Erratic U.S. policy is undermining its global economic edge
Heavy reliance on executive orders, a weak fiscal position, and inflation uncertainty are dampening U.S. growth prospects, raising recession risks and opening the door for Europe and Asia to reclaim economic momentum
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Gulf Business
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Air India crash: How will it challenge the airline's ‘world class' ambitions
Image credit: airindia/Instagram The Air India plane crash on Thursday which left more than 240 people dead, the worst aviation disaster in a decade, will challenge the airline's ambitious campaign to restore its reputation and revamp its fleet. After taking the carrier over from the government in 2022, the Tata Group unveiled plans to reverse years of underinvestment in an ageing and outdated fleet and create a 'world class airline', as CEO Campbell Wilson has repeatedly put it. Read: The turnaround has been aimed at tackling its myriad problems under government ownership including persistent flight delays, disgruntled customers, a shortage of spare parts, poorly maintained planes and years of financial losses. The cause of the crash, the first for a Boeing Dreamliner wide-body airliner, has not yet been determined and India's aviation minister said a formal investigation had begun. Air India has not commented on what caused the crash. 'Newer aircraft and better maintenance should be the hallmark for Air India to survive. Proper maintenance is what they should be looking into, because Air India has had a chequered past,' said Vibhuti Deora, a former legal expert at India's Aircraft Accident Investigation Bureau. That past includes, while under government ownership, a Boeing 737 flight from Dubai in 2010 that overshot the runway at a domestic airport and crashed into a gorge, killing 158 people. In 2020, an aircraft of its low-cost unit Air India Express skidded off a runway in India, killing 21 people. Indian Prime Minister Narendra Modi told an international gathering of hundreds of airline executives in New Delhi on June 2 that the country's booming aviation industry stood at a crucial point. On Thursday, Air India's website swapped its bright red colour scheme and logo for a more sombre black and grey one, covering it with a banner that carried the crashed flight's number: 'AI-171'. 'For an airline, the most important thing is the brand's identity with safety. This will be a major setback for the brand in that aspect,' said Dilip Cherian, a communications consultant and co-founder of public relations firm Perfect Relations. A difficult day With its maharajah mascot, Air India was once known for lavishly decorated planes and meticulous service championed by its founder, JRD Tata, India's first commercial pilot. But after the mid-2000s the carrier's reputation worsened as its financial troubles mounted. It has flown wide-body planes with business class seats in poor condition and grounded some of its new Boeing 787 Dreamliners for a lack of spare parts. When Tata regained control, the airline was 'just in absolute shambles', its CEO Wilson told Reuters in a 2024 interview, noting that some of its planes hadn't had a product refresh since they were delivered in 2010-2011. Air India has a 30 per cent share of the domestic passenger market and a fleet of 198 planes, of which 27 are 10 to 15 years old and 43 are more than 15 years old, the civil aviation ministry told parliament in March. Air India Express had 101 planes, with 37 per cent more than 15 years old. The plane that crashed on Thursday was 11 years old, according to Flightradar24. Rival Indian airlines such as IndiGo operate newer planes. Air India, which is part-owned by Singapore Airlines, has placed orders for 570 new jets in recent years and is in talks for dozens more. While it has aggressively expanded its international flight network, it has also faced persistent complaints from passengers, who often take to social media to show soiled seats, broken armrests, non-operational entertainment systems and dirty cabin areas. It has been ranked the worst airline for flight delays in Britain, where its departures were on average just under 46 minutes behind schedule in 2024, according to analysis of Civil Aviation Authority data by the PA news agency published in May. It has also been reporting losses since at least fiscal year 2019-20. In 2023-24, it reported a net loss of $520 million on sales of $4.6 billion. For now, Air India faces the task of investigating one of India's worst aviation disasters. 'This is a difficult day for all of us at Air India,' CEO Wilson said in a video message on Thursday. 'Investigations will take time.'
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World Bank warns global growth to slow to lowest pace since 2008 amid trade tensions
Image: Getty Images/ For illustrative purposes Heightened trade tensions and persistent policy uncertainty are set to drag global growth down in 2025 to its weakest level since 2008, excluding outright global recessions, the World Bank said in its latest Global Economic Prospects Growth forecasts have been downgraded in nearly 70 per cent of economies across all regions and income groups, with global output now expected to expand by just 2.3 per cent in 2025 — nearly half a percentage point lower than projected at the start of the year. While the report does not forecast a global recession, it cautions that if projections for 2025 and 2026 materialize, the average global growth for the first seven years of this decade will mark the slowest start to any decade since the 1960s. 'Outside of Asia, the developing world is becoming a development-free zone,' said Indermit Gill, chief economist and SVP for Development Economics at the World Bank. 'Growth in developing economies has ratcheted down for three decades—from 6 per cent annually in the 2000s to 5 per cent in the 2010s — to less than 4 per cent in the 2020s. That tracks the trajectory of growth in global trade… Investment growth has also slowed, but debt has climbed to record levels.' Growth to weaken in 60 per cent of emerging economies The World Bank expects growth to weaken in nearly 60 per cent of developing economies this year, reaching an average of 3.8 per cent in 2025, before slightly improving to 3.9 per cent in 2026–27. That is more than a full percentage point below the average growth recorded in the 2010s. Among low-income countries, growth is now projected at 5.3 per cent in 2025, down 0.4 percentage points from earlier forecasts. Global inflation remains elevated, with price pressures driven by tariffs and tight labour markets; the World Bank projects inflation to average 2.9 per cent in 2025, above pre-pandemic levels. The report warns that sluggish growth will hinder developing economies in their efforts to create jobs, reduce extreme poverty, and close per capita income gaps with advanced economies. Per capita income growth is expected to hit 2.9 per cent in 2025, down 1.1 percentage points compared to the 2000–2019 average. Assuming developing economies excluding China maintain a growth rate of 4 per cent — as forecast for 2027 — it could take about two decades to return to their pre-pandemic output trajectory. Still, the 'Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict,' said M Ayhan Kose, deputy chief economist and director of the Prospects Group. 'The smartest way to respond is to redouble efforts on integration with new partners, advance pro-growth reforms, and shore up fiscal resilience to weather the storm.' The report encourages developing economies to pursue regional trade agreements, diversify export markets, and liberalise investment policies to counter rising protectionism. It also stresses the importance of domestic revenue mobilisation, targeted fiscal spending for vulnerable populations, and stronger fiscal frameworks. To accelerate growth, countries must improve business environments, boost productive employment, and strengthen labour market linkages. Multilateral support, concessional financing, and emergency relief will be essential for the most vulnerable economies, particularly those affected by conflict. World Bank's regional outlooks (2025 projections) East Asia and Pacific : 4.5 per cent Europe and Central Asia : 2.4 per cent Latin America and Caribbean : 2.3 per cent Middle East and North Africa : 2.7 per cent South Asia : 5.8 per cent Sub-Saharan Africa : 3.7 per cent
Zawya
an hour ago
- Zawya
Is the Fed still in a 'good place'?: McGeever
ORLANDO, Florida: At the Federal Open Market Committee meeting next week, investors will scrutinize all communications for any sign that the recent softening in U.S. inflation could be enough to nudge policymakers closer to cutting interest rates. Current economic data might be leaning in that direction, but policy out of Washington could well keep Chair Jerome Powell and colleagues in 'wait and see' mode. No one expects the Fed to cut rates next week, but businesses, households and investors should get a better sense of policymakers' future plans from the revised quarterly Staff Economic Projections and Powell's press conference. Powell was very clear in his post-meeting press conference last month that the Fed is prepared to take its time assessing the incoming economic data, particularly the impact of tariffs, before deciding on its next step. He told reporters no less than eight times that policy is in a "good place" and said four times that the Fed is "well positioned" to face the challenges ahead. Will he change his tune next Wednesday? Annual PCE inflation in April was 2.1%, the lowest in four years and virtually at the Fed's 2% target, while CPI inflation in May was also lower than expected. The labor market is softening, economic activity is slowing, and recent red-hot consumer inflation expectations are now starting to come down. In that light, it may be surprising that markets are not fully pricing in a quarter-point rate cut until October. "The upcoming meeting offers an opportunity (for Fed officials) to signal that the recent mix of tamer inflation and softer consumption growth warrant a careful 'recalibration' of rates lower, while remaining very cautious about what comes next," economist Phil Suttle wrote on Wednesday. But there are two well-known barriers that could keep the Fed from quickly re-joining the ranks of rate-cutting central banks: tariffs and the U.S. fiscal outlook. WASHINGTON WILD CARD Tariffs have yet to show up in consumer prices, especially in goods, and no one knows how inflationary they will be. They could simply result in a one-off price hit, they could trigger longer-lasting price spikes, or the inflationary impact could end up being limited if companies absorb a lot of the price increases. In other words, everything is on the table. Equity investors appear to be pretty sanguine about it all, hauling the S&P 500 back near its all-time high. But Powell and colleagues may be slower to lower their guard, and for good reason. Although import duties on goods from China will be lower than feared a few months ago and Washington is expected to seal more trade deals in the coming weeks, overall tariffs will still end up being significantly higher than they were at the end of last year, probably the highest since the 1930s. Economists at Goldman Sachs reckon U.S. inflation will rise to near 4% later this year, with tariffs accounting for around half of that. This makes the U.S. an "important exception" among industrialized economies, the OECD said last week. The other major concern is the U.S. public finances. President Trump's 'big beautiful bill' being debated in congress is expected to add $2.4 trillion to the federal debt over the next decade, and many economists expect the budget deficit will hover around 7% of GDP for years. With fiscal policy so loose, Fed officials may be reluctant to signal a readiness to loosen monetary policy, especially if there is no pressing need to do so. FOMC members in December last changed their median forecasts for the central bank's policy rate, hiking it this year and next year by a hefty 50 basis points to 3.9% and 3.4%, respectively. They left projections unchanged in March amid the tariff fog. That implies 50 basis points of rate cuts this year and another 50 bps next year, which is pretty much in line with rates futures markets right now. So perhaps Fed policy is still in a "good place", but with economic expectations changing quickly, it's unclear how long that will be the case. (The opinions expressed here are those of the author, a columnist for Reuters) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X. (Editing by Andrew Heavens)
