What We're Reading:
Lebanon agrees new government. Lebanese leaders have today agreed a new government after a year of political feuding over cabinet seats that has exacerbated a devastating economic collapse. (Middle East Monitor)
Early stumble as El Salvador starts Bitcoin as currency. El Salvador became the first country to adopt Bitcoin as legal tender on Tuesday, but the rollout stumbled in its first hours and President Nayib Bukele said the digital wallet used for transactions was not functioning. (Business Mirror)
Scrapping Northern Ireland protocol will only make things worse, says EU. Brussels says renegotiation UK is suggesting will mean more instability for the region. (The Guardian)
Moroccan voters hand stinging defeat to governing Islamists. A Moroccan party run by a billionaire considered close to the monarchy won the most seats in legislative elections, while the Islamist party that has been in power for a decade suffered a stinging defeat, according to results announced Thursday. (AP News)
South Korea clamps down on Apple and Google payment systems. South Korean lawmakers have unanimously passed legislation making it impossible for Apple and Google to force app developers to use the tech giants' payment systems. The move could trigger similar steps elsewhere. (DW)
Vietnam’s supply chain role to grow despite Covid. Covid has disrupted but not derailed Vietnam’s expanding role in global supply chains and growth prospects, the head of the American Chamber of Commerce in Hanoi said Tuesday. (Business Mirror)
Guinea’s new junta leaders seek to tighten grip on power. Guinea’s new military leaders sought to tighten their grip on power Monday after overthrowing President Alpha Conde, ordering the soldiers from his presidential guard to now join the junta forces and barring government officials from leaving the country. (Business Mirror)
Argentines apathetic as Peronists face midterm test. Argentines will go to the polls on Sunday in a primary election that is a litmus test for the November legislative midterms, with the vote marked by political apathy, concerns about the economy and the shadow of the coronavirus pandemic. (Reuters)
Taiwan rift remains despite Xi-Biden call for closer contact. Beijing and Washington may have resolved to maintain communication but Friday’s phone call between the US and Chinese leaders has not narrowed differences over Taiwan, diplomatic observers said. (SCMP)
Vessel identity laundering: an emerging threat to maritime trade. Criminals are fraudulently obtaining vessel registration numbers to evade sanctions on maritime trade, researchers say, warning that illicit export operations are becoming “significantly more sophisticated”. (Global Trade Review)
China's trade accelerates in August despite coronavirus. China’s import and export growth accelerated in August despite disruptions due to the spread of the coronavirus’s delta variant. (US News & World Report)
Key global events to watch in September. A list of key upcoming meetings and events that have implications for global affairs. (Global Observatory)
Supply chain lessons learned from the Covid-19 pandemic. There’s no doubt that the tumultuous events of the past 18 months led to the massive disruption of many key supply chains. Although industries experienced supply chain fragility before the Covid-19 pandemic, the current scale and diversity of impact are unprecedented. (Forbes)
China in a post-US Afghanistan: A paradigm shift in foreign policy? China’s long-standing policy of non-interference is challenged by the cruel geopolitical realities and developments in the country with which it shares its smallest border. The U.S. military withdrawal, coupled with Afghanistan’s seizure by the Taliban, have marked a major turning point, presenting China with both opportunities and challenges. (Global Risk Insights)
European investors warn of shift away from Vietnam over restrictions. More European investors in Vietnam are considering relocating projects elsewhere if the country's coronavirus restrictions continued for much longer, the European Chamber of Commerce (EuroCham) said. (US News & World Report)
UAE: A Brighter Outlook for 2021 After a Difficult 2020
The UAE’s economy was hit by a double shock in 2020: the collapse in oil prices and the COVID-19 pandemic. According to preliminary estimates, the UAE’s economy shrank by 6.1% in 2020. However, the outlook is brighter for 2021, according to trade credit insurer, Coface.
Coface expects growth at 3.1% thanks to a fast vaccination campaign, a sharp recovery of the global economy and the rebound in energy prices. The extent of this recovery will however vary across sectors. Performance in tourism, construction and retail is expected to correlate with new variants of the virus. COVID also will continue as a determinant for the retail sector, one of the most diversified and developed in the region.
The sharp global and regional economic recovery will benefit the oil and transport sectors, the firm said. In July, the UAE agreed with the OPEC-plus group, which includes Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan, to increase their baseline oil production reference. Despite challenges, the outlook remains positive for the UAE oil sector, in line with some investment projects, Coface said. The position of the UAE as the regional trade hub will support the transport sector.
Under these circumstances, the normalization of relations between the UAE and Israel will be profitable in terms of trade and investments across a variety of sectors. Some unexpected tensions may arise with Saudi Arabia over competition for the regional hub status, but should remain limited to the economic sphere.
“The UAE is one of the most diversified economies in the region and plays an important role as the regional trade hub,” said Seltem İyigün, Middle East and Turkey economist at Coface. “We expect the growth to be supported by the rise in oil prices, the strong vaccination campaign in the country and the recovery in global trade volumes. These factors will result in a direct improvement in operational conditions in a number of sectors such as tourism, energy and retail, although the pace of recovery will vary." The construction sector and real estate will need more time to return to pre-Covid performance.
"Working from home policies and the decline in expatriate population following the crisis will continue to put pressure on real estate prices,” she added. “Building new regional alliances has become more important for the UAE given rising competition to its regional hub position from Saudi Arabia and Qatar. The normalization of relations with Israel is expected to offer important opportunities for both countries in terms of trade and investments in a wide range of areas such as tourism, agriculture, defense and energy.”
In September 2020, the UAE became the third Arab country that agreed to normalize relations with Israel. For the UAE, this could be a key step to boost its diversification efforts and also would allow the UAE to benefit from the Israeli technological and innovation capacity. In April 2021, the UAE announced the structuring of a USD10 billion investment fund to invest in strategic sectors in Israel, including energy, water, manufacturing, space, agro-tech and healthcare. Both countries also signed a bilateral agreement on economic and trade co-operation in June. Authorities said that bilateral trade reached USD675 million within 10 months of the signing of the deal normalizing the relations.
Credit Congress Spotlight Session: Take Your Game
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Speaker: Jake Hillemeyer, Dolese Bros. Co.
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Get Yourself Ready for 2024 - Goal Setting & Future Planning
Speaker: Hailey Zureich, zHailey Coaching
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Global Expert Briefings: Trade Credit Risks
Speaker: Jay Tenney, Trade Risk Group
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Exports of Intermediate Goods Sustain Gains in Q1 of 2021
World exports of intermediate goods such as parts and components rose by 20% in the first quarter of 2021 compared with first-quarter 2020, according to a new WTO quarterly report that tracks the health of global supply chains released Sept. 2. The increase sustains the upward trend in intermediate goods exports following the sharp decline in the second quarter of 2020 when the global spread of the COVID-19 crisis was in its early stages.
Trade statistics on intermediate goods reflect the international exchanges of parts, components and accessories used to produce final products and serve as an indicator of the activity in supply chains.
The most resilient supply chains in the first quarter were for ores, precious stones and rare earths, with exports increasing by 43% in the first quarter, and for food and beverages (22%). In contrast, exports of transport parts and accessories posted the weakest recovery at 6% following steep declines in 2020 as the pandemic affected both demand for and production of automotive products.
Platinum group metals (PGMs), a commodity used in electronic components, catalytic converters to treat automobile exhaust emissions and other industries, accounted for around 2% of ores, precious stones and rare earths exported in 2020 and are strategic inputs for many industries.
Asia recorded the highest growth in exports of intermediate goods in the first quarter (28%) due to a 41% increase in Chinese exports of industrial intermediate goods, mainly parts for information communication technology equipment and photovoltaic cells.
Overall, China’s exports jumped 25.6% in August from one year ago to $294.3 billion, and imports spiked 33.1% to $236 billion, both the highest numbers on record, according to a report from CNN.
These economic strides are in despite of new coronavirus outbreaks and supply bottlenecks. "While near-term headwinds remain, supply constraints in China have eased and we think the global economic recovery will continue to underpin China's exports in the end of this year and in 2022," Louis Kuijs, head of Asia economics at Oxford Economics, wrote in a report on Tuesday.
The United States was China's top export market, purchasing $51.7 billion worth of goods in total in last month, according to CNN. "The bottom line is that China's trade data continues to act to mitigate against the impact of slowing domestic growth," Mitul Kotecha, chief emerging Asia and Europe strategist for TD Securities told the news outlet.
However, similar to other countries, the manufacturing and service industry are still behind in recovery. Manufacturing activity last month indicated the lowest rate of growth since the start of the pandemic, according to a recent survey CNN reported.
Last month, Chinese authorities also had to partially shutdown a major container port due to a worker testing positive for COVID-19. But even with these obstacles, trade in China has reached record highs.
UK Economic Growth Slows in July
Monthly real GDP growth for the United Kingdom slowed in July 2021, growing by 0.1% compared with 1.0% growth in June 2021, and it remains 2.1% below its pre-Covid pandemic level (February 2020), according to the latest report by the U.K.’s Office of National Statistics. This is the sixth consecutive month of GDP growth, as coronavirus restrictions continued to ease to varying degrees in England, Scotland and Wales.
Overall, GDP grew by 3.6% in the three months leading to July 2021, largely because of the performance of the services sector. This partly reflects the gradual reopening of accommodation and food service activities, the reopening of non-essential stores and the increase in school attendance compared with the previous three months (February to April 2021).
The latest comparisons of month-on-same-month-a-year-ago growth should be treated with caution given the impact of base effects on growth rates because of the economic impact of the coronavirus pandemic throughout 2020, the Office of National Statistics said.
Services output remained broadly flat in July 2021, and remains 2.1% below February 2020. This follows strong growth of 1.5% in June 2021. Information and communication were the main contributors to services, mainly because of a 2.8% growth in computer programming, consultancy and related activities. Financial services also contributed positively to services, mainly because of a 2.1% growth in financial service activities (not including insurance and pensions). Estimates on financial services for July 2021 are mainly forecast at this stage, and may be revised in future releases. Arts, entertainment and recreation activities grew by 9.0%, boosted by sports clubs, amusement parks and festivals, and reflecting the easing of restrictions on social distancing on July 19. Output in consumer-facing services fell by 0.3% in July 2021, its first fall since January 2021, mainly because of a 2.5% fall in retail sales.
Production output increased by 1.2% in July 2021 and was the main contributor to GDP growth; boosted by the reopening of an oil field production site, which was previously temporarily closed for planned maintenance. This follows a fall in production of 0.7% in June 2021. Mining and quarrying contributed most to production’s increase, as it grew by 21.9% in July 2021. This strong growth mainly reflects the reopening of an oil field production site, which was previously temporarily closed for planned maintenance. Despite this growth, output in the extraction of crude petroleum and natural gas remains low by historical standards, with July 2021 output 19.1% below its July 2020 level.
The manufacturing sector remained broadly flat in July 2021, after five consecutive months of growth, with anecdotal evidence from businesses responding to the Monthly Business Survey suggesting staff shortages (including COVID-19 self-isolation requirements) as a challenge to production. Results from Wave 36 of the Business Insights and Conditions Survey (BICS) also suggest that the most common challenge, reported by manufacturing firms, to filling vacancies in July was a lack of suitable applicants for the roles on offer, followed by a reduced number of EU applicants. The largest negative contributors to manufacturing in July 2021 were the manufacture of machinery and equipment, falling by 4.3%, and the manufacture of fabricated metal products, falling by 3.3%.
Production in four out of the 13 manufacturing sub-sectors increased in July 2021. The largest positive contribution to manufacturing growth came from the manufacture of motor vehicles, trailers and semi-trailers, which grew by 11.4% as reports of microchip shortages disrupting car production eased in July 2021. Overall, production grew by 0.4% in the three months to July 2021, mainly because of a boost to the manufacture of food and beverage products throughout this period as demand from hospitality services increased following their gradual reopening. The boost to manufacturing was partially offset by a fall in the extraction of crude petroleum, as planned shutdowns of oil fields for maintenance temporarily held back output.
Construction output fell for a fourth consecutive month in July 2021, by 1.6%. Construction output, as of July, is now 1.8% below its February 2020 level. The fall in monthly construction output in July 2021 was driven by falls in both new work (1.1%) and repair and maintenance (2.4%). At the sector level, private housing saw falls in both private housing new work and private housing repair and maintenance of 7.5% and 6.2%, respectively. Anecdotal evidence from businesses responding to the Monthly Business Survey for Construction and Allied Trades suggests that price increases, caused by delays in the availability and sourcing of construction products (notably steel, concrete, timber and glass), were the main reason for the decline.
Week in Review Editorial Team:
Diana Mota, Editor in Chief and David Anderson, Member Relations