The International Monetary Fund (IMF) has lowered its growth forecast for this year and 2016. The lower growth estimates were said to be down to a mix of factors, including the recession in Russia, continuing weakness in the Eurozone, and economic slowdown in China. Growth for 2015 is now predicted to be 3.5 percent, while the predicted growth for 2016 has been lowered to 3.7 percent. The lowered prediction comes despite the fall in oil prices – the benefits from which are said to be outweighed by negative factors. The news comes as global economic leaders gather in Davos for the World Economic Forum. The IMF has asked representatives at the summit to consider boosting growth through infrastructure projects, maintaining low interest rates to stave off deflation, and making the most of low oil prices. The threat of deflation is currently a priority for the Eurozone, where growth is only expected to be 1.2 percent this year, while Russia’s economy has now been forecast to contract by 3 percent this year and 1 percent in 2016. The United States is the major exception to the revised forecasts, with its growth prediction raised up to 3.6 percent this year and 3.3 percent the next.
A cross-party committee of MPs has urged the government to do more to protect dairy farmers from falling milk prices. According to the Commons Environment, Food and Rural Affairs Committee, farmers are being forced out of business every week by low prices demanded by UK supermarkets. Farmers have also been hit by rising supply and falling demand, with lower-than-expected demand from China and Russia’s ban on food imports both particularly problematic. Russia’s decision to stop importing milk from the EU in the wake of sanctions has led to 2.5 billion litres of milk not being sold in the country, the committee stated. Big supermarket chains have also pressured farms to lower prices. Some dairy farmers are now paid 20p per litre of milk, despite it costing 30p to produce that amount. The Commons committee has asked the government to extend the role of the Groceries Code Adjudicator, the government’s groceries watchdog, to protect dairy farmers. The watchdog does not currently handle pricing disputes, however.
China’s economy grew at its slowest pace in 24 years in 2014, expanding by 7.4 percent. However, growth did come in higher than the market expectation of 7.2 percent. China’s cooling real estate sector and heavy local government debt forced authorities to take steps to avoid a sharper slowdown in 2014, such as cutting interest rates in November. Further stimulus is expected in 2015, while increasing domestic demand remains a key objective in transitioning from a manufacturing, export-based economy. Asian stock markets reacted positively at the news, with the Shanghai Composite rising by 1.8 percent and the Hang Seng up by 0.7 percent.
A mix of stories in the headlines today, though headlines in the tabloid press are dominated by the death of Coronation Street star Anne Kirkbride. The Times leads with news that dangerous inmates will be “stripped of human rights” under a planned Conservative bill for the general election. Terror suspects, illegal immigrants and criminals would no longer be able to avoid deportation by claiming a right to a family life in Britain as part of the bill. The Independent, meanwhile, leads with the headline “Free Raif Badawi”, as it campaigns for the release of the Saudi Arabian blogger who has been flogged for his writing. Nobel Laureates have called for Badawi’s release, the paper writes, while there has been an “international outcry” over Badawi’s detention. The Guardian leads with news of an interview with top NHS doctor, Professor Sir Bruce Keogh, who has said that Britain’s NHS is “not fit” for a future of “relentlessly growing demand for treatment caused by the ageing population”. Resources should be shifted to GPs, Prof Sir Keogh advises. The Daily Telegraph leads with news of demands from the Treasury that “Energy prices must keep falling” after a five percent price reduction by British Gas. Britain’s ‘Big Six’ energy suppliers must cut prices further when wholesale prices are reduced. The aftermath of the recent volatility in the Swiss franc is the top story for The Financial Times, which reports that the storm claimed the “scalp” of a “top forex broker”, after firm Alpari filed for administration in the wake of the upheaval.
British Media on China
On China’s growth figures: China’s GDP growth of 7.4 percent earned coverage from the BBC, while The Guardian also carried a news agency piece on the story. The BBC reports that China’s economy has shown to be “more resilient than expected”, and that “more easing by the central bank will likely be needed” to guard against a ‘wobbly’ real estate market. The Guardian writes that the figures “cast a shadow” over the outlook for the global economy, though also notes that Asian markets “rallied” at China’s quarterly growth figures for the last three months of 2014.