Last Week in the Global Economy (16-20 July)

Last week global markets rallied on stimulus hopes and better than expected corporate earnings, while geopolitical tensions drove up crude oil. On that note, speculation on what will happen to Sri Lanka should it discover commercially viable oil reserves has already begun.

(Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission.) 

The Week in Global Markets

Asian stocks rose last week amidst speculation that China and the US would boost growth in their economies, European and US markets also rose with the S&P 500 index gaining 0.4% its first back to back gain since June on better than expected corporate earnings supplemented by expectations of stimulus in the US. Escalating geopolitical tensions contributed to the rise of crude oil, which reached its highest level since May with Brent Crude gaining 7.7% and WTI gaining 6.3% during the week.

The Week in Economic Views

India’s current account problems are largely similar to Sri Lanka’s, with the critical difference of India having slightly better options that SL to work towards solving them. Any real solution however is still rendered academic by India’s policy logjam and government inactivity. SL on the other hand, has the will but can do little more than use tariff-based methods to fight the deficit.

State intervention and ‘status-quo preservation’ in East Asian economies might have actually contributed to Tiger Economy growth. Relevant to Sri Lanka as it too faces accusations of sub-standard governance relative to international best practices, should it still be able to grow despite this?

What if Sri Lanka hits Big Oil next year? We at Frontier are starting to focus on a possible game changer if Sri Lankan oil proves commercially viable, and stories from other Frontier nations such as Mongolia that have hit resource riches and high GDP growth can be illuminating both in terms of the good news and the bad.

A related piece highlights the process of energy policy formulation in Nigeria, giving an indication of the level of influence big oil companies have in policy oriented decisions.

The Economist looks at structural gaps in the LIBOR market’s pricing mechanism. The LIBOR manipulation scandal made waves after Barclays Bank was caught rigging the benchmark interest rate.

An interesting proposal from India highlights the need for an alternate inflation index in India, this is relevant to Sri Lanka as the CCPI has consistently come under fire of being inadequate to measure the country’s real inflation.

The IMF has expressed skepticism with regard to the recovery of European markets, a negative factor for regional economies.


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