in the same period of 2019. While the lender’s loan book grew by 53.7 percent from N70.62 percent in Q2 2019 to
Also, Unity Bank grew deposit by 19 percent from N257.69 billion recorded as of December 2019 to N306.47 billion.
Speaking on the performance, Mrs. Tomi Somefun, the bank’s Managing Director/Chief Executive Officer, said “Despite the inclement economic conditions occasioned by the global pandemic, which almost paused or at best put activities at a slower pace in virtually all sectors of the economy, the bank has been able to ride the waves to maintain its growth trajectory looking at the key performance indicators.
“The assessment, therefore, is that the repositioning efforts which have taken root before the headwinds are equally able to withstand shocks.”
States Debt Rises by 163 Percent -BudgIT
Debts of All 36 States Rise by 163 Percent or N3.34 Trillion to N5.39 trillion Between 2014 and 2019
Debts continue to rise across the 36 states of the Federation, according to a recent report by BudgIT, a public sector-focused financial information house.
In the just released 2020 edition of its annual state of states report titled, “Fiscal Sustainability and Epidemic Preparedness Financing at the State Level”, BudgIT said debts rose by 162.87 percent or N3.34 trillion from N2.05 trillion in 2014 to N5.39 trillion in 2019 across the 36 states.
The report stated that 10 of the states incurred half or N1.68 trillion of the entire debt, adding that seven of the 10 states are from the South while three are from the North.
Speaking on how states can attain fiscal sustainability, Damilola Ogundipe, BudgIT’s Communications Lead, said: “States need to grow their Internally Generated Revenue, IGR, as options for borrowing are reduced due to debt ceilings put in place by the Federal Government to prevent states from slipping into debt crisis. There has to be a shift from the culture of states’ overdependence on Federation Account Allocation Commission, FAAC.”
The report further stated that 13 states, including Lagos, Oyo, Kogi and others, were unable to fund their recurrent expenditure together with debt repayments due in 2019.
It stated: “From our 2020 State of States analysis, 13 states were unable to fund their recurrent expenditure obligations together with their loan repayment schedules due in 2019 with their respective total revenues.
“The worst hit of these 13 states are – Lagos, Oyo, Kogi, Osun and Ekiti states while the other states on this pendulum are Plateau, Adamawa, Bauchi, Gombe, Cross River, Benue, Taraba and Abia.
“Furthermore, of the remaining 23 states that can meet recurrent expenditure and loan repayment schedules with their total revenue, eight of those states had really low (less than N6 billion) excess revenue, that they had to borrow heavily to fund their capital projects.
“The worst hit are Zamfara, Ondo and Kwara who had N782.45 million, N788.22 million and N1.48 billion left, respectively.
“Based on their fiscal analysis, only five states – Rivers, Kaduna, Akwa Ibom, Ebonyi and Kebbi states – prioritised capital expenditure over recurrent obligations, while 31 states prioritised recurrent expenditure according to their 2019 financial statements.”
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