23/04/2020
BENGALURU (Reuters) – The Indian economy is likely to suffer its worst quarter since the mid-1990s, hit by the ongoing lockdown imposed to stem the spread of coronavirus, according to a Reuters poll, which predicted a mild and gradual recovery.
Over 2.6 million people tmsnrt.rs/3aIRuz7 have been infected by the coronavirus worldwide and more than 180,000 have died. Business and household lockdowns have disrupted supply chains globally, bringing growth to a halt.
The April 17-22 Reuters poll predicted the economy expanded at an annual pace of 3.0% last quarter but will shrink 5.2% in the three months ending in June, far weaker than expectations in a poll published last month for 4.0% and 2.0% growth, respectively.
The predicted contraction would be the first – under any gross domestic product calculation, which has changed a few times – since the mid-1990s, when official reporting for quarterly data began.
“The extended lockdown until early May adds further downside risk to our view of a 5% year-on-year GDP fall in the current quarter, the worst in the last few decades,” said Prakash Sakpal, Asia economist at ING.
“We don’t consider economic stimulus as strong enough to position the economy for a speedy recovery once the pandemic ends,” he said.
(Graphic: Reuters poll graphic on coronavirus impact on the Indian economy IMAGE link: here)
The Indian government announced a spending package of 1.7 trillion rupees in March to cushion the economy from the initial lockdown, which has been extended until May 3.
In an emergency meeting last week, the Reserve Bank of India cut its deposit rate again, after reducing it on March 27 and lowering the main policy rate by 75 basis points. It also announced another round of targeted long-term repo operations to ease liquidity.
But even with those measures, 40% of economists, or 13 of 32 – who provided quarterly figures – predicted an outright recession this year. Only one had expected a recession last month.
In the worst case, a smaller sample of respondents predicted, the economy would contract 9.3% in the current quarter. That compares with 0.5% growth in the previous poll’s worst-case forecast in late March, underscoring how rapidly the outlook has deteriorated.
The latest poll’s consensus view still shows the economy recovering again slowly in the July-September quarter, growing 0.8%, then 4.2% in October-December and 6.0% in the final quarter of the fiscal year, in early 2021.
But that compares with considerably more optimistic near-term forecasts of 3.3%, 5.0% and 5.6%, respectively, in the previous poll.
“A rebound in economic activity following the disruption is expected, but the low starting point of growth implies a gradual recovery,” said Upasana Chachra, chief India economist at Morgan Stanley.
“Indeed, before disruptions related to COVID-19, growth was slowing, with domestic issues of risk aversion in financial sector … (and) those concerns will likely stay after the COVID-19 disruptions have passed unless the policy response is much larger than expected,” she said.
The unemployment rate has tripled to 23.8% since the lockdown started on March 25, according to the Centre for Monitoring Indian Economy, a Mumbai-based research firm.
The Indian economy was now forecast to expand 1.5% in the fiscal year ending on March 31, 2021 – the weakest since 1991 and significantly lower than 3.6% predicted in late March. It probably grew 4.6% in the fiscal year that just ended.
Under a worst-case scenario, the median showed the economy shrinking 1.0% this fiscal year. That would be the first officially reported economic contraction for a 12-month period since GDP was reported to have contracted for calendar year 1979.
“Unless fiscal policy is also loosened aggressively alongside monetary policy, there is a big risk the drastic economic slowdown currently underway morphs into an annual contraction in output and that the recovery is hampered,” said Shilan Shah, senior India economist at Capital Economics.
All 37 economists who answered a separate question unanimously said the RBI would follow up with more easing, including lowering the repo and reverse repo rates and expanding the new long-term loans programme.
The RBI was expected to cut its repo rate by another 40 basis points to 4.00% by the end of this quarter. Already lowered twice over the past month by a cumulative 115 basis points, the reverse repo rate was forecast to be trimmed by another 25 points by end-June to 3.50%.
Source: Reuters
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19/02/2019
HONG KONG/LONDON (Reuters) – HSBC Holdings turned in a disappointing annual profit as higher costs and a stocks rout chipped away at its trading businesses, while warning that an economic slowdown in China and Britain would throw up further hurdles this year.
Chief Executive John Flint, rounding off his first year at the helm of the company, said the bank may have to scale back investment plans in order to avoid missing a key target known as ‘positive jaws’ – which tracks whether it is growing revenues faster than costs – for a second straight year.
HSBC remains alert to the downside risks of the current economic environment, economic environment and the future path of interest rates, Flint said, adding the bank was “committed” to the growth targets announced in June.
“We will be proactive in managing costs and investment to meet the risks to revenue growth where necessary, but we will not take short-term decisions that harm the long-term interests of the business,” Flint said on Tuesday, after HSBC reported a lower-than-expected 16 percent rise in 2018 profit before tax.
In June, Flint had said HSBC would invest $15-$17 billion in three years in areas including technology and China, while keeping profitability and dividend targets little changed.
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“The key thing is just to moderate the pace of investments … not to cancel it or change the shape of the investments,” Flint told Reuters.
The bank said it failed to achieve positive jaws in 2018 due to the negative market environment in the fourth quarter.
A combination of U.S.-China trade tensions, central banks turning off the money taps and cooling growth in former hot spots wiped 10 percent off MSCI’s 47-country world stocks index last year, its first double-digit loss in any year since the 2008 global financial crisis.
GROWING BUT SLOWLY
Flint’s comments come as an economic slowdown in China, exacerbated by a bitter Sino-U.S. trade war, challenges HSBC’s strategy of pouring more resources into Asia where it already makes more than three quarters of its profits.
China’s economic growth slowed to 6.6 percent in 2018, the weakest in 28 years, weighed down by rising borrowing costs and a clampdown on riskier lending that starved smaller, private companies of capital and stifled investment.
Pressure on the world’s second-largest economy could increase if Beijing and Washington do not reach a deal soon to end their year-long trade dispute, which is taking a growing toll on export-reliant economies from Asia to Europe.
HSBC’s profits in Asia grew by 16 percent to $17.8 billion last year, accounting for 89 percent of the group profit.
“Clearly our customers are really more cautious and are more thoughtful around this trade war with the U.S.,” Flint said.
“It’s possible that we’ll see slightly lower growth rate this year but we are still going to see a growth rate.”
Since taking over from Stuart Gulliver last February, Flint has largely stuck to the same China-focused strategy as his predecessor while attempting to revive HSBC’s ailing U.S. franchise and putting less emphasis on its investment bank.
Honda to close UK car plant cutting 3,500 jobs
Europe’s biggest bank by market value is also being buffeted by headwinds from Britain, which grew at its slowest in half a year in the three months to November as factories suffered from tough global trade conditions and the approach of Brexit.
HSBC joined its London-based peer Royal Bank of Scotland in warning that uncertainties related to Brexit could drive businesses under.
“The longer we have the uncertainty the worse it’s going to be for the customers. Customers are absolutely postponing investment decisions … and that’s been the part of this slowdown that we have seen in the U.K.,” Flint said.
DISAPPOINTING PROFIT
Earlier in the day, HSBC reported a profit before tax of $19.9 billion for 2018, versus $17.2 billion the year before, but below an average estimate of $22 billion, according to Refinitiv data based on forecasts from 17 analysts.
HSBC’s Hong Kong shares dropped as much as 2.7 percent after the earnings announcement.
The stock was down 1.4 percent at 0732 GMT, while the Hong Kong market index was 0.3 percent lower.
HSBC said it would pay a full-year dividend of $0.51 per share, roughly in line with analysts’ expectations. The bank was confident of maintaining the dividend at this level, it said.
The bank’s core capital ratio, a key measure of financial strength, fell to 14 percent at end-December from 14.5 percent at end-2017, mainly due to adverse foreign exchange movements.
Source: Reuters
Posted in Brexit, Britain, capital ratio, Chief Executive, China alert, costs, disappoints, Dividend, downside, economic environment, foreign exchange, HSBC, John Flint, key target, positive jaws, profit, revenues, Royal Bank of Scotland, slowdown, Uncategorized |
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