Finance Minister II had warned that the economy was at the edge of a fiscal precipice, and hence wanted the government to adhere to fiscal discipline.Governments everywhere are tempted to respond to a fall in growth by raising expenditure. The global financial crisis led to a massive avalanche of public spending across the world. Assisted with this steroid, growth accelerated to 10% levels, and India became one of the fastest-growing economies in a world languishing under recession. Governments everywhere are tempted to respond to a fall in growth by raising expenditure. The global financial crisis led to a massive avalanche of public spending across the world
suggested some pathbreaking methods over a decade back that the economists backing
The government should now neutralise the impact of the US federal rate hike by moving full speed to reboot the economy and boost business confidence."We should not panic," Johari said.
The ringgit was slightly lower against the US dollar in the early session today on profit-taking, following the local note's recent gains.
the ringgit was traded at 4.4290/4350 against the greenback, lower than the 4.4270/4310 recorded at close .FRI, JAN 27, 2017 However, a dealer said the ringgit would likely improve throughout the day as market sentiment towards the greenback, was fairly bearish on worries over US President Donald Trump's protectionist stance on trade.Meanwhile, the ringgit traded higher against a basket of major currencies.
The handful of studies on fiscal multipliers in India, however, offer an interesting insight. A study by states that the fiscal multiplier is around 2.5 for capital expenditure, while it’s less than 1 for revenue expenditure. This means that for every Rgt 1 the government invests in capital goods like roads and railways, the GDP is likely to end up increasing byRgt 2.50.
But the overall impact of spending an extra Rgt 1 on revenue expenditure, like salaries and subsidies, will end up having an overall impact of less than Rgt 1on the overall GDP.
The Government can use it to empower the people and turn the economic initiative into a definitive political initiative?
Infrastructure investment is stuck due as companies are weighed down by debt. Public investment needs a boost to revive the economy, calling for action from the government. Stepping up public investment will create new demand. It also has the potential to crowd in private investment to meet that demand. The short point is that for same amount of private savings, there is really no threat of public borrowings competing with private borrowings.
There is no dispute that the government should cut wasteful spending and raise extra money — by adopting the goods and services tax and widening the base, and administering taxes better. But does it not make sense to achieve a 3% of GDP target for the deficit over a business cycle rather than through every year of a it? This can be done only if the government stops worrying about what rating agencies would have to say.Connectivity and high-impact infrastructure projects are implemented to help stimulate the country's economy and not for grandeur, said Prime Minister Najib Abdul Razak.
Referring to projects like the Pan-Borneo Expressway, Rapid Pengerang in Johor, Malaysia Vision Valley, Bandar Malaysia, Tun Razak Exchange, the East Coast Rail Line (ECRL) and the High Speed Rail (HSR), he said they were also not luxury projects."These projects are not for grandeur, not luxurious in nature, but to help generate the country's economy," he said at the Finance Ministry's special assembly in Putrajaya today.Najib, who is also finance minister, said the projects were capable of creating high paying jobs, as well as contract opportunities for local companies, including Class F contractors."This creates better connectivity and leads to an increase in the country's gross domestic product (GDP)," he added.Citing the ECRL project, he said when completed, it was expected to increase the growth rate of the three states in the East Coast by 1.5 percent.
"This is the government's commitment to infrastructure development, stimulating local economy and to provide a significant increase in the people's lives."We provide a transport system which is affordable and the MRT system is well-received."Come July, the MRT project, stretching 51 kilometres from Sungai Buloh to Kajang will be ready. This project is a game-changer for the country," Najib added.
As such, the prime minister emphasised the need for the projects to be carried out fast and efficiently, had high impact on the people, at minimum cost, with rapid execution and sustainable."These should be made the basis in determining whether a project can be implemented or otherwise," he added.
From a market-friendly viewpoint, the government’s role is to facilitate private enterprise. Provision of infrastructure is crucial for this. Providing roads and electricity to every habitation, or ports and airports for international connectivity, can hugely improve business opportunities. Some of these sectors require massive funds, carry big commercial risks, and are unprofitable (no villagers will pay tolls on rural roads). The government has the greatest capacity to raise money and take risks, since it can use tax revenues rather than commercial capital. Hence it has dominated infrastructure everywhere.
government constantly lacks funds for badly needed infrastructure. Finance Minister II ’s solution is for government undertakings to routinely sell existing assets, and use the sale proceeds to finance fresh investment. Public sector entities can sell entire subsidiary companies, or projects, or vacant land to finance fresh projects.The greatest potential lies in recycling infrastructure. Instead of depending on money from the stressed budget, infrastructure sectors can raise all the equity they need by selling old assets. Instead of building in order to own and run, the government should build in order to sell.model had the private sector building, operating and transferring a project to the government. The new model has the government building, operating and then transferring projects to the private sector. This reversal makes excellent sense.
while the government has a major role in building infrastructure, should it maintain and operate roads or power stations? No, not at all. Once the commanding heights have been built, they can be sold to private entities for routine operation. model was fundamentally unsound. Construction is the riskiest part of an infrastructure project, when unanticipated delays and glitches are common. Major infrastructure projects the world over have suffered huge cost overruns. New model entrusted construction, the riskiest part, to the private sector, to be transferred to the government after the risky stage was over. This placed the maximum burden of risk on heavily leveraged private players, who were least equipped to bear it.
. It said the government, which has the greatest risk-bearing capacity (it can always use tax revenues to rescue a project) should build projects, and operate them in the initial phase when revenues are uncertain. Once the project is firmly established and revenues are steady and predictable, it can be sold to private players (including international ones) who will pay a high price for utilities with stable revenues. The sale proceeds can then be recycled into new projects.
Overall investment growth in the top five developed markets (DMs) and top 10 emerging markets (EMs), excluding China, slowed significantly in the aftermath of the global credit crisis. In China, although investment growth has remained higher than in other economies, it almost halved in pace in 2015-16 relative to the 2000-07 period.
However, there are early signs that global investment growth may be accelerating. Particularly in DMs, investment growth seems to have troughed during 2Q16 and is now likely to recover meaningfully in 2017 and 2018.
Investment trends in DMs had been sluggish, with persistent deleveraging pressures holding back aggregate demand, which resulted in lowflation. The disappointing growth and inflation outcomes, in turn, had adversely influenced the corporate sector’s expectations on future growth and returns. However, after six years, the DM private sector is now exiting the deleveraging phase.
Home-Made Demand
In particular, the US household sector, which was at the epicentre of the credit crisis, has finally stopped deleveraging since 2Q16. As a result, DM domestic demand growth should rise further, which will raise inflation expectations. Indeed, import volume growth has already recovered in a synchronous fashion across the US, Europe and Japan.
As output gaps continue to narrow, wage growth is gradually accelerating across DMs, lifting inflation expectations. Monetary policy also remains accommodative, especially in the US and euro area, where real policy rates are still below the neutral rate, even as the US Fed has begun to reduce accommodation.
At the same time, fiscal policies have turned moderately expansionary in the US and Japan, and stayed broadly neutral in the euro area during 2016. Along with the fact that the worst of the disinflationary pressure in DMs is now behind us, there should be faster reflation in the group. In short, the reflationary policies that had been taken up have begun to kick-start a positive feedback loop of accelerating growth, rising inflation (moving closer towards central banks’ goals) and increasing return expectations, all of which are driving a recovery in investment. In and of itself, the accelerator effect should mean that an improving growth environment should be conducive to a pick-up in investment growth.
In EMs, there is a transition from a prolonged period of adjustment (2013-16), triggered first by the ‘taper tantrum’ and then a sharp fall in commodity prices, to a recovery phase. By now, most of the EMs have experienced a significant improvement in macro stability — current account balances are higher and inflation risks are lower — and the productivity dynamic. EMs should benefit from an improvement in DM domestic demand.
Considering that DMs still account for 60% of EMs’ exports, this should result in a more conducive growth environment for EMs. Moreover, EMs have built an adequate buffer of real rate differentials with the US, which should ensure that their recovery isn’t derailed by a gradual rise in US rates.
Within EMs, commodity-exporting countries had been a major drag on global investment and trade growth during 2015-16. However, following deep adjustment and a bottoming out of commodity prices, they should see a significant improvement in investment growth, even if staying below 2003-07 levels. EM commodity importers ex-China, on the other hand, have suffered from a subdued global trade environment post-credit crisis that was accompanied by a steady decline in capacity utilisation to levels similar to the 2008 lows for key EMs (where these data are available).
Investment Hits Great Wall
India is part of this group and had experienced a similar drop in capacity utilisation rates. For this group, a pickup in manufacturing exports should help to improve capacity utilisation and drive a recovery in investment with a lag in 2018. Finally, in China, a continued slowdown in investment growth due to the structural shift in its growth model is expected.
Apick-up in external demand will help to improve capacity utilisation and provide a more favourable environment for investment. But policymakers are now focused on maintaining financial stability and better managing the debt-disinflation challenge, which entails toleration of slower GDP growth and, thus, a further slowdown in investment growth.
To be sure, structural challenges including high debt levels, weakening demographics (reflected in a rise in the global age dependency ratio) and the productivity growth slowdown will continue to weigh on global potential growth and the corporate sector’s return expectations. As a result, while a meaningful cyclical recovery in investment in 2017 and 2018 is expected, the rate of growth is unlikely to rise to pre-credit crisis levels.
These challenges are prevalent not only in most of the DM economies but also in several emerging economies. In this context, structural reforms such as market and product deregulation as well as fiscal incentives to boost investment can play an important role in driving stronger growth in investment.
Three key risks to the continued recovery in investment growth need to be monitored: one, policy uncertainty — any aggressive monetary policy tightening or under-delivery on fiscal support/tax reforms in the US; two, protectionism and its impact on business confidence; three, a major slowdown in China’s economic growth and drop in commodity prices.
suggested some pathbreaking methods over a decade back that the economists backing
The government should now neutralise the impact of the US federal rate hike by moving full speed to reboot the economy and boost business confidence."We should not panic," Johari said.
The ringgit was slightly lower against the US dollar in the early session today on profit-taking, following the local note's recent gains.
the ringgit was traded at 4.4290/4350 against the greenback, lower than the 4.4270/4310 recorded at close .FRI, JAN 27, 2017 However, a dealer said the ringgit would likely improve throughout the day as market sentiment towards the greenback, was fairly bearish on worries over US President Donald Trump's protectionist stance on trade.Meanwhile, the ringgit traded higher against a basket of major currencies.
The handful of studies on fiscal multipliers in India, however, offer an interesting insight. A study by states that the fiscal multiplier is around 2.5 for capital expenditure, while it’s less than 1 for revenue expenditure. This means that for every Rgt 1 the government invests in capital goods like roads and railways, the GDP is likely to end up increasing byRgt 2.50.
But the overall impact of spending an extra Rgt 1 on revenue expenditure, like salaries and subsidies, will end up having an overall impact of less than Rgt 1on the overall GDP.
The Government can use it to empower the people and turn the economic initiative into a definitive political initiative?
Infrastructure investment is stuck due as companies are weighed down by debt. Public investment needs a boost to revive the economy, calling for action from the government. Stepping up public investment will create new demand. It also has the potential to crowd in private investment to meet that demand. The short point is that for same amount of private savings, there is really no threat of public borrowings competing with private borrowings.
There is no dispute that the government should cut wasteful spending and raise extra money — by adopting the goods and services tax and widening the base, and administering taxes better. But does it not make sense to achieve a 3% of GDP target for the deficit over a business cycle rather than through every year of a it? This can be done only if the government stops worrying about what rating agencies would have to say.Connectivity and high-impact infrastructure projects are implemented to help stimulate the country's economy and not for grandeur, said Prime Minister Najib Abdul Razak.
Referring to projects like the Pan-Borneo Expressway, Rapid Pengerang in Johor, Malaysia Vision Valley, Bandar Malaysia, Tun Razak Exchange, the East Coast Rail Line (ECRL) and the High Speed Rail (HSR), he said they were also not luxury projects."These projects are not for grandeur, not luxurious in nature, but to help generate the country's economy," he said at the Finance Ministry's special assembly in Putrajaya today.Najib, who is also finance minister, said the projects were capable of creating high paying jobs, as well as contract opportunities for local companies, including Class F contractors."This creates better connectivity and leads to an increase in the country's gross domestic product (GDP)," he added.Citing the ECRL project, he said when completed, it was expected to increase the growth rate of the three states in the East Coast by 1.5 percent.
"This is the government's commitment to infrastructure development, stimulating local economy and to provide a significant increase in the people's lives."We provide a transport system which is affordable and the MRT system is well-received."Come July, the MRT project, stretching 51 kilometres from Sungai Buloh to Kajang will be ready. This project is a game-changer for the country," Najib added.
As such, the prime minister emphasised the need for the projects to be carried out fast and efficiently, had high impact on the people, at minimum cost, with rapid execution and sustainable."These should be made the basis in determining whether a project can be implemented or otherwise," he added.
From a market-friendly viewpoint, the government’s role is to facilitate private enterprise. Provision of infrastructure is crucial for this. Providing roads and electricity to every habitation, or ports and airports for international connectivity, can hugely improve business opportunities. Some of these sectors require massive funds, carry big commercial risks, and are unprofitable (no villagers will pay tolls on rural roads). The government has the greatest capacity to raise money and take risks, since it can use tax revenues rather than commercial capital. Hence it has dominated infrastructure everywhere.
government constantly lacks funds for badly needed infrastructure. Finance Minister II ’s solution is for government undertakings to routinely sell existing assets, and use the sale proceeds to finance fresh investment. Public sector entities can sell entire subsidiary companies, or projects, or vacant land to finance fresh projects.The greatest potential lies in recycling infrastructure. Instead of depending on money from the stressed budget, infrastructure sectors can raise all the equity they need by selling old assets. Instead of building in order to own and run, the government should build in order to sell.model had the private sector building, operating and transferring a project to the government. The new model has the government building, operating and then transferring projects to the private sector. This reversal makes excellent sense.
while the government has a major role in building infrastructure, should it maintain and operate roads or power stations? No, not at all. Once the commanding heights have been built, they can be sold to private entities for routine operation. model was fundamentally unsound. Construction is the riskiest part of an infrastructure project, when unanticipated delays and glitches are common. Major infrastructure projects the world over have suffered huge cost overruns. New model entrusted construction, the riskiest part, to the private sector, to be transferred to the government after the risky stage was over. This placed the maximum burden of risk on heavily leveraged private players, who were least equipped to bear it.
. It said the government, which has the greatest risk-bearing capacity (it can always use tax revenues to rescue a project) should build projects, and operate them in the initial phase when revenues are uncertain. Once the project is firmly established and revenues are steady and predictable, it can be sold to private players (including international ones) who will pay a high price for utilities with stable revenues. The sale proceeds can then be recycled into new projects.
Overall investment growth in the top five developed markets (DMs) and top 10 emerging markets (EMs), excluding China, slowed significantly in the aftermath of the global credit crisis. In China, although investment growth has remained higher than in other economies, it almost halved in pace in 2015-16 relative to the 2000-07 period.
However, there are early signs that global investment growth may be accelerating. Particularly in DMs, investment growth seems to have troughed during 2Q16 and is now likely to recover meaningfully in 2017 and 2018.
Investment trends in DMs had been sluggish, with persistent deleveraging pressures holding back aggregate demand, which resulted in lowflation. The disappointing growth and inflation outcomes, in turn, had adversely influenced the corporate sector’s expectations on future growth and returns. However, after six years, the DM private sector is now exiting the deleveraging phase.
Home-Made Demand
In particular, the US household sector, which was at the epicentre of the credit crisis, has finally stopped deleveraging since 2Q16. As a result, DM domestic demand growth should rise further, which will raise inflation expectations. Indeed, import volume growth has already recovered in a synchronous fashion across the US, Europe and Japan.
As output gaps continue to narrow, wage growth is gradually accelerating across DMs, lifting inflation expectations. Monetary policy also remains accommodative, especially in the US and euro area, where real policy rates are still below the neutral rate, even as the US Fed has begun to reduce accommodation.
At the same time, fiscal policies have turned moderately expansionary in the US and Japan, and stayed broadly neutral in the euro area during 2016. Along with the fact that the worst of the disinflationary pressure in DMs is now behind us, there should be faster reflation in the group. In short, the reflationary policies that had been taken up have begun to kick-start a positive feedback loop of accelerating growth, rising inflation (moving closer towards central banks’ goals) and increasing return expectations, all of which are driving a recovery in investment. In and of itself, the accelerator effect should mean that an improving growth environment should be conducive to a pick-up in investment growth.
In EMs, there is a transition from a prolonged period of adjustment (2013-16), triggered first by the ‘taper tantrum’ and then a sharp fall in commodity prices, to a recovery phase. By now, most of the EMs have experienced a significant improvement in macro stability — current account balances are higher and inflation risks are lower — and the productivity dynamic. EMs should benefit from an improvement in DM domestic demand.
Considering that DMs still account for 60% of EMs’ exports, this should result in a more conducive growth environment for EMs. Moreover, EMs have built an adequate buffer of real rate differentials with the US, which should ensure that their recovery isn’t derailed by a gradual rise in US rates.
Within EMs, commodity-exporting countries had been a major drag on global investment and trade growth during 2015-16. However, following deep adjustment and a bottoming out of commodity prices, they should see a significant improvement in investment growth, even if staying below 2003-07 levels. EM commodity importers ex-China, on the other hand, have suffered from a subdued global trade environment post-credit crisis that was accompanied by a steady decline in capacity utilisation to levels similar to the 2008 lows for key EMs (where these data are available).
Investment Hits Great Wall
India is part of this group and had experienced a similar drop in capacity utilisation rates. For this group, a pickup in manufacturing exports should help to improve capacity utilisation and drive a recovery in investment with a lag in 2018. Finally, in China, a continued slowdown in investment growth due to the structural shift in its growth model is expected.
Apick-up in external demand will help to improve capacity utilisation and provide a more favourable environment for investment. But policymakers are now focused on maintaining financial stability and better managing the debt-disinflation challenge, which entails toleration of slower GDP growth and, thus, a further slowdown in investment growth.
To be sure, structural challenges including high debt levels, weakening demographics (reflected in a rise in the global age dependency ratio) and the productivity growth slowdown will continue to weigh on global potential growth and the corporate sector’s return expectations. As a result, while a meaningful cyclical recovery in investment in 2017 and 2018 is expected, the rate of growth is unlikely to rise to pre-credit crisis levels.
These challenges are prevalent not only in most of the DM economies but also in several emerging economies. In this context, structural reforms such as market and product deregulation as well as fiscal incentives to boost investment can play an important role in driving stronger growth in investment.
Three key risks to the continued recovery in investment growth need to be monitored: one, policy uncertainty — any aggressive monetary policy tightening or under-delivery on fiscal support/tax reforms in the US; two, protectionism and its impact on business confidence; three, a major slowdown in China’s economic growth and drop in commodity prices.
The speed and intricacy of banking fraud are mind-boggling: the Association for Financial Professionals’ 2016 Payments Fraud and Control Survey found that 73% of finance professionals reported an attempted or actual payments fraud in 2015.
For financial institutions, data and analytics can speed the decision cycles used to observe, orient, decide and act in fighting fraud. Since the best insights are often at the margins of where industries or data sets overlap, it’s necessary to pose targeted questions and develop solutions from all information sources.
By combining proprietary data sets with industry benchmarks and government information, financial institutions can use artificial intelligence, machine learning and analytics in the fight against financial fraud. Focus on adopting appropriate processes, developing and acquiring the necessary talent, and creating the right culture to integrate analytics into the frauddetection efforts.
Avast amount of data flows through financial services organisations, so the ability to harness the data and analyse it effectively could transform frauddetection efforts and provide a host of other benefits. Coupling the rich data sets with appropriate analytical models provides a way to harvest the information needed to identify and prevent fraud more effectively.
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