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Slow economic growth for emerging markets in 2020

United States based financial think tank, Moody’s has forecast further stalled economic conditions for emerging markets in 2020. In their outlook for 2020 released this week, the New York based rating agency says credit conditions for emerging markets in 2020 are set to turn negative amid sluggish growth which is at further risk from political and trade uncertainties.

“Global growth slowed considerably in 2019, and we do not expect much improvement in 2020,” says Moody's Senior Vice President Gersan Zurita. According to Zunita trade tensions have created an extra challenge for manufacturing and trade reliant economies, while heightened geopolitical risk and domestic policy unpredictability cast long shadows in many parts of the world. “Against this backdrop, emerging market debt issuers are vulnerable to sudden shocks such as a slump in commodity prices, an escalation of trade tensions or sudden capital outflows,” he said.

The outlook further states that in most African countries 2020 will post economic growth of waves well below historical levels and in some cases below what is needed to maintain living standards. Moody’s Vice President has noted that in particular South Africa‘s persisting high unemployment, income inequality and the social and political challenges are proving to be strong obstacles to the government’s plans to raise potential growth. He added that as these headwinds contain fiscal deficits thus giving little room for policymakers to explore growth opportunities.

Most of African countries are resource based with a significant bulk of them dependent on natural resources like minerals and oil for economic revenue. Moody’s says as Oil producers like Angola and Nigeria continue to adjust to lower prices, subpar global growth and social and political factors continue to hinder revenue generation and broader fiscal reforms while elevated debt levels constrain fiscal response to shocks.

The US based global economic commentator says progress in addressing high debt burdens and increasingly tighter affordability has been limited, including particularly key economies such as Tunisia, Kenya, South Africa, Angola and Zambia. “The efforts of governments to preserve high living standards, employment growth for nationals and support diversification efforts will slow the pace of fiscal consolidation. Some sovereigns like Egypt continue to implement measures that will over time reduce the debt burden, as long as growth remains robust and social tensions at bay.”

In the entirety Moody’s says it projects a tough year for 2020 resulting in multi sectoral downward pressures across emerging market economies. “The fragility of the global and regional economies, geopolitical risks and higher government debt levels will inevitably affect the banking sector given high interlinkages and rising asset quality pressures,” explained Moody’s Vice President. The outlook says two of the region’s largest banking sectors – Turkey and South Africa – already have negative outlooks reflecting, among other issues, their difficult operating conditions.

“For Turkish banks we have highlighted funding vulnerabilities and capital ratios that are highly sensitive to currency depreciation.” However most other banking systems in some emerging markets regions have sound funding and liquidity and relatively robust capital buffers, which will help them to absorb some unexpected losses. In the main weakening economic conditions and pressures on government credit quality will likely have a knock-on effect on banks. Slowing or volatile economies hamper business generation at banks and weaken their financial health.

 “Similarly, our bank credit ratings are typically constrained at the sovereign level, given the banks' large holdings of government securities, policy uncertainty and lack of economic growth stimulus will limit companies' confidence in investing, especially in Turkey and South Africa,” said Moody’s Vice President. Gersan Zunita  says subdued economic growth and rising government debt will also lead to increased payment arrears, placing a strain on corporate finances and resulting in rising problem loans.  

According to Zunita pressure on sovereign ratings also feeds across to banks that benefit from uplift in their ratings from our assumption that they would receive government support in times of stress. “Despite these macroeconomic and loan quality pressures, we expect banks to maintain their current capital buffers and good earnings generating capacity as well as their high liquidity buffers and sufficient access to funding for their lending activities.”

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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