Russia-Iran negotiate using local currencies, Kiev speaks out about Moscow extending grain deal, Japan welcomes good news

Russia and Iran tighten energy cooperation, negotiate the use of local currencies in transactions; the US is optimistic about reaching an agreement on the public debt ceiling, Kiev welcomes Moscow's extension of the grain agreement, Japan continuously receives positive signals... are the outstanding world economic news of the past week.

Iran and Russia signed 10 cooperation agreements in the oil sector. (Source: Press TV)

World economy

Warning of the risk of prolonged low global growth

A report released on May 16 by the United Nations (UN) stated that the world economy is facing the risk of prolonged low growth due to the consequences of the Covid-19 pandemic, the Ukraine crisis, climate change and changing macroeconomic conditions, although some signs of improvement have appeared.

Global growth remains well below the 3.1% average growth rate in the two decades before the pandemic, the report said.

For the United States, solid household spending prompted the UN to raise its forecast for the country to 1.1 percent this year from 0.4 percent. The European Union (EU) forecast was also raised to 0.9 percent from 0.2 percent. China’s growth estimate for this year was revised up to 5.3 percent from 4.8 percent.

As for other major economies, Japan's growth is now forecast at 1.2%, down from the previous estimate of 1.5%. The UK economy is expected to shrink less than first estimated, falling 0.1% instead of 0.8%.

Russia, which is under heavy Western sanctions, will see its economy shrink by 0.6%, a much better scenario than the January forecast of a 2.9% contraction. The forecast for India’s economic growth remains unchanged at 5.8%.

Global trade is expected to remain under pressure. The baseline scenario forecasts that global trade in goods and services will grow by 2.3% in 2023, up from the previous forecast of near-zero growth.

However, the lingering effects of Covid-19, rising geopolitical tensions and tightening currencies will continue to hold back global trade, despite easing supply chain constraints and shipping costs.

Average global inflation is estimated at 5.2% in 2023, down from a two-decade high of 7.5% in 2022. The report noted that while price pressures are expected to gradually ease, inflation in many countries will remain well above central banks' targets. (THX)

US economy

* US President Joe Biden and Republican leaders on May 16 expressed hope for a deal that could avoid the risk of default for the country .

After the latest negotiations failed to produce a breakthrough, House Speaker Kevin McCarthy told reporters that there was still much work to be done to break the impasse with the President over the debt ceiling. He said that a deal could be reached by the end of the week, although the issues have not been resolved so far.

Democrats are not optimistic about the possibility of a quick agreement, but the White House said the negotiations were constructive. Mr. Biden is optimistic about the possibility of reaching a responsible bipartisan budget agreement if both sides negotiate in good faith. (TTXVN)

* According to Michael Barr, Vice Chairman of the US Federal Reserve (Fed) in charge of supervision, the Fed will announce a plan to tighten capital regulations for banks in the summer and will increase supervision of banks after some recent bankruptcies.

The Fed is cautiously considering adjusting regulations for regional banks with assets above $100 billion. (Reuters)

Chinese Economy

* China's new home prices rose for a fourth straight month in April 2023, but at a slower pace .

According to Reuters calculations based on data from the National Bureau of Statistics (NBS), new home prices in April 2023 increased 0.4% from the previous month, compared with a 0.5% increase in March 2023.

Slower home price growth in April 2023 showed a sharp decline in investment and property sales, adding to concerns about the resilience of a sector vital to the health of China's economy.

Home prices fell 0.2% from a year earlier, the 12th straight monthly decline. Home prices fell 0.8% in March 2023. (Reuters)

* According to official statistics released on May 16, China's industrial output and retail sales growth in April 2023 were both lower than forecast . This data shows that the growth momentum of the world's No. 2 economy weakened at the beginning of the second quarter of 2023.

Specifically, China's industrial output in April increased 5.6% compared to the same period a year earlier, the fastest growth rate since September 2022. This figure is also higher than the 3.9% recorded in March, but much lower than analysts' expectations of a 10.9% increase.

China's retail sales rose 18.4% in the same period, up from 10.6% in March and the fastest pace since March 2021. But the figure still missed expectations, with analysts expecting a 21% rise. (Reuters)

European Economy

* At a meeting in Brussels (Belgium) on May 16, EU Finance Ministers approved the world's first comprehensive set of rules to regulate cryptocurrencies, putting pressure on countries like the UK and the US to quickly catch up.

The rules were discussed by the EU with the European Parliament, which approved them in April. The rules are expected to be implemented from 2024. Under the rules, any company that wants to issue, trade or guarantee cryptocurrencies, other types of tokenized assets and stablecoins (cryptocurrencies “pegged” to a traditional asset such as gold or the US dollar) in the 27-nation bloc must have a license. (Reuters)

* On May 17, Russian Foreign Ministry spokeswoman Maria Zakharova confirmed that the Black Sea Grain Initiative has been extended for two months to support countries in difficulty. However, the spokeswoman affirmed that Russia's general assessment of the situation related to this agreement remains unchanged.

Making a statement on social media, Ukrainian Deputy Prime Minister Oleksandr Kubrakov also welcomed the initiative's continued existence.

Earlier, Turkish President Tayyip Erdogan announced that the Black Sea Grain Initiative would be extended by two months. (TASS)

* According to the Shana news agency under the Iranian Ministry of Oil, on May 17, Iran and Russia signed 10 important cooperation documents in the oil industry.

The agreements include six memorandums of understanding (MoUs), two contracts, one agreement and a roadmap relating to bilateral cooperation in the fields of industry, technology transfer and enhanced oil recovery. In addition, the two countries held talks on cooperation in the banking sector and the use of local currencies in bilateral transactions. ( VNA)

* The International Energy Agency (IEA) said on May 16 that Russia's oil exports in April 2023 increased to their highest level since the conflict between the country and Ukraine broke out in late February 2022, with revenue increasing by 1.7 billion USD despite a series of Western sanctions.

In its latest monthly report, the IEA said Russian exports rose by 50,000 barrels per day to 8.3 million barrels per day last month. (AFP)

* According to a survey by the ZEW Institute, investor confidence in Germany fell sharply in May, raising further concerns about the risk of recession in Europe's largest economy.

The ZEW survey's economic expectations index fell for the third consecutive month, down 14.8 points to minus 10.7 points.

The figure was lower than analysts' forecasts and turned negative for the first time since December 2022.

The negative reading shows that most investors are pessimistic about the economy. (AFP)

* Italy is forecast to have the highest growth among major EU economies in 2023.

"Italy has grown by 12% over the past three years, after a 9% decline during the pandemic," EU Economic Commissioner and former Italian Prime Minister Paolo Gentiloni said in presenting the European Commission's (EC) spring forecast on May 15.

On the same day, May 15, the EC announced that Italy's GDP will increase by 1.2% this year and 1.1% in 2024. This figure is higher than the growth forecast of 0.8% and 1% for 2023 and 2024, respectively, given in February this year. (VNA)

MV Brave Commander carrying 30 tonnes of Ukrainian wheat arrives at the port of Djibouti, August 30, 2022. (Source: AFP)

Japanese and Korean Economy

* Since the beginning of 2023, the Tokyo Stock Exchange (Topix) - an index measuring the value of stocks on the Tokyo Stock Exchange - has increased by more than 6%, much higher than the general stock indexes in the Asia-Pacific region. In particular, in the trading session on May 17, this index increased to a record, reaching its highest level since August 1990.

Asian stock market experts say the continued rise in the Topix index is a sign that foreign investors are returning to Japan. (Kyodo)

* New official data released on May 17 showed that Japan's economy grew faster than expected in the first quarter of 2023, thanks to a recovery in tourism activities after border restrictions during the pandemic were lifted from October 2022.

Japan's GDP grew 0.4% in the first three months of this year, beating market expectations of 0.2% and higher than the 0% recorded in the final quarter of 2022.

Compared to the same period in 2022, Japan's economy grew 1.6%, marking the first increase in three quarters and exceeding the 1.1% forecast by experts. Overall, in fiscal 2022 (ending March 3, 2023), the world's third largest economy grew 1.2%, also the second consecutive year of growth. ( VNA)

* South Korea will make further inroads into the global seafood market with the goal of reaching $4.5 billion in seafood exports by 2027, according to the Ministry of Oceans and Fisheries.

The amount is up about 50 percent from a record high of $3.15 billion in 2022, thanks to the global popularity of gim (dried seaweed) and abalone, according to the ministry. (Yonhap)

ASEAN Economy and Emerging Economies

* Thailand's economy grew faster than expected in the first quarter of 2023, helped by a recovery in tourism, while investors worried about political instability after the opposition won the recent election.

Thailand’s tourism-dependent economy has lagged behind its regional peers due to the impact of the Covid-19 pandemic. However, the economy has rebounded in recent months as Chinese tourists return. The revival of the “smokeless industry”, which accounts for 11-12% of GDP, is expected to help offset the impact of falling exports.

Thailand's state planning agency forecasts economic growth of 2.7-3.7% in 2023, up from 2.6% last year, and said the post-election atmosphere should remain positive to build investor confidence. (Reuters)

* According to Mr. Dicky Kartikoyono, Head of Strategy and Governance Management of Bank Indonesia (BI), the country will build a new national payment system to replace the current system that relies on foreign payment networks such as Visa or Mastercard.

The transition to a national payment system is going smoothly and Indonesia hopes the system will soon become widespread, even among state-owned enterprises.

BI affirmed that Indonesia's decision to create its own payment system is "very timely", while stressing that Southeast Asian countries need to establish "a safety cushion to protect their businesses and ordinary citizens" from growing financial instability. (TTXVN)

* Credit rating agency Moody's Investors Service warned that Malaysia will face the risk of rising food inflation , due to disruptions in supply chains and other global uncertainties.

In fact, Malaysia's food inflation has remained high since last year, which may prompt policymakers to consider additional measures to mitigate the impact on the broader economy, said Moody's Assistant Vice President and Analyst Nishad Majmudar. (VNA)

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