EU depends on Russia, worries about trade war with China; 5 European countries suffer losses due to conflict in Ukraine

Comments on the global monetary policy tightening cycle, the conflict in Ukraine causing the GDP of 5 European countries to fall sharply, the EU still depending on Russian goods, the US consumer confidence index falling... are the outstanding world economic news of the past week.

EU trade with Russia via third countries reduces the effectiveness of Western sanctions. (Source: Shutterstock)

World economy

The global monetary tightening cycle may be over

Economists, financial markets and most central banks believe there will be no need to continue raising interest rates amid further signs of slowing global economic activity,

Policymakers in the United States, Britain, Japan and Switzerland all decided to keep interest rates unchanged this week, with central bank governors stressing the need to remain calm rather than tighten monetary policy as inflation continues to fall across much of the West.

Capital Economics chief global economist Jennifer McKeown said the monetary policy tightening cycle is over.

For the first time since late 2020, the world's 30 biggest central banks are more likely to cut interest rates in the next quarter than to raise them.

Financial markets got the message that most major central banks would stop raising interest rates and central banks in many emerging economies would cut.

Citi chief economist Nathan Sheets said the global economy is approaching a turning point with growth and inflation falling.

Reports of slowing inflation in many countries and forecasts by the Organisation for Economic Co-operation and Development (OECD) of sharp interest rate rises, and recent oil prices rising to around $95 a barrel have shown growing signs of slowing growth.

Central banks sprang into action after the data was released. Many emerging economies began cutting interest rates, while the Bank of England and the Swiss National Bank surprised analysts by leaving rates unchanged rather than raising them.

Monetary policymakers in major economies are not yet ready to talk about cutting interest rates and want to keep them on hold until they are more certain that prices have stabilized.

In the US, inflation has more than halved from a peak of 9.1% in June 2022 to 3.7% last month.

In some Baltic and Eastern European countries, inflation fell more than 10 percentage points from its peak.

Official data due next week could show eurozone inflation falling to a near two-year low of 4.6% in September 2023, down from 5.2% in August 2023 and a peak of 10.6% in October 2023.

Meanwhile, economic activity was weaker. Purchasing managers' indexes showed weakness in economic activity in the UK and the Eurozone, while the US continued to slow. (Financial Times)

US economy

* A report released by the non-profit consulting organization Conference Board on September 26 showed that the US consumer confidence index fell from 108.7 in August 2023 to 103 this September. This is the second consecutive month of decline and the lowest level since May.

Consumers’ perception of a recession next year has rebounded, the report said, and that waning optimism has led to a drop in confidence. Millions of Americans will also start paying off their student loans in October, with most of their pandemic savings already depleted. (VNA)

Chinese Economy

* Mr. He Keng, former Deputy Director of the National Bureau of Statistics of China (NBS), commented that even China's population of 1.4 billion people cannot "cover" all the vacant apartments spread across the country. Accordingly, there are many different figures given about the number of vacant apartments in this country, including the opinion that the current number of vacant houses can be enough for 3 billion people. This means that China's population of 1.4 billion people cannot "cover" all this number, although according to Mr. He Keng, the above estimate is a bit too much.

The latest data from NBS shows that as of the end of August 2023, the total floor area of unsold houses has reached 648 million square meters, equivalent to 7.2 million houses (an average of 90 square meters/house).

That does not include many housing projects that have been sold but are still unfinished due to cash flow problems, or many houses bought by speculators during the market boom in 2016 that are still empty. (Reuters)

European Economy

* According to the Norwegian website ABC Nyheter , the economies of five European countries, including Germany, France, the UK, Italy and Switzerland, have suffered significant damage due to the impact of Russia's special military campaign in Ukraine.

Without the conflict, the gross domestic product (GDP) of the five European countries could be 0.1-0.7% higher in the fourth quarter of 2022 and inflation would be 0.2-0.4% lower. The report also said that the German economy was the hardest hit.

Experts in Switzerland predict that the situation will get worse in the future. According to Bloomberg , Germany - the largest economy in the European Union (EU) - will face stagnation this year, meaning that GDP will not grow. (TTXVN)

* The UK's FT newspaper said that supplies through third countries have hidden the EU's real dependence on raw materials from Russia.

A testament to this is the Swiss company Glencore, which supplied thousands of tonnes of Russian copper to Italy via Türkiye in July 2023.

According to customs documents and photographs obtained by the FT , a London-listed metals and oil trader bought at least 5,000 tonnes of copper sheet produced by Russia’s Urals Mining and Metallurgy Company (UMMC). The products were exported from Turkey to the Italian port of Livorno in July.

According to the FT , such deals show Europe's dependence on vital Russian goods, as well as Turkey's growing role as a transit hub. The British newspaper emphasized that some European officials believe that trade with Russia through third countries reduces the effectiveness of Western sanctions. (FT/TTXVN)

* German Transport Minister Volker Wissing on September 25 spoke out against the protectionist tariffs that could be imposed by the EU on Chinese electric vehicles (EVs).

In an interview with the Augsburger Allgemeine newspaper, Mr. Wissing said that, in principle, he does not want to erect market barriers. The official stressed that Germany wants to produce electric vehicles competitively for the domestic and world markets. Meanwhile, a trade war could quickly spread to other sectors and cause great economic damage. (THX)

* On September 27, the European Bank for Reconstruction and Development (EBRD) said it expected Russia's economy to grow in 2023 thanks to rising oil prices, after predicting the country would fall into recession earlier this year.

The EBRD expects Russia's economy to grow by 1.5% in 2023, after predicting a 1.5% contraction in its May estimate. The EBRD expects Russia's economic growth next year to be 1%.

The bank also expects Ukraine's economy to grow by 1% this year, as more businesses resume operations and energy supplies improve. (AFP)

Japanese and Korean Economy

* Survey results released by the National Tax Agency of Japan on September 27 show that the average salary of employees at private enterprises in this country in 2022 is 4.58 million Yen (about 30,000 USD).

The survey was conducted on Japanese private enterprises in 2022, including full-time and part-time employees. Accordingly, the average salary paid by Japanese private enterprises to employees in 2022 was 4.58 million yen (about 30,000 USD), an increase of 119,000 yen (about 800 USD), equivalent to 2.7% compared to 2021.

This is the second consecutive year of increase, surpassing the level achieved before the Covid-19 outbreak in this Northeast Asian country. In terms of gender, the average salary of men increased by 137,000 Yen, to 5.63 million Yen, while that of women also increased by 119,000 Yen, to 3.14 million Yen . (TTXVN)

The average salary of employees at Japanese private companies in 2022 is 4.58 million Yen (about 30,000 USD). (Source: Getty)

* The Japanese government is considering establishing Special Asset Management Zones in four localities including the capital Tokyo, Osaka province, Fukuoka province and Sapporo city (in Hokkaido) as a lever to attract investment from outside.

The special asset management zone operates as a form of “special economic zone”, so in addition to standardizing administrative procedures in English, local authorities will create a favorable working and living environment for foreign businesses, including introducing medical services in English. (VNA)

* Late payment of wages is not a rare phenomenon for workers in South Korea . The results of a survey released on September 25 showed that about 4 out of 10 workers surveyed in this country have experienced late payment of wages.

According to a survey of 1,000 Korean workers conducted by Embrain Public from August 1 to 6, up to 43.7% of respondents said they had encountered problems with delayed salary payments.

In terms of percentage, the most common late payments were for basic salary at 30.2%, followed by overtime at 27.8%, allowances at 24.5% and annual leave allowance at 23.2%.

The survey results also showed that informal employees are more likely to experience delayed pay, with 34.8 percent of respondents reporting having experienced delayed pay, compared to 27.2 percent of formal employees. (Yonhap/VNA)

ASEAN Economy and Emerging Economies

* Chairman of the ASEAN Business Advisory Council (ABAC) Arsjad Rasjid said that Southeast Asian companies are evaluating potential investments in the African market to support growth and seek new opportunities amid the slowing Chinese economy.

Mr Rasjid said that China’s economic slowdown would “definitely” affect Southeast Asia, which has close trade ties with the world’s second-largest economy. However, he also noted that this could be viewed “positively”.

“It is important to realize that we are now looking at other non-traditional markets. We have talked about Africa,” Rasjid told Nikkei Asia in a recent interview.

With a population of more than 1 billion people, Africa is considered by companies from all over the world as a place with many potential markets in the future. (TTXVN)

* The General Department of Customs and Excise of Cambodia (GDCE) announced that China, Vietnam and Thailand, the three major markets from which Cambodia imports goods, have shipped goods worth more than 11.5 billion USD to the country, accounting for about 70.8% of the total import turnover of 16.3 billion USD in the 8 months since the beginning of 2023.

According to GDCE, China topped the list with exports of 7.2 billion USD to Cambodia , equivalent to about 43.9% of the Southeast Asian country's total imports, down 0.6% year-on-year. Imports from Vietnam fell 11.7% to 2.5 billion USD, accounting for 15% of total imports. Meanwhile, shipments from Thailand fell 25.8% to 1.9 billion USD, equivalent to 11.9% of total imports. (VNA)

* The head of Indonesia's National Food Agency (Bapanas) Arief Prasetyo Adi said that the country's President, Mr. Joko Widodo, has directed the import of 1 million tons of rice from China to increase the government's rice reserves for 2024.

Mr. Arief said that the decision to import rice was made in the context of a decrease in domestic production due to the impact of the El Nino phenomenon. The Indonesian Ministry of Agriculture recorded a decrease of up to 5% in rice production. (TTXVN)

Source