In today’s briefing:
- Chinese LGFVs Contribute to Lower Growth and Disinflation
- Bank Funding Watch: The lender of ‘favorite’ resort? – Watch Series
- UK: Pricing Slowing into Summer-23
- CX Daily: How China Is Sharpening Ethics Rules for Scientific Research
- Eurozone Economy – Quarterly Macro Note – June 26, 2023
- Greek Economy – Quarterly Macro Note – June 12, 2023
Chinese LGFVs Contribute to Lower Growth and Disinflation
- Chinese Local Government Financing Vehicles, representing roughly 50% of the total Chinese government debt, face a maturity wall of CNY 5.5 trillion this year.
- We expect no official defaults, implying an ongoing accommodative stance of the PBoC, further diverging from monetary policy in the rest of the world.
- A ‘kick the can down the road’ strategy, keeping insolvent LGFVs artificially alive results in misallocation of capital, lower GDP growth, lower inflation, and pressure on risk assets.
Bank Funding Watch: The lender of ‘favorite’ resort? – Watch Series
- Emergency lending facilities provided by the Federal Reserve, and the BTFP in particular, relieved banks in distress and helped them stay afloat, but are the same risks still lurking or has the need for funding eased?
- Welcome to this edition of the ‘Watch Series’ where we’ll have a closer look at the use of currently operational funding, credit, liquidity and loan facilities provided by the Fed to try and deduce the state of and outlook for the economy and financial markets – banks in particular.
- To ensure the functioning of the treasury and MBS markets in the immediate aftermath of patient zero, the Fed implemented lax monetary policy and resumed its QE.
UK: Pricing Slowing into Summer-23
- Persistently excessive inflation has startled the BoE into extending its hiking cycle. Though the median is sticky, it may welcome signs of softening mean expectations.
- Wage settlements have risen to especially problematic levels in the UK, creating widespread cost growth. Firms still plan to pass this on and restore margins.
- The BoE must still break the second-round effects from resistance in real wages and margins. At least moderated pricing plans don’t appear as internationally unfavourable.
CX Daily: How China Is Sharpening Ethics Rules for Scientific Research
- Ethics /In Depth: How China is sharpening ethics rules for scientific research
- SCO /: Iran becomes full member of Shanghai Cooperation Organization
- PMI /: China’s services sector recovery downshifts, Caixin PMI shows
Eurozone Economy – Quarterly Macro Note – June 26, 2023
- The revised figures on the Euro area’s GDP growth rates reveal that the economy has entered a mild technical recession amid an increasingly challenging environment.
- Stubbornly high inflation rates, a tightening monetary cycle, and heightened geopolitical tensions are taking a toll on households’ balance sheets and business activity.
- Against this backdrop, we expect that Euro area will only recover moderately in the near term and grow by 0.16% (q-o-q) in the second quarter of the year followed by 0.19% in the third quarter.
Greek Economy – Quarterly Macro Note – June 12, 2023
- In 2022, the Greek economy witnessed a substantial boost in GDP growth, as Real GDP (2015 Prices) reached €192.06 billion, reflecting a 6% increase compared to the previous year.
- Moving forward, the OECD, IMF, and EU have forecasted average growth rates of 2.2% for 2023 and 1.67% for 2024.
- Despite the steady increase in nominal values of Public Debt, as indicated by both ELSTAT data and IMF-EU Commission projections, there is a positive aspect in the declining Debt-to-GDP ratio based on projections.
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