Broader Network of Trade Links Key to Philippine Growth and Stability

The Aquino administration is seeking to expand the country’s trade links with emerging markets and developed economies to enhance export performance, encourage FDI, and sustain growth. In 2011, RGE is forecasting GDP to expand 5.2% in our outlook as President Aquino’s Public Private Partnership program, aimed at improving the country’s infrastructure, galvanizes capex in Q4 […]

LIA Portfolio Snapshot

A leaked statement of the Libyan investment authority (LIA)’s portfolio from mid last year gives a rare glimpse into its US$53 billion asset portfolio, much of which has been frozen in early 2011 due to sanctions. While only one data point, it provides more details on how Libya was diversifying its assets. Although described as […]

Egypt: And the Money Starts Rolling In?

Saudi Arabia has stepped up to the plate for Egypt, announcing a US$4 billion package for Egypt which included transfers, investment, a capital injection for the central bank, purchases of some of T-bills and bonds that Egypt will issue in the coming year, as well as other financial support. This announcement comes just days after […]

RGE’s Wednesday Note – Japan’s Production Shortfall Drags on EM Asia Supply Chain

The amplified shock from Japan’s March 11 earthquake, then tsunami, then nuclear crisis has rippled through the supply chain of its emerging Asia (EM Asia) neighbors. Production shutdowns and weakened demand in Japan began to register in Asia’s trade channels in the weeks following the disaster. As the extent and duration of disruptions to production in Japan become more apparent, the severity of regional supply chain interruptions and the effects on EM Asia’s industrial production and export volumes and prices through 2011 can be better anticipated.

Brazil’s Current Account Deficit Likely Narrowed in February

The current account deficit likely narrowed to US$3.9 billion in February, from a deficit of US$5.4 billion in January, but widened compared to a deficit of US$3.3 billion in February 2010. A widening of the merchandize trade surplus to US$1.2 billion—driven by higher commodity prices—despite an expected narrowing in the net services deficit to US$5.3 billion, should explain the deterioration from January. This would mean that, on 12-months rolling basis, the current account shortfall shrank to US$49.3 billion in February from US$48.6 billion in the previous month. We highlight that FDI and portfolio inflows have been more than enough to cover the gap; however, the quality of the funding has deteriorated as portfolio, rather than FDI, becomes more prominent. We expect the current account to continue to deteriorate in 2011 to US$70 billion, or 3% of GDP, as domestic demand should continue to grow at a faster pace than external demand as the currency remains overvalued—though elevated commodity prices should help in avoiding a sharper deterioration.

RGE’s Wednesday Note – Fallout From the MENA Days of Rage

The political situation throughout the Middle East and North Africa (MENA) is still in flux, with a rotating cast of countries carrying on “days of rage” and several regimes, including Libya’s, teetering. The overthrow of the Egyptian and Tunisian leaders has energized populations and opposition groups—leaders will no longer be able to rely solely on the old playbook of repression and subsidies. Regardless of how the political developments play out, all the regimes in the region have been challenged, and the populations will not be content with business as usual. In fact, many members of Tunisia’s caretaker government resigned this week as protesters demanded a government untainted by members of the old regime. In our latest MENA Focus, we consider what the recent political shake-up could mean for regional economies, their neighbors and their trading partners.

Will New Regulations Bring Continued Rebalancing for Canadian Housing?

Though Canada managed to avoid a U.S.-style housing crash, the Great White North may face its own set of difficulties, as the same ample credit extension, low interest rates and government incentives that helped the housing market rapidly recover the losses incurred during the 2008-09 downturn are contributing to increased household indebtedness. The ratio of debt to disposable income reached a record high of 148% in Q3 2010. As underlying macroeconomic trends (e.g., the open output gap and weak core inflation) warrant an extended pause in the Bank of Canada’s tightening cycle, Canadian authorities have turned to regulatory means to dampen excessive credit practices and ultimately decrease households’ vulnerability to rising debt service payments.

Argentina’s Trade Surplus to Shrink Significantly

RGE expects Argentina’s trade balance to register a US$589 million surplus in December, compared with surpluses of US$0.4 billion in November and US$1.2 billion in December 2009. This would shrink the trade surplus to US$12.4 billion from US$16.9 billion in 2009 as a result of strong domestic demand. An over-stimulated and unsustainable domestic demand growth likely kept imports increasing at a strong pace (50% y/y), while exports (24% y/y) likely benefited from higher commodity prices and demand from Brazil—particularly industrial products.