Financial markets around the world are responding to current political uncertainty in both Australia and the UK by sending stocks, bonds and currencies on a rollercoaster ride. The far-reaching implications of Brexit caused the S&P/ASX 200 volatility index (A-VIX) to spike to the highest level since the start of 2016. Similarly, the A-VIX jumped 5% in the opening minutes of trading on Monday after it became clear the federal election would remain unresolved.
The biggest macroeconomic challenge facing Vietnam today is sustaining growth. Most doi moi-era growth has resulted either from efficiency gains associated with the introduction of a market economy (opening domestic markets and trade, relaxing restrictions on labour movement and land transactions) or from expanded endowments of low-skill labour and capital. GDP continues to grow at a very respectable rate, albeit lower than that projected in national planning documents.
Lower factory orders and a lower growth expectation show cracks in America’s already slow recovery. Factory orders for manufactured goods fell 1% in May, according to a new report by the Census Bureau. That is a sharp reversal of April’s 1.8% growth for new orders of manufactured goods. Meanwhile, shipments were almost flat, down from the 0.4% increase in April.
‘Brexit’, close on the heels of the shock resignation of the Governor of the Reserve Bank of India (RBI) Raghuram Rajan, has triggered a great deal of market turbulence and future uncertainty for the Indian economy.
What should India do to meet this challenge? It will need to ensure, firstly, that its macroeconomic parameters remain rock solid and the Indian economy is seen as contributing to global macro stability rather than adding to turbulence.
The services sector dominates the Philippine economy. In 2015, it accounted for 59 percent of GDP and 54.5 percent of employment. In recent years the industry sector — which includes manufacturing and construction — has started to recover, growing faster than services. However, given its size, the services sector remains the key driver of the economy contributing more to GDP growth than all other sectors combined.
A notable element of South Korea’s general elections in April 2016 was the hypervisibility of anti-gay political rhetoric, promulgated especially by the fledgling Christian Liberal Party (CLP). An ultra-conservative Protestant political party established in March 2016, the CLP ultimately failed to gain a seat in the National Assembly — but it came close, earning 2.6 percent of votes nationwide, just shy of the 3 percent required for a proportional representation seat.
Sterling is continuing to move lower. It has tested the $1.3050 area in the North American morning, having been under pressure through the Asian session and the European morning. That the UK economy is slowing down, materially, as BOE Governor Carney said, is not really new news. Nor is the fact that the BOE reversed its previous decision to force banks to boost their capital buffers. This was anticipated last week.
Following its vote to leave the European Union (EU), its vote also known as “Brexit,” the United Kingdom (UK) has been searching for ways to attract new businesses. One proposal that has gained traction in the government is the idea of becoming a new tax haven for foreign corporations by slashing corporate taxes. The Organization for Economic Cooperation and Development (OECD), however, has put in its opinion on the matter, and it says such an act is unlikely to entice foreign investment.
EM and risk recovered nicely from the Brexit turmoil last week. Yet we think markets are being too carried away with the “low rates forever” theme and are likely underestimating the capability of the Fed to tighten before 2018. This Friday, the June jobs data could spark a shift in sentiment with a strong reading. Consensus is currently 175k jobs created, up from 38k in May.
Whatever its final impact, in the short-term the UK’s EU referendum will increase global economic uncertainty, market volatility and economic risk. In Africa, most scenarios will prove costly, particularly among those economies highly exposed to UK trade, investment, banking and remittances.
