Morning Briefing: Lower US Recession Risk, Goldman Sach Says

United States real gross domestic product contracted 3.5 percent throughout 2020, the worst economic freeze since the end of World War II - Photo: Special

JAKARTA (TheInsiderStories) — Good morning! Federal Open Market Committee policy has been rising the recession risk to 10 percent from 20 percent in United States (US), said Goldman Sachs studies. The improving condition also gave a recession delay from the fourth quarter of 2018 to the following year.

Goldman Sachs also hoisted that US economic growth in the first quarter to nearly 2 percent from just 1 percent. Improving financial condition since the beginning of this year was caused by the Federal Reserves’ (Fed) softened policy after raising the rate four times last year.

America’ financial conditions, including capital market and interest rate, have loosened significantly, with the financial condition index is turning around 80 percent of the tightening in the fourth quarter of 2018. By the faded tightening effect, the Fed may be willing to review their policy, as shown in the January minutes.

Previously in the minutes, The Fed predicted that US economy would be weakening. Other than that, The Fed indicated that there will be no rate hike this year, affirming the word “patient” had  repeatedly said by Fed top officials.

At the Spring meeting in Washington, International Monetary Fund said that policy decision makers should be aware of the increasing public debt ratios. The agencu then suggested government to prepare the next downturn or financial crisis and upgrade fiscal policy.

IMF Fiscal Affairs Department Director Vitor Gaspar rated that public debt levels are significantly higher across all country groups than before the global financial crisis in 2012. It then continued to rise in emerging market economies and low‑income developing countries by 15 percent average of Gross Domestic Product (GDP).
Exchange rate and interest rate risk caused public debt levels to rise further in several large emerging market economies, according to Gaspar. In some countries, sovereign spreads fluctuate has an increasing trend in 2018. But spreads have fallen significantly since the beginning of 2019. So Gaspar recommended fiscal restraint.
Otherwise, low‑income developing countries, public debt vulnerabilities have increased. The number of countries that the IMF considers to be at high risk or in debt distress increased by half from 2012, from 16 to 24. At the same time, additional spending is required for meeting the Sustainable Development Goals by 2030.
Its estimating 15 percent of the country’ GDP. Additional spending is even larger, at about 20 percent of GDP in sub‑Saharan Africa, said Gaspar.
On the other side, advanced economy countries have benefitted from historically low interest rates, considering the intraservice tax revenue ratios. Public debt ratio is highest in advanced economies, but the interest service ratio is lowest. Declining interest rates to extremely low levels have contributed to the fall in the interest‑to‑tax revenue ratio.
Ten‑year bond yields are now negative in Japan and Germany. Meanwhile, the US and Italy have 2.5 percent bond yields.

While, North Korean Leader Kim Jong Un mentioned that he will give a serious hit to countries that are giving sanctions, and saying his country is independent. Kim then indicates that he will sustainably focus on North Korea’ economy development.

“We must give a serious blow to the enemy forces who are wrongly determined to impose us with sanctions, by advancing socialist construction to a high degree of independence that is in accordance with our circumstances and country, based on our own strength, technology and resources,” said the leader.

This is Kim’ first statement about North Korea position after the meeting with the US. In the mean time, the US and North Korea relations went deteriorating after the failed-to-reach-agreement meeting in Hanoi, last February.

In Indonesia, manufacture industry performance is improving. Bank Indonesia prompt manufacturing index was recorded at 52.62 percent in the first quarter, higher than 52.58 percent in the fourth quarter of 2018.

The hike shown in the rising business activity of manufacture industry. Based on the central bank’ business activity survey, Indonesia’s manufacture industry weighted net balance was 1 percent in the first quarter, three times higher than 0.32 percent in the previous quarter.

Rupiah position against Dollar was hardly moving ended to 14,178.45 against the Greenback. But the Jakarta Composite Index slumped by 1.05 percent to 6,410.16, though there was Rp546.8 billion net buys.

May you have a profitable day!

US$1: Rp14,000

Written by Linda Silaen and TIS Intelligence Team, Please Read Our Insight to Get More information about Indonesia