- Growth Prospects For China Pull Down
- Record Profit From Toyota In The Second Quarter
- IMF Approve a Historic $650 Billion SDR Allocation
Growth Prospects For China Pull Down
The increase in the effect of the delta variant led to the revision of expectations regarding global economic activity and brought the downward revision of the forecasts for China.
With the Delta variant rolling out to close to half of 32 districts in the country in just two weeks, residents of at least 46 cities have been advised not to travel unless necessary.
While the authorities closed the tourism facilities, cultural events and domestic flights were canceled. In addition to the flood disaster, the latest Covid-19 measures are expected to negatively affect the economy in the second half of the year.
On Wednesday, Nomura lowered its China GDP growth forecast to 5.1% in the third quarter and 4.4% in the fourth quarter, from 6.4% to 5.3%, respectively.
Goldman Sachs Group Inc. said the potential impact on third-quarter growth could be 0.7 percentage points. However, it did not change its 6.2 % forecast for the quarter, saying there are uncertainties about the duration of the outbreak and likely stronger policy support.
Bloomberg Economics and NatWest Group Plc. also announced that there are downside risks on Chinese growth forecasts.
The International Monetary Fund also lowered China’s growth expectations in its latest World Economic Outlook Report updates.
In the report, the economic growth expectation for this year in China, where the Covid-19 epidemic emerged, was reduced from 8.4 % to 8.1 %. The 2022 growth forecast of the Chinese economy was revised from 5.6 % to 5.7 %.
Record Profit From Toyota In The Second Quarter
Toyota, Japan’s largest automaker, announced its second-quarter financials.
Toyota Motor announced that it made a profit of $9.15 billion (997.49 billion yen) in the second quarter due to the recovery of automobile sales during the epidemic period and the recovery of the global chip crisis better than many competitors.
Toyota has been storing semiconductors, which are needed in everything from engine maintenance to vehicle safety and entertainment systems, due to a global supply shortage that has slowed output at competitors such as Hyundai and Ford.
The company’s profit for the three months ended June 30 exceeded the average forecast of market analysts.
Toyota shares fell 2% in afternoon trading on Wednesday, extending losses from the morning session, with some investors disappointed that the company had not lifted its profit guidance. “In the first quarter, we have seen the results of our improvement activities, despite the severe business environment,” Toyota said in a statement.
“We will continue these activities in the future, but the situation is still unpredictable due to the expansion of Covid-19 in emerging countries, semiconductor shortage, and soaring material prices,” Toyota said in a statement.
IMF Approve a Historic $650 Billion SDR Allocation
The International Monetary Fund (IMF) announced that its board of directors approved the new $650 billion allocations of the international reserve currency Special Drawing Rights (SDR). The largest allocation of money reserves in IMF history will take place on August 23.
SDRs allocated directly proportional to the “quotas” of member countries in the IMF can be converted into dollars, euros, pounds sterling, yen, and yuan.
“The allocation of SDR will benefit all members, address the long-term need for global reserves, build confidence and support the resilience and stability of the global economy,” IMF Managing Director Kristalina Georgieva said in a statement.
The IMF issues SDRs to the central banks of member countries as reserve assets. Central banks can use this reserve asset to exchange foreign currency with other central banks easily.
“This will especially help our most vulnerable countries struggling to cope with the impact of the Covid-19 crisis,” said Georgieva, adding that approximately $275 billion of allocation will go to emerging markets and low-income countries.
Georgieva said the IMF would continue to actively engage with members to identify appropriate options for rich countries receiving SDRs to divert them to poorer countries that need them more.
The IMF’s last SDR distribution was in 2009 when member countries received $250 billion in SDR reserves to help alleviate a global financial crisis.
To spend their SDRs, countries must first exchange them for stable base currencies and find a country to be an exchange partner.