It might not be on investors’ calendars, but European officials will take steps toward addressing two issues tomorrow. First, the EC will make a preliminary recommendation of visa-free travel in the Schengen area for Turkish passport holders. Second, the ECB governing council will hold a non-monetary policy meeting. It is expected to discuss the future of the 500-euro note.
Amid weakening manufacturing activity and poor economic growth in the beginning of the year, the United States Treasury has decided to pay less debt in the coming months.
The first quarter of 2016 saw America paying $112 billion of its bills, but because of higher spending than expected and lower receipts from a weak tax base, the Treasury’s coffers are being pressured. That means the federal government will pay just $65 billion of its debts in the second quarter, down significantly from the $112 billion it paid in the first three months of 2016.
Sri Lanka’s former pro-Chinese ‘strongman’ President Mahinda Rajapaksa was voted out of office in January 2015. The new administration, led by President Maithripala Sirisena, is committed to more ‘balanced’ major power relations.
The steady state in the Asian region is growth and dynamism that requires continuous structural change and adjustment. The trajectory of China’s potential rate of growth is certainly 2 or 3 percentage points lower than it was a decade ago, but even at around 6 percent over the coming decade the massive Chinese economy can still grow at two to three times the rate of the world economy as a whole. India is on the way back towards its growth potential, upwards of 8 percent over the next decade in which the young will be pouring into its labour markets.
India’s rapid economic growth has resulted in a substantial increase in solid waste generation in urban centres. Urban areas in India alone generate more than 100,000 metric tonnes of solid waste per day, which is higher than many countries’ total daily waste generation. Large metropoles such as Mumbai and Delhi generate around 9000 metric tonnes and 8300 metric tonnes per day respectively. Due to sustained rapid economic growth, Indian cities are expected to only intensify their consumption patterns.
Yesterday, China announced one of the most important tax reforms of the past twenty years. It is replacing a business tax on gross revenue for non-manufacturing companies with a VAT. Manufacturing companies have been subject to a VAT approach for a few years.
The reform extends it from manufacturing and a few services in a pilot program to industry-wide application. It will now cover construction, real estate, finance and consumer services.
EM ended the week on a firm note, which should carry over into this week. The biggest near-term risk to EM is the US jobs data on Friday, as the weekly claims data points to another strong gain. Otherwise, the global liquidity backdrop remains EM-supportive.
After a major decline in economic growth, further indicators of weakness in the U.S. economy are coming from various studies. The Chicago Purchasing Managers Index (PMI) fell to 50.4 in April, indicating that activity just barely expanded. That was far above the expectation that the index would almost hold its previous reading of 53.6.
In making a preliminary decision on the sale of S. Kidman & Co to a Chinese consortium, the Treasurer Scott Morrison has shed some light on what the government defines as being in the “national interest”. He describes the Chinese bid as being contrary to Australia’s national interest, because:
The economic and political reach of the US, arguably the most visible and vocal Western country on the African continent is gradually being diminished. This follows a pattern in which the economic and political stronghold of Western countries has ebbed as the role of non-traditional donors such as China has grown in importance.
