China’s GDP grew 4.9% in the third quarter compared to the same time last year, the country’s National Bureau of Statistics <a rel="noreferrer noopener" href="http://www.stats.gov.cn/english/PressRelease/202010/t20201019_1794616.html" target="_blank">said</a> Monday, as the economic superpower continues to rebound after the coronavirus pandemic. 



<h4 class="wp-block-heading">KEY FACTS</h4>



That growth was fueled by strong retail sales and industrial production, the government said.&nbsp;



China’s exports rose 9.9% last month while imports soared 13.2%—two more&nbsp;<a href="https://www.reuters.com/article/us-china-economy-trade/chinas-imports-exports-surge-as-global-economy-reopens-idUSKBN26Y0BL" target="_blank" rel="noreferrer noopener">strong signs</a>&nbsp;of recovery.&nbsp;



China’s is the only major economy that is expected to grow in 2020, according to the International Monetary Fund, which is forecasting&nbsp;<a href="https://www.imf.org/en/Countries/CHN" target="_blank" rel="noreferrer noopener">1.9% growth</a>&nbsp;for the year.&nbsp;



<h4 class="wp-block-heading">CRUCIAL QUOTE&nbsp;</h4>



Despite robust growth at home, the Chinese government also noted Monday that the global environment remains “complicated and severe” and that the country is under “great pressure” to prevent any further outbreaks of the virus.&nbsp;



<h4 class="wp-block-heading">KEY BACKGROUND</h4>



China’s economy&nbsp;<a href="https://www.forbes.com/sites/isabeltogoh/2020/04/17/coronavirus-drags-chinas-economy-into-first-slump-in-four-decades/#1aa08e324bcb">shrank 6.8%</a>&nbsp;in the first quarter—its worst contraction in 40 years—as the government shut down nearly all activity in parts of the country to prevent the spread of the coronavirus. In the second quarter, growth bounced back to 3.2% after factories reopened and the government poured billions of dollars in stimulus measures back into the economy.&nbsp;



<h4 class="wp-block-heading">TANGENT</h4>



Economists&nbsp;<a href="https://markets.businessinsider.com/news/stocks/economic-outlook-gdp-estimates-bank-america-stimulus-bill-recovery-quarter-2020-9-1029582684#" target="_blank" rel="noreferrer noopener">expect</a>&nbsp;the United States to see growth in the third quarter, too, but that growth is likely to be limited in the fourth quarter if further stimulus measures from the federal government are delayed until 2021.&nbsp;



<h4 class="wp-block-heading">FURTHER READING</h4>



<a href="https://www.forbes.com/sites/sarahhansen/2020/07/30/economy-shrank-at-historic-33-annual-rate-in-second-quarter-but-thats-not-the-whole-story/">Economy Shrank At Historic 33% Annual Rate In Second Quarter—But That’s Not The Whole Story</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/sarahhansen/2020/09/07/chinas-exports-surged-95-in-august-despite-escalating-tensions-with-the-united-states/">China’s Exports Surged 9.5% In August Despite Escalating Tensions With The United States</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/carlieporterfield/2020/10/15/europe-breaks-record-for-weekly-coronavirus-cases-as-countries-enforce-new-lockdowns/">Europe Breaks Record For Weekly Coronavirus Cases As Countries Enforce New Lockdowns</a> (Forbes)



-By Sarah Hansen, Forbes Staff

CHINA-ECONOMY-GLASS

China’s Economy Continues Rebound With 4.9% Growth In Third Quarter

After terrorists were rooted out of the Westgate shopping mall, a group of dignitaries flocked to the site of the siege. One of the first to visit the shopping mall was Phyllis Kandie, the cabinet secretary for East African affairs, commerce and tourism.
After laying a wreath, she turned to the swarming media and declared: “The country is still safe for tourists.”
<div id="attachment_2274" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-2274" class="size-medium wp-image-2274" src="/wp-content/uploads/2017/04/NM_00001208-300x201.jpg" alt="" width="300" height="201" />NAIROBI, KENYA &#8211; SEPTEMBER 23: Heavy smoke is seen from the site of the terrorist attack, Westgate Mall, on September 23, 2013 in Nairobi, Kenya. The attack occurred on Saturday, 10-15 gunmen from the extremist group Al-Shabab entered the mall and opened fire at random on shoppers; 68 deaths have been confirmed. (Photo by Gallo Images / Nation Media / Salaton Njau)</div>
One day later, the country’s principal secretary of Kenya’s treasury, Kamau Thugge, emerged to assure investors of the country’s security. The officials’ sentiments reflected the uncertainty over the effects the attacks committed by the terrorist group, Al Shabaab, which left 67 dead and dozens missing, on the Kenyan economy.
While government spin doctors insist that the siege will not have any effect, analysts predict a slight dent on economic growth. The most immediate impact was the closure of stores in Westgate, which housed international brands like Deacons, Clarks and other businesses, such as banks.
On a larger scale, global credit rating firm, Moody’s, predicts that Kenya’s economy will lose 0.5% of potential GDP growth this year. In an advisory to investors, the firm noted that the attack will affect Kenya’s growth and fiscal revenues, most directly through its effects on tourism.
This industry accounts for 2% of Kenya’s GDP and earned the country more than $13 billion last year, in addition to creating millions of jobs.
Moody’s could have been onto something. Barely a week after the siege, the governments of the United States, Britain, Australia and Sweden cautioned citizens against visiting Kenya, to the chagrin of Kenyan state officials who had pushed for the West not to do so. These countries account for half of the 1.7 million tourists who visited Kenya last year.
<div id="attachment_2276" style="width: 187px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-2276" class="size-medium wp-image-2276" src="/wp-content/uploads/2017/04/RTX13XVR-177x300.jpg" alt="" width="177" height="300" />Kenya Defence Forces soldiers comb the rooftop of the Westgate shopping mall, on the fourth day since militants stormed into the mall, in Nairobi September 24, 2013. Somalia&#8217;s al Shabaab Islamist group said on Tuesday its militants were still holed up in a Kenyan shopping mall they attacked at the weekend and there were &#8220;countless dead bodies&#8221;, raising fears the death toll could be higher than 62. REUTERS/Noor Khamis (KENYA &#8211; Tags: CIVIL UNREST CRIME LAW MILITARY) &#8211; RTX13XVR</div>
Kenya, which is known for exotic wildlife safaris and pristine beaches, is traditionally a tourism hotspot. The attack came at a bad time. The sector’s peak season is from July to December and many hotels and parks had hoped to benefit from the many bookings normally recorded in this period. After the attack, some have recorded cancellations as visitors adopted a wait-and-see attitude.
The sector is also still reeling from the election blues in March, when visitors stayed away due to fears of a repeat of the post-election violence that took place in 2008. Last year, the uncertainties over elections and the European economic crisis led to a 1.9% decline in the number of tourists.
The attack and any political instability brought about by the trial of the country’s president, Uhuru Kenyatta, and his deputy, William Ruto, at the International Criminal Court will hurt risk ratings, making it difficult to raise money in foreign markets. Any money that is raised will also attract higher interest rates.
Kenya plans to issue a $1.5 billion Eurobond this year to finance rail, road and port upgrades. The country has a favorable rating by various firms. For instance, Standard and Poor’s rating for Kenya is ‘B+’ stable and Fitch has graded it ‘B+’ positive outlook. Weakened by the terrorist attacks, the favorable rating is also being assaulted by politicians.
There have been calls by the Senate and the National Assembly to ratify a motion to pull out of the Rome Statute that creates the ICC, where Kenyatta and Ruto are on trial. Moody’s has warned that Kenya risks being downgraded from a stable rating of B1 if it goes ahead with this, signifying a higher risk for investors.
A lower rating may deter investors with plans to put their money in Kenya in addition to raising premiums that insurers charge for terrorism cover. George Otieno, the chief executive officer of Africa Trade Insurance Agency, an institution that insures investors against terrorism in different countries, told reporters that premiums are likely to go up for those taking terrorism and sabotage cover. However, he predicted that the costs will go down in the long run.
In addition to insurance, firms will also have to spend more on security by installing CCTV cameras, alarms and metal detectors. They will also have to train employees and arrange back-up for their data. All this will increase the cost of doing business.
The government, under pressure after analysts accused them of bungling the intelligence gathered before the attacks, is likely to increase spending on security and defense.
“This will have the consequence of raising the government’s gaping budget deficit,” noted Laura Chakava of investment firm Alpha Africa Asset Managers. Kenya’s budget deficit has grown from 6.5% of the GDP in the 2012/2013 fiscal year to 7.9% in 2013/2014, marking a 1.4% increase. This is against a target of 5%.
Though there are no reliable studies on the effect terrorism, like the Westgate attack, will have on the flow of foreign direct investment in Kenya, research by American scholars offers a glimpse.
In a paper published this year, Subhayu Bandyopadhyay of the Federal Reserve Bank of St. Louis, Todd Sandler of the University of Texas at Dallas and Javed Younas of the American University of Sharjah looked at how terrorist activity had impacted foreign direct investment (FDI) to 78 developing countries between 1984 and 2008. They noted that one domestic terrorist incident per 100,000 persons reduces net FDI between $323.60 million and $512.94 million for an average country. On the other hand one transnational terrorist incident per 100,000 persons reduces net FDI between $296.49 million and $735.65 million.
Kenya plans to attract $8 billion in foreign investments over the next five years.
However, both governments and analysts agree on one thing; the fundamentals of the Kenyan economy are sound. Unless other factors crop up, the attacks will only have a short to medium-term effect on growth.

The Cost of Terror In The Mall

In the 1800s, Europeans referred to Africa as the “dark continent”, although the Victorian term has fallen from usage, until recently it accurately described the approach of foreign investors to Africa. Risk was thought to be too high, returns too low. A decade ago, the region’s share of FDI was less than one-tenth of the amount flowing into Asia or Latin America. Until a few years ago, a single company, Exxon Mobil, was worth more than all of Africa’s listed companies put together, excluding those of South Africa.
But what a difference a few years can make. Since the financial crisis hit in 2008, there has been a dramatic shift in how investors view Africa. One of the markets that has best epitomized this change is Ghana.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-1598" src="/wp-content/uploads/2017/04/one-300x199.jpg" alt="" width="300" height="199" />
The West African county was near the top of worldwide tables in 2011 in terms of GDP growth with a rate of more than 14%. 2012 figures were equally robust, coming in at above 8.5% buoyed by strong growth in the non-oil sector of 8%. While the country is largely dependent on commodities for export revenues, increased activity in housing, construction and banking has spurred an expansion of the services sector, which makes up more than half of GDP.
Last year saw a gradual depreciation in the cedi, which fell by around 14% against the dollar, driven by increased demand for imports. While the country’s robust growth also stoked inflationary pressures, at least over the short-term, the CPI fell to 8.8% in December—its thirty-first consecutive month of single-digit inflation.
The country benefited from a statistical rebasing a few years earlier, which dramatically improved data collection and accuracy. As a result, the country was catapulted into middle-income status.
The biggest recent watershed moment for the country is as a result of its newfound oil and gas reserves. The offshore Jubilee field, discovered in 2007, began production in record time, with the first barrel being lifted at the end of 2010. The speed with which Ghana went about capitalizing on its new oil wealth, 42 months from discovery to production, led to a few hiccups. For four months, light, sweet crude flowed without a regulatory framework to determine how the revenue would be channeled and how future production would be handled. Eventually, the Petroleum Revenue Management Bill was put in place. It allocates a proportion of revenue to future generation funds and price stabilization funds and some $444 million worth of oil revenue flowed into government coffers by the end of 2011. The production, in relation to the country’s overall economy, is modest and by some estimates will work out to around $50 per capita annually but the rush of investment into the sector—and ancillary industries, such as construction and services—helped ensure the country was one of the largest FDI destinations in Africa last year.
Associated gas deposits in the field brim with equally promising potential, particularly in terms of domestic industrial and electricity production, although timing has been problematic. Currently, with a ban on flaring and no offtake infrastructure, gas has been re-injected into the deposits but at a certain point this will negatively affect oil production. As a result, the country has been racing over the past year to finalize infrastructure for its gas master plan, which will see the construction of more than $750 million worth of new processing and pipeline infrastructure by China’s SINOPEC. Gas is due to begin flowing to the newly-built Aboadze power plant over the next month or two—and none too soon, given the blackouts last year when the country’s alternative gas supply, the West African Gas Pipeline, experienced supply shortages.
While hydrocarbons dominate the headlines, Ghana’s traditional commodities have provided the bulk of revenues in recent years. Cocoa, which indirectly supports more than one-sixth of the population, had a successful year with an estimated production figure of 860,000 tons, down slightly from the previous year but enough to make it the world’s second largest producer. The distribution of more than 20,000 new hybrid seedlings and efforts to improve the ability of small farmers to tend and replace their crops, looks set to strengthen output over the medium-term.
Similarly, gold, which accounts for roughly 40% of exports, grew by double-digit figures over 2012. Although production fell slightly, higher prices on international markets helped keep prices afloat and fund new exploration in marginal deposits. Ghana has revamped its regulatory scheme, introducing a new bidding system and increasing the fiscal burden for operators, including a windfall tax and higher royalties.
Of course, with all this laudable growth comes a note of caution. This rapid change must be managed carefully, for the downside risks facing the country are sizable. Ghana was the third-largest recipient of FDI in Africa last year, but it remains worryingly dependent on commodities. Gold, cocoa and oil dominate exports and while Ghana is not as sensitive to price fluctuations as it was in the 1980s, when the economy seesawed according to international prices, volatility still impacts overall performance. Furthermore, labor-intensive activities such as manufacturing remain marginalized, exacerbating unemployment and weakening the balance of payments. The benefits of the economic boom have been disproportionately concentrated in the south and development in the north lags significantly.
However, Ghana has the ideal foundation for future growth. It has natural resources, policy stability and reasonable infrastructure and it has benefited accordingly. But exporting raw materials, by sending gold and cocoa elsewhere for processing, is a short-term solution. The country has begun aggressively encouraging increased value-added production in the secondary and tertiary sectors, to improve the sustainability and inclusiveness of growth and to ensure that the country’s current performance is not a temporary blip.

Gas And Cocoa Oils Ghana Growth

Over the past two years, Egypt has undergone a significant transformation, not only politically but also economically. The protests in Cairo’s downtown Tahrir Square, in January 2011, have had a wide-ranging impact not only on the country’s political composition, but also on its short- and medium-term economic performance. While the ups and downs since the revolution have been palpable, the downs obviously more so; the long-term fundamentals of Egypt remain just as appealing as they were in the years leading up to former President Mubarak’s ousting. Provided investors are willing to ride out the immediate uncertainty, the prospects for growth are encouraging.
In the pre-crisis days of 2007 and 2008, Egypt was racking up GDP growth in excess of 7% and services like telecommunications were growing by double digits annually; tourism jumped up by as much as 21% in one year. The country’s stock market, one of the continent’s largest both in terms of listed firms and capitalization, attracted significant inflows from foreign institutional investors, while the banking sector—leaner and meaner after several years of consolidation and robust regulation—saw a drop in non-performing loans and an increase in profitability.
But the combination of falling global demand, together with revolutionary instability, meant that GDP growth last year fell to 1.8%. Growth in 2012  was only slightly better, at 2%, while forecasts for 2013 are at a solid but lower-than-needed 3%. Foreign Direct Investment (FDI) fell by more than $10 billion in 2011 and key sectors, like tourism, have slumped, contracting by nearly 6% over the most recent fiscal year. Industrial action has depressed manufacturing output in labor-intensive sectors even as official unemployment has risen to 12%, not counting the vast ranks of the underemployed.
Egypt faces problems that have been exacerbated by the revolution—including some very pressing long-term political questions, ranging from the creation of a new constitution to improving institutional trust—but among the more urgent challenges is the lack of inclusive growth. The subsidy debate highlights this most acutely. Government grants and social benefits made up roughly one-third of total expenditure in the 2011/12 fiscal year, which runs from June to June, according to the ministry of finance. Reducing the burden is a priority for President Mohamed Morsi’s new government, yet reforming subsidies carries not only significant political risk but also fails to alleviate the pressure on the most vulnerable portions of the population. As a result, steps have been tentative at best. The focus has been primarily on energy subsidies and the most recent version of the 2012/13 budget from May 2012 sought a reduction in fuel subsidies by some 27%, with consumption-intensive industries seeing the most significant increase in costs. Food subsidies have been left untouched.
The country is also grappling with an increasingly hollow labor structure, which exacerbates income inequality. Figures from Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS) show that unemployment among university graduates reached 18.9% in 2010 and a similar study in 2012 revealed that demand for high- and low-skilled workers is outstripping that for middle-skilled employees, dampening social mobility and constraining opportunities for the middle class.
However, for a short period there was a steady stream of more encouraging news, which while not exactly pointing to a full-fledged recovery, hinted at a more hopeful outlook. Growth forecasts for 2013 were pegged at 3%, still far lower than what is needed but nonetheless comparatively robust. Headline inflation, which reached as high as 18% in the pre-crisis years, dropped to a far more manageable 5.4% in August. Similarly, yields on a number of Egyptian bonds had eased to some of their lowest levels in nearly a year in September when the country hawked its first floating-rate bonds. Around roughly the same time, Moody’s reaffirmed its B2 rating for Egyptian sovereign bonds, due in part to an improving political outlook, along with a more stable external payments position, stronger macroeconomic conditions and a restart of International Monterary Fund (IMF) negotiations—all of which spelled good news for the government.
By the end of the year, however, things began to look rocky again, with the pound dropping precipitously, from 6.05 to the dollar to 6.30 to the dollar. Deficit estimates from the current     fiscal year, ending in June, may hit up to 10% of GDP. Combined with continuing political instability in the wake of protests over the constitutional referendum, the spate of worsening indicators is far from encouraging for Egypt’s policymakers.
The IMF loan, which could be worth up to $4.8 billion, is particularly important in terms of strengthening investor confidence, which has been hit hard not only by the broader uncertainty but also by regulatory hiccups and governance scandals, particularly in sectors such as real estate and construction. However, with one of the most attractive price-earnings ratios in the region, Egypt’s firms remain extremely attractive on a value basis and the country’s stock market has rebounded by more than 37% in recent months.
There is still potential for a turnaround for the country’s economy, but if this momentum is to be sustained in the years to come, Egypt will need to better leverage its competitive advantages. Crucially, Egypt benefits from both strong export ties and a vast consumer population, which provides firms with access to large domestic and foreign markets. In spite of rising subsidies and wages, the country is nonetheless extremely competitive as a manufacturing destination. Furthermore, significant upstream gas reserves have the ability to provide feedstock not only for Africa’s largest refining sector but also for the rapidly-growing electricity segment, which is racing to keep up with annual demand growth of 7%.
It is difficult to understate the impact of Egypt’s 2011 revolution, given the economic ramifications of the massive political changes the country has undergone. The past two years have been turbulent but if the country can better exploit its healthy long-term fundamentals, a return to robust growth is virtually assured.

Tag: GDP growth

FORBES AFRICA SOCIAL MEDIA

China’s Economy Continues Rebound With 4.9% Growth In Third Quarter

The Cost of Terror In The Mall

Gas And Cocoa Oils Ghana Growth

Egypt Rising