MarketLine Blog

Posts about Economy

Shinzo Abe reelected as tensions in Asia rise

MarketLine

Japan has in the past decade been hit by two major financial crises. The first one was the global financial crisis of 2008 and the second one came about following the Fukushima nuclear power plant disaster. The latter resulted in a nuclear meltdown and forced the Japanese government to immediately cease operations at all other nuclear power plants in the country, which together generated almost a third of all electricity consumed in Japan. As Japan increasingly relied on fossil fuel powered electricity in the aftermath of Fukushima, increased imports of… Read more

Monarch Airlines: Management not to blame for collapse of UK’s longest-serving airline

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In the early hours of Monday October 2, 2017, KPMG announced that it had entered the office of Monarch Airlines and the company had officially entered administration. In the following hours the Civil Aviation Authority chartered 30 planes from across Europe to repatriate some 110,000 British citizens and customers who were then stranded abroad with no return flights. Cancellations of every flight from October 2 and onwards have affected some 300,000 bookings and likely close to a million individuals, and Monarch’s departure from the short-haul flight market will almost certainly… Read more

Boeing vs. Bombardier: Tariffs justified as Bombardier receives state aid

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In September 2017, the US Department of Commerce announced the preliminary decision to implement import tariffs of approximately 220% on any imports of Bombardier’s C-Series jets into the US. Following a complaint by major competitor Boeing that Bombardier was dumping its jets into the US market as below cost-price, the tariff plan has met with widespread criticism across Canada – where Bombardier is based – and in the UK, where wings are built in a plant in Belfast, currently providing 4,200 jobs. In reality the tariff – which would more… Read more

Macron labor law reforms: Overdue changes to French labor laws are much needed victory for business

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The envisioned reforms are wide-ranging and are easily the most ambitious set of labor market reforms to have made it this far intact. Previously, all efforts have floundered under the weight of popular protest. Although productivity remains healthy in the domestic economy, business growth has been stymied by bad regulation which deters job creation, especially for small businesses nearing the 50th employee threshold which makes the employer subject to an alarmingly complex and costly set of regulations. Bodies representing small and medium businesses are pleased with the outcome, hailing them… Read more

Pound depreciation against euro: A short-term undervaluation trend

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The ongoing depreciation of the pound against the euro has provoked many analysts to bet on the parity of these two currencies by the end of the year. However, even top financial firms that still advise investors to ride the tide against the pound, admit that they do so based on the prevailing uncertainty bias over Brexit. This bias is manifested through the contradictory perceptions of investors over the performance of the UK economy. Particularly, the rising inflation in the UK over the last six months has led to the… Read more

No longer too big to jail: Imprisoning heir to Samsung can create change in chaebol culture

MarketLine

Efforts to solve problems emanating from corporate governance and culture within massive chaebols have gained fresh impetus from the conviction of Lee Jae-yong for bribery in a corruption scandal which was responsible for the impeachment of President Park earlier this year. For significant change in culture to occur and for forces seeking change to stand a reasonable chance of success, Mr. Lee must remain in prison rather than be subject to the pardons previous prison sentences handed to powerful businessmen have ended in. Pushed by a sizeable chunk of public… Read more

Ezetap Quest to democratize India’s digital payments industry

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India has recently been going through a digitalization of almost everything, and this revolution has now reached the traditional banking and finance sectors. As even large banks have realized that using time tested technology means always staying a generation behind, there is now much acceptance and demand in terms of implementing financial startup products and services in the country. Additionally, the recent and largest ever government demonetization caused a cash-crunch, hitting the remote, rural areas most, and left citizens with no choice but to go digital. With nearly 1 billion… Read more

BoE interest rates: It is time for a raise

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On June 15, the Monetary Policy Committee of the Bank of England decided once again to keep interest rates at the record low of 0.25%. However, the big news is that the unexpected 5-3 vote on that decision signals a change of a monetary policy, amid rising inflation that threatens households’ real income. This was no surprise as inflation in the UK economy reached 2.9% in May, keeping up its accelerated trend. In fact, this rate has surpassed the target rate of 2% set by the BoE, quicker than expected…. Read more

Behind the Digital Iron Curtain: Rise of Chinese Silicon Valley

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After a long period of rapid, double digit growth, the Chinese economy entered a more sustainable phase of development, based on innovation and consumption. Given the large population of 1.3 billion in China, the explosive growth of smartphone users, e-commerce, and online content consumption and creation led to a digital revolution in almost all industries and business sectors. While the Chinese Communist Party is trying to match its social control in the real world with the virtual world, which becomes more and more restrictive, the country’s internet is thriving and… Read more

Sanctions against Qatar: The huge costs for a large exporter that also spread to the global economy

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The ban of transportation of goods and citizens’ movements from and to Qatar, implemented by the most powerful Middle-Eastern countries (Saudi Arabia, UAE, Bahrain and Egypt) was a huge diplomatic shock that entails a series of economic effects. Indeed, it seems that politics are a force of impact for a small geographical country that is heavily engaged in global trade. Qatar, one of the richest countries in the world, with large trade surpluses based on gas and oil exports, will have to sustain the consequences of that dependence. Taking into… Read more

Namibia: NEEEF is not the solution. New policy would be bad for the economy

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NEEEF is not the policy the Namibian economy requires at present. Businesses, however big or small, would be required to be at least 25% owned by people described as ‘disadvantaged persons’ and occupy half of board and management positions. The suggested legislation appears to be an effort towards what amounts to forced redistribution of wealth and has similarities with the land redistribution attempted in Zimbabwe. Ownership is not the only target: spending and investment would be subject to new controls too. Problems regarding implementation are legion. Given approximately 40% of… Read more

UK General Election: Theresa May’s Call for Election on June 8 an Opportunistic Masterstroke

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On June 23, 2016, the United Kingdom voted to leave the European Union, a historic result the likes of which has never been seen. On June 5, 1975 the UK voted overwhelmingly in favor of remaining in the EU (then called the European Community) and the thought of any member state actually leaving is a very recent phenomenon. Many point to the Great Recession of 2008-09 as the catalyst for the most recent wave of anti-EU sentiment but opposition to the EU has existed in the UK since it joined… Read more

IMF appeases US trade policy

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The first conference held by the IMF since the economic policy of the United States underwent dramatic changes following the election victory of Donald Trump already shows strong signs of moving towards a position designed to appease the new president. Differences between previous statements and policies from the IMF and what is now being espoused point towards the dropping of the pledge occurring for political purposes. Indeed the language used by the German Finance Minister and that of the IMF shows a stark contrast between views on the matter. Whilst… Read more

French elections: Economic considerations and policies will shape the final outcome

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First of all, the preference of French voters is clarified from the polls as three quarters of voting preferences tend to be gathered among center to right wing politicians. This indicates certain prevailing trends of voters such as the need for sense of security and the adjustment of France’’ foreign relations with Europe and the rest of the world. Nevertheless, even immigration and foreign relations are associated with economic policies over unemployment, welfare state, national security and certain industries of the French economy. Especially, unemployment and social protection are fundamental… Read more

UK General Election: Prime minister May calls snap GE for 8th June, another big play risks further chaos for the country

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On the 18th of April 2017 UK Prime Minister Teresa May announced a snap general election. For months political commentators had been speculating that this might happen, as the opposition parties were weak and the time looked opportune. Conservatives were strong and Prime Minister May needed a strong mandate to help with the exceptional political circumstances that the Brexit vote and subsequent resignation of David Cameron left behind. On announcement the argument provided was exactly this; that the Prime Minister wanted to build on her majority to make sure that… Read more

Iran Transport: Accelerating forward to the future

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Iran is a growing hub for transportation, acting as a critical connection point between India and Russia/ Europe. Until recently, the Suez Canal served as the quickest transport route between India and Russia however with Iran undergoing rail infrastructure upgrades and also building part of the North-South corridor, Iran is set to become a key part of the ongoing development of transport links using the rail network. The North-South corridor has the potential to cut the transport time by around 50% and is sure to disrupt the naval transportation market…. Read more

The Digital Age: A Hackers delight

MarketLine

Online storage is a huge leap forward in technology, allowing files to be accessed from anywhere without the need to send them via email. Files can be shared in a much simpler fashion and can be locked to ensure that any changes made are present in a single file as opposed to numerous versions of the file. This online system serves as a backup for companies and customers. A network of banking telecommunications (SWIFT) has been the target of numerous hacking and data leaks over recent years, serving to reduce… Read more

South Korea and China: WTO complaint must be resolved swiftly and amicably

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In July 2016, American and South Korean military officials agreed to deploy the Terminal High Altitude Area Defense (THAAD) missile defense system in South Korea. China was unimpressed, seeing the move as an act of aggression and intimidation by the US close to its borders, as well as citing concerns that it could interfere with the efficacy of its own military capabilities. On March 20, 2017, South Korea complained to the WTO that China’s unease with the THAAD situation has caused it to retaliate economically, although it was keen to… Read more

Netflix competition: Not a chill environment

MarketLine

Growing from a DVD rental/ selling service in 1997, Netflix today has become one of the leading companies in the online streaming market. Netflix has benefitted greatly from the increased range and depth of broadband internet. The global reach of Netflix and its competitors serve to increase rivalry.  Gaming systems which now incorporate applications into their systems present new and growing opportunities and potential dangers for Netflix. The increased advertisements from gaming systems can help recruit more customers which is also an opportunity for competitors of Netflix. Netflix, as one… Read more

Spring Budget 2017: Budget statement to address Brexit effect and to impact business rates

MarketLine

The economic forecasts released by the UK government before and after the referendum, are astounding in how much they have changed: from an optimistic positive outlook quoted by George Osborn, to a more bleak negative picture for the next five years. Uncertainty playing a major part has led to the outcome of more borrowing for the UK government in order to cover the worst case scenario of lower valued tax receipts in the future. With the Spring statement being the first and last one this April (there will only be… Read more

Greek debt crisis: Why Grexit is not an option

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It is actually proven that undoing a fatal mistake of relying on an overvalued currency does not correct matters. The no alternatives case for the Greek economy on staying in the single currency union is easy to realize after having a close look at its macroeconomic figures that reflect something of an economic collapse. In fact, the heavy reliance of the Greek economy on services and at the same time its lack of a national productive base  rule out the possibility of achieving growth through the adoption of a devalued… Read more

May’s Brexit: Twelve steps to recovery

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Since the Brexit referendum in June 2016, the British population has been going through an uncertain period. In order to help protect the British economy and strengthen businesses following the Brexit talks, Prime Minister Theresa May has outlined a twelve point negotiation plan for the discussions with the EU. The focus of this insight is to look at the potential huge benefits to the British economy following the Brexit talks, with a look at how the talks could also be construed as detrimental and could lead to a divided Britain…. Read more

Chinese Foreign Direct Investment Liberalization

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Reducing the number of markets foreign investors are prevented from entering – down to 62 from 93 – marks a useful step in the right direction and should encourage investment into China, reducing the gap to the outflow. Investors should become more comfortable with China given the proposed new rules, but there is much to be done and reasons for pessimism. The proposals appear to be hobbled by caution and need to go much further to create a lasting impact. More worryingly, the problems that the changes aim to tackle… Read more

Donald Trump: Incoming president likely to create bigger mess than his hair

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Donald Trump’s policy detail is rather thin, but based on multiple and contradictory things he has said on the campaign trail, shrinking of the state via both reduced tax income and federal spending while promising to build a border wall and renovate infrastructure, protectionist stances on international trade agreements while promising a Brexit Britain a comprehensive deal, an expansion of dirty industries at the expense of environmental regulation, and undermined central bank independence. Donald Trump’s election to the Oval Office was considered one of the most divisive and bitter elections… Read more

Trump’s win is good news for US economy

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Donald Trump’s whole mantra during his campaign (as evidenced by his rather natty headwear) has been to ‘Make America Great Again.’ In order to do this, he knows he must make the US competitive on the global stage. He has pledged to reduce taxes heavily for low and middle income Americans and also to make sure that the wealthy (including corporations) do not pay too much as that undermines jobs. This should help boost the currently questionable level of job creation and to increase spending power, which should in turn… Read more

An inconvenient truth about the euro area

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The creation of the euro area was a mistake. Top ranks of business and political classes in Europe were expecting an explosion in trade and economic activity following the creation of the single currency area in 2002. The euro would lubricate the integration of the newly formed euro area. It would be possible to achieve higher levels of growth and long-term prosperity. Unfortunately, the real GDP of the euro area increased only by 1.8% per year between 2001 and 2006 and by merely 0.2% per year within the 2007 -2015… Read more

Uncertainty over political events trumps fundamentals as markets fall

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On Thursday June 23, 2016 the UK went to the polls to decide on its future as a member of the European Union (EU). By a small margin, the country opted to leave and despite the fact that no steps to enact Article 50 have yet been taken by Theresa May and her government, speculation about an imminent implosion of the British economy has been rife, damaging the value of the Pound and serving as a rather convenient scapegoat for everything from companies’ poor performance to increased prices, to political… Read more

Post-Brexit effect on inflation

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The UK voted to leave the European Union (EU) in a referendum undertaken in June 2016. The separation will be complex and will take many years to complete. However, the effects have been felt immediately. Since Brexit, the pound has dropped by 18%. After an initial tumble following the result, it fell further in October following Prime Minister Theresa May’s signal that she would use Brexit to tighten borders, even if it means losing access to the EU’s single market on the current terms. On October 18, the Office for… Read more

EU before Brexit – looking underneath the headlines

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Data from eurostat puts the number of unemployment in the Euro area at 16 million in 2016, close to 10% of its population aged between 18 and 74 years of age. This is equivalent to the entire population of the Netherlands or 8 times the population of Paris. Clearly, the number of Europeans struggling on a daily basis is much higher than the official figure coming from the eurostat. This is because any person that works at least one hour per week is considered to be employed. The failure to consistently reduce… Read more

Brexit skepticism and predicting the unpredictable

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In a bizarre confluence of polarized opinions battling amidst the wanton exposition of misinformation by careerist politicians, the UK has voluntarily plunged itself into a prolonged period of economic and political uncertainty by voting to the leave the European Union. The Prime Minister has resigned, any potential successor from the Leave campaign lacks public credibility or electability, and the Chancellor claims to have no responsibility for delivering a plan for the country in terms of how to navigate and exploit the proposed exit. All those currently in power are willing… Read more