Sweden’s economy faces slowest per-capita growth in more than three decades
There's less than meets the eye to Sweden's economic boom.
The
largest Nordic economy has been outpacing most of Europe in recent
years, helped by booming domestic demand and rising exports. But
under the surface, the growth is a lot less impressive and looking ahead
prospects looks positively gloomy.
That’s
because the expansion has been inflated by massive population growth,
triggered by record immigration and high birth rates. In fact, the
difference between overall growth in gross domestic product and growth
when measured per capita hasn't been as wide since at least 1950.
Spread Widens
The difference between growth and per capita growth is getting bigger
Source: Statistics Sweden
To avoid slipping into a period of historically weak growth,
economists say Sweden must make profound structural changes in areas
such as education, the housing rental market, taxes and improve
productivity. It also needs to ensure that the hundreds of thousands of
immigrants from countries such as Syria and Iraq that arrived in the
past few years find their way into the labor market.
“The
problem is not a lack of knowledge, but that the economic-politic
discussion isn’t centered around Sweden’s long-term growth,” says John
Hassler, a professor of economics at Stockholm University.
In
2016, GDP growth was 3.2 percent while per capita growth was just 2.0
percent. Looking ahead, it could get worse. Real per capita growth is
seen averaging just 1 percent in the decade through 2026, according to
the Swedish National Institute of Economic Research. That's down from
1.8 percent in the decade that ended 2016 and from 3.4 percent in the
prior 10-year period.
But the NIER cautions against getting too
gloomy. A big reason for the drop is due to a large wave of people
retiring. These people have savings and will be able to keep up
consumption, according to Ylva Heden Westerdahl, the NIER’s director of
forecasting.
It therefore gets better when you look at consumption per capita over the next years.
Holding Up
Growth in consumption per capita is seen steady or higher even as GDP per capita growth slows
Source: National Instistue of Economic Research
Change in per capita consumption, 5-year moving average
In what looks like a climb-down by the prime minister, scandal-plagued banks will be probed for alleged misconduct
MALCOLM TURNBULL, Australia’s prime minister, has changed
his tune. Just last week he dismissed calls for an inquiry into
Australia’s banks, saying it would be an expensive exercise that
“doesn’t do anything other than write a report”. But on November 30th,
Mr Turnbull abruptly announced a royal commission, Australia’s most
wide-ranging form of inquiry, into “alleged misconduct” not just by
banks but in other financial services as well.
Only hours
earlier, Australia’s four biggest banks—the Australia and New Zealand
Banking Group, the Commonwealth Bank of Australia, the National
Australia Bank and Westpac Banking Corporation—had themselves called for
an inquiry. Their chairmen and chief executives wrote to the federal
government asking for an inquiry to end uncertainty and “restore trust,
respect and confidence”.
Australia
weathered the financial crisis a decade ago without a recession—indeed
in 2018 it is poised to enter its 27th consecutive year of unbroken
expansion. Its resilience was seen as, in part, a consequence of sound
banking regulation. But in recent years, a series of scandals has fed a
different image. The press has exposed stories of customers losing
savings after following poor financial advice from banks. Many
Australians have come to see banks as pursuers of big profits and fat
executive salaries at the expense of service to ordinary customers. In
August the Commonwealth Bank faced accusations from a regulator of
turning a blind eye to money-laundering through its deposit machines.
This only heightened calls for an inquiry into the entire industry.
The
banks’ call for one came after political pressure had been mounting on
Mr Turnbull’s conservative coalition government. Barry O’Sullivan, a
federal senator from the rural-based National Party, the coalition’s
junior partner, had threatened to introduce a private member’s bill for a
parliamentary commission of inquiry. Its powers would not be as broad
as those of a royal commission. The Labor opposition, the Australian
Greens and independents had offered support, ensuring it would pass the
Senate. That left Mr Turnbull politically vulnerable. He survives in the
lower house with a one-seat majority. He could have lost that if
rebellious Nationals there had helped to pass the bill, too.
By
writing to the government as this political drama flared, the banks
seemed to have seized the high ground. Political uncertainty, they said,
was “hurting confidence in our financial-services system, including in
offshore markets”. It also risked “undermining the critical perception
that our banks are unquestionably strong”.
After the
banks’ intervention, Mr Turnbull appeared at a press conference in
Canberra with Scott Morrison, the treasurer. He called the decision to
call the royal commission a “regrettable but necessary” one. Echoing the
banks, he said that uncertainty about an inquiry was “starting to
undermine confidence in our financial system and, as a result, the
national economy”. The Royal Commission into Misconduct in the Financial
Services Industry (as it is called) will be headed by a judge, or a
former judge, yet to be appointed, cost A$75m ($57m) and will be
expected to report in February 2019.
Mr Turnbull, himself
a former banker who once headed Goldman Sachs in Australia, showed a
touch of defensiveness over the apparent climb-down. He said the inquiry
would not be putting “capitalism on trial”, nor should banks be used as
“political football”. They were the “bedrock of the economy”, employing
more than 200,000 people.
Mr Turnbull says the royal
commission will ensure a “responsible but comprehensive” investigation
into how financial institutions have dealt with past misconduct, and
whether those cases expose “cultural and governance issues”. Pension
funds, insurance companies and other wealth managers will be included.
The
Labor opposition had already promised to hold a royal commission if
elected. The government had tried to head off this pressure by showing
it understood people’s grievances. When he spoke at an event to mark
Westpac’s bicentenary last year, Mr Turnbull turned on banks, saying
they should “put their customers’ interests first”. In its budget last
May, the government imposed a levy on Australia’s five biggest banks to
raise about A$1.5bn a year. Now that he has been unable to avoid an
inquiry any longer, Mr Turnbull will have to prepare for the potential
political fallout from having put it off. The bankers must brace
themselves too. One senior financial-industry executive predicts the
inquiry will be an “unpleasant experience”.
Mobile wallet firm MobiKwik has announced the introduction of Magic, a
digital platform for seamless and paperless processing and transfer of
rewards and reimbursements to employees working in the corporate sector.
The
product offering includes employee benefits such as reimbursement for
food, fuel, medical, phone, LTA and other company benefits. These will
be accessible for both corporates and employees on a MobiKwik app.
The
company said the employee benefit and reimbursement industry in India,
estimated at ₹51,600 crore and is largely paper- based.
“With
Magic, we are introducing a technology solution that will ease corporate
processes, thereby simplifying the lives of million of employees in
India. Magic makes the disbursal of employee benefits fast, simple and
more efficient,” said Bipin Preet Singh, co-founder & CEO, MobiKwik
in Mumbai.
“We aim to eliminate the estimated processing cost of
₹6 crore for organisations and benefit over 5 million users by 2020 thus
achieving a revenue of ₹8,400 crore,” he added.
Bitcoin plunged 20% to a three-month low today, its latest sharp loss
following a series of setbacks for the cryptocurrency that, with a
collapse across global mainstream markets adding to the selling.
The virtual currency fell to $6,190 for the first time since
mid-November, according to Bloomberg News, and represents the latest
hammering for a unit that saw a stratospheric 26-fold rise last year.
Today’s collapse comes just six weeks after bitcoin hit a record high
of $19,511, fuelled by a flood of speculators looking to make a quick
buck, with warnings it could fall another 50 per cent.
Since
those heady days the cryptomarket — which includes dozens of other units
— has been pounded by news of crackdowns by governments including in
China, Russia and South Korea, one of the biggest markets for the
sector.
On Thursday, India said it would “take all measures to
eliminate” cryptocurrencies’ use as part of a payment system and in
funding illegitimate activities, while Japanese authorities raided a
virtual currency exchange after it lost $530 million to hackers.
Central bank in Europe, Japan and the United States have also flagged
concerns about the unit and this week saw several commercial lenders say
they would stop allowing their customers to buy bitcoin through their
credit cards owing to debt concerns.
Stephen Innes, head of
trading for Asia Pacific at Oanda, said “the dynamics behind the moves
are regulatory clampdowns and investors losing confidence in crypto”.
The
sell-off on Tuesday was exacerbated by crushing losses on world stock
markets, with the Dow on Wall Street suffering its biggest one-day
points loss and wiping out all its 2018 gains.
The global rout
comes as panicked investors fret over rising US borrowing costs, leading
them to cash in profits after a stellar couple of months that have seen
many indexes hit record or all-time highs.
Equities have enjoyed months of surges fuelled by optimism over the US economy, corporate earnings and the global outlook.
But while traders have been piling into equities, pushing many global
indexes to record or multi-year highs, there has been growing concern on
trading floors about elevated US Treasury bond yields — at four-year
highs — and the likelihood of fresh Federal Reserve interest rate hikes.
“The
risk-off tone is hitting Bitcoin almost as hard as a global regulator
and bank scrutiny,” said Greg McKenna, chief market strategist at
AxiTrader. “The latest dent to the Cryptospace has been banks saying
they are shutting down the ability of clients to buy bitcoin with their
cards.”
“This could end up a full round trip back into the $1,850/$2,966 region.”
Non-perishable agri products may see slight price rise till MSPs come into effect
The announcement of a Minimum Support Price (MSP) of 1.5 times the
farmer’s cost will likely not have a strong upward impact on overall
inflation but could spur a waning of the sharp slowdown in food price
gains seen in 2017, according to officials and economists.
In the
short term, a slight increase in prices of non-perishable farm products
is possible as producers hold on to produce till the higher MSPs come
into effect around September or October. The increase in MSPs would come
into effect when the Kharif crop came into the market, Economic Affairs
Secretary Subhash Chandra Garg had told The Hindu, adding he
did not expect any impact in the first six months. However, there was
the possibility of an induced effect as farmers held stocks in
expectation of a higher price, he said. Price expectations
Farmers
would hold on to crops only if current prices were lower than 1.5 times
the cost of production, economists said, adding that the inflationary
impact of higher MSPs would be felt only if food prices fall fell below
that level. “If prices are currently depressed and we know that in the
future it will be 1.5 times the cost, then the prices may start going up
right now,” said Ranen Banerjee, partner and leader - Public Finance
and Economics at PwC India. “The non-perishable products, and those that
can be stored, will be held till that time.”
Food inflation
decelerated in 2017 at both the wholesale and retail levels. The ‘food
and beverages’ category of the Consumer Price Index went from a strong
growth of 7.2% in May 2016 to a contraction of 0.2% in May 2017.
Similarly, the food part of the primary articles segment of the
Wholesale Price Index went from a growth of 6.82% to a contraction of
2.13% over the same period. These plummeting prices due to excess supply
had hurt farmers, forcing the government to act.
The nature of
MSPs and the fact that government has limited funds to use to buy crops
at that price, would contain inflationary expectations, said D.K.
Srivastava, Chief Policy Advisor at EY India.
“MSPs don’t come
into effect until market prices dip. And even if they dip, government’s
ability to purchase at MSP is based on budget allocation. Currently,
only limited purchases are done due to budget and quality
considerations. If all the crops were to be bought, then the budgetary
allocation would have to be much higher,” he said.
Mr. Banerjee
added that due to this nature of MSPs, that they kick in only when
market prices dip, the upward effect on inflation may be limited, but
now even the sharp downward trend seen in the middle of 2017 will no
longer take place.
“It is not necessarily going to have a higher
inflationary effect,” Mr. Banerjee said. “But yes, there won’t be a
sharp downward movement or drop in prices.”
2017
was the year when curiosity about the Bitcoin hit an all-time high,
thanks largely to a dramatic surge in its value. Notwithstanding recent
fluctuations in its price, interest remains strong in the original
cryptocurrency, which was launched in 2009.
One question
everybody has is what is the process of 'mining' that creates new
Bitcoins and how does the blockchain technology underpinning the
cryptocurrency really work. Here's how...
Making of the coin
Bitcoins
are generated by a mathematical formula, or algorithm. It started with
50 coins in Jan 2009, the formula produces batches of new coins every 10
minutes.
These coins can be 'mined' by anyone willing to dedicate computing power.
Then it goes public
The blockchain forms a permanent, publicly available history of every bitcoin transaction.
Miners get more
Miners are rewarded for their work with new bitcoins automatically generated by the bitcoin algorithm.
Is there a mining limit?
The bitcoin formula sets a limit of 21 million coins. This limit is expected to be reached around the year 2140.
Commenting on the development Mr. Rana Kapoor, MD & CEO, YES BANK, said, "This landmark issue is the first foreign currency bond offering by YES BANK under our newly established MTN program, and the significant over-subscription as well as high quality investor base is testament to the commitment reposed by global investors in the Bank. As the 1st Bank to have begun operations at GIFT, we remain committed to expanding our operations at the IBU, Gandhinagar." In its successful fund raising streak, YES BANK has previously raised a total of INR 37.5 Bn of Infrastructure bonds of which INR 3,300 Mn (USD 50 Mn) was raised through issue of Green Infrastructure Bond to FMO. In FY17, YES BANK was one of the best performing banks in India across key parameters of growth, profitability and asset quality owing to a differentiated strategy. Bank's Advances grew by 34.7% to INR 1,323 Bn compared to industry growth rate of 5.4%, Total Assets grew by 34.7% to INR 2,151 Bn and Net profit grew by 31.1% to INR 33.3 Bn. Further, YES BANK emerged as the fourth most profitable bank in India, as per H1FY18 net profit of INR 19.7 Bn. As on March 31, 2017, YES BANK's Total Capital Adequacy Ratio stood healthy at 17% with Tier I Capital at 13.3%, ensuring that the Bank is well positioned to capitalize on growth. As evidenced, YES BANK has been one of the strongest banks in India to have successfully demonstrated ability and consistency in raising capital across cycles. Through the equity route too, the Bank has raised a total of more than INR 200 Bn. • The Bank has raised a total of INR 78.5 Bn (USD 1.2 Bn) in QIPs since 2014 • Recently raised INR 40 Bn (USD 612 Mn) through private placement of Basel III Tier II bonds • INR 84.15 Bn was in total raised under Basel III Compliant Additional Tier-1 ('AT1') Bonds
