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Fibre2Fashion
05-05-2025
- Business
- Fibre2Fashion
Eurozone manufacturing sees 2nd successive monthly output rise in Apr
The eurozone's manufacturing sector posted a second successive monthly increase in output during April this year, according to S&P Global Ratings. The Hamburg Commercial Bank (HCOB) eurozone manufacturing purchasing managers' index (PMI) increased for a fourth month running in April, posting a 32-month high of 49 (it was 48.6 in March). The eurozone's manufacturing sector posted a second successive monthly increase in output during April this year, according to S&P Global Ratings. New orders continued to fall, but there was a near-stabilisation of demand as the rate of contraction slowed further. Export markets were the principal drag on sales performances. Manufacturers in the bloc preferred to trim headcounts. Still below the 50 threshold separating growth from contraction, the headline figure was indicative of a decline that was only marginal overall. The rate of growth also quickened to its strongest in just over three years, providing further evidence of recovery in the currency union's industrial economy. New orders continued to fall, but there was a near-stabilisation of demand as the rate of contraction slowed further. Softer rates of contraction were also seen for employment, stocks and purchasing activity, but confidence was the weakest in 2025 so far, the rating agency said in a release. At the country level, the data revealed that Greece had the best-performing manufacturing sector in April despite a slowdown since March. Ireland followed closely with its fastest improvement in factory conditions for almost three years. Manufacturing PMI values for the remaining monitored nations were all in sub-50 contraction territory, although the big-three economies of Germany, France and Italy all posted softer reductions than in March. Slightly quicker declines were recorded in Austria, Spain and the Netherlands, however. There were further signs of recovery in April. Following a renewed increase in production during March, the eurozone manufacturing sector posted a quicker expansion at the start of the second quarter. In fact, the upturn in output was the fastest in just over three years. Growth in output was achieved despite a further drop in the volume of incoming new business. demand for eurozone goods nearly stabilised during April, with the HCOB new orders index rising to a three-year high and posting only just below the neutral 50 threshold. Export markets were the main drag on sales, as new business from overseas shrank at a faster pace than that seen for total new work. Still, the drop in new orders from non-domestic customers was its shallowest since April 2022. Eurozone factories still demonstrated some reservation with regards to the outlook. For instance, purchasing activity fell further in April, as did both stocks of pre- and post-production items. Rates of contraction cooled in all three cases. Firms' expectations for growth meanwhile eased, with confidence dipping to its lowest level in the year-to-date. Regarding employment, the latest survey data showed a preference among manufacturers to trim headcounts, in line with the trend seen for almost two years. Nevertheless, the rate at which jobs were shed was the softest in ten months, a release from S&P Global Ratings said. Fibre2Fashion News Desk (DS)
Business Recorder
03-05-2025
- Business
- Business Recorder
S&P suggests staying the course, accelerating reforms
ISLAMABAD: The Standard and Poor's (S&P) Global Ratings recommended Pakistan to stay the course, deepen the reform momentum, and focus on embedding permanence in macroeconomic stability, with international partners, while expressing readiness to support the country in achieving these objectives. The Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, along with his team, held a Zoom meeting on Friday with representatives of S&P Global Ratings as part of the ongoing Pakistan Sovereign Ratings Review. Aurangzeb briefed S&P on reform progress and economic stability outlook. The finance minister presented a detailed overview of the government's macroeconomic reform agenda and reaffirmed Pakistan's commitment to achieving sustainable and inclusive economic growth by enhancing productivity and promoting exports. He emphasised the continuity of reforms across key sectors including taxation, energy, state-owned enterprises (SOEs), privatisation, public finance management, rightsizing of government functions, and more active debt management strategies. The finance minister noted that inflation and the current account deficit (CAD) had remained a good story throughout the year, contributing positively to overall economic stability. He also highlighted the achievement of surpluses in both the primary balance and the current account as major milestones, underscoring the improving fundamentals of Pakistan's economy. He stated that the country's external portfolio was well-managed, with foreign exchange reserves projected to reach $14 billion by the end of June, supported by upcoming institutional and trade inflows, strong remittances, and easing oil prices, all of which are helping reduce pressure on the external account. He credited strict financial discipline and robust coordination between the federal and provincial governments for enabling the achievement of a primary surplus. The finance minister pointed to significant institutional reforms including the signing of a comprehensive National Fiscal Pact, operationalisation of the National Tax Council, and the imposition of agricultural income tax, reflecting a whole-of-government approach and a shared national resolve to improve resource efficiency, broaden the tax base, and ensure long-term inclusive growth. He stated that the tax-to-GDP ratio was expected to reach 10.6 percent by the end of June, which would mark progress toward the government's target of raising it to 13 percent by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF). He added that the separation of the Tax Policy office from the Federal Board of Revenue (FBR) was part of a broader effort to align tax policymaking with economic value principles rather than administrative convenience. The finance minister also shared insights from his recent visit to the United States for the World Bank/IMF Spring Meetings, during which he held over 70 meetings in six days with counterparts, Development Finance Institutions (DFIs), investment banks, multilateral and bilateral partners, rating agencies, think tanks, and media outlets. He conveyed that the feedback received from these stakeholders consistently reflected appreciation and support for the structural reforms and macroeconomic stability achieved by Pakistan over the past 14 months. At the same time, there was a strong and unified recommendation for Pakistan to stay the course, deepen the reform momentum, and focus on embedding permanence in macroeconomic stability, with international partners expressing readiness to support the country in achieving these objectives. Copyright Business Recorder, 2025
Arab News
02-05-2025
- Business
- Arab News
Pakistan sees tax-to-GDP ratio hitting 10.6% by June as reform efforts continue
KARACHI: Pakistan's finance chief said on Friday the country's tax-to-GDP ratio was expected to reach 10.6% by the end of the current fiscal year, according to an official statement, as the government works to build on economic progress made under recent International Monetary Fund (IMF) loan programs. Pakistan's tax-to-GDP ratio, one of the lowest in the region, stood at around 8.8% in fiscal year 2023-24. Finance Minister Muhammad Aurangzeb has repeatedly warned that such low levels of revenue mobilization are unsustainable and pose long-term risks to fiscal stability. Aurangzeb shared the projection while briefing representatives of Standard & Poor's Global Ratings as part of Pakistan's ongoing sovereign ratings review. 'The Finance Minister presented a detailed overview of the government's macroeconomic reform agenda and reaffirmed Pakistan's commitment to achieving sustainable and inclusive economic growth by enhancing productivity and promoting exports,' the finance ministry said in a statement after the meeting. He said Pakistan's external portfolio was well-managed, with foreign exchange reserves projected to reach $14 billion by the end of June. 'He further stated that the tax-to-GDP ratio was expected to reach 10.6 percent by the end of June, which would mark progress toward the government's target of raising it to 13 percent by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF),' the statement said. Pakistan has taken several steps to improve revenue collection, including the automation of processes at the Federal Board of Revenue (FBR), the operationalization of the National Tax Council and the imposition of agricultural income tax. It has also separated the Tax Policy Office from the FBR to better align tax policymaking with broader economic goals. Aurangzeb also highlighted recent surpluses in both the primary balance and the current account, along with falling inflation and current account deficit figures, which he said were contributing to improved economic fundamentals. During last month's IMF-World Bank Spring Meetings in Washington, the Pakistani finance chief held over 70 engagements with rating agencies, development finance institutions, investors and think tanks. The government also maintains the international community broadly supports Pakistan's reform agenda, as it tries to maintain its overall economic momentum.
Bloomberg
02-05-2025
- Business
- Bloomberg
Indonesian Firms Now More Resilient to Rupiah Weakness, S&P Says
Indonesian companies are currently in better shape than in previous bouts of rupiah weakness, thanks to a more manageable debt load and a tempered rate of currency depreciation, according to S&P Global Ratings. 'We believe the Indonesian corporate sector is more resilient to depreciations in the rupiah than in previous depreciation cycles,' Xavier Jean, S&P senior director for corporate ratings in Singapore, said in an email interview last Friday. Financial leveraging has decreased from Covid highs and 'domestic funding is more prevalent in the economy' as firms take advantage of lower bank rates to refinance in the local currency, he added.
Khaleej Times
21-04-2025
- Business
- Khaleej Times
GCC faces indirect but significant risks from trade war
The GCC region faces mounting economic challenges as intensifying global trade tensions, particularly US tariff threats, and a sharp decline in oil prices ripple through its markets. A recent S&P Global Ratings report highlights the indirect but significant risks to GCC economies, with banks likely to face increased market volatility and investor risk aversion. However, the region's financial institutions appear well-positioned to weather the storm, bolstered by strong liquidity, profitability, and capitalisation, according to credit analyst Mohamed Damak. S&P has revised its oil price forecast to $65 per barrel for 2025, down from previous estimates, reflecting heightened trade disputes and weaker global demand. This drop, a roughly 15 per cent decline from mid-2024 Brent crude averages of $80 per barrel, threatens government revenues and spending in oil-dependent GCC economies. Saudi Arabia, the UAE, Qatar, and other GCC nations rely heavily on hydrocarbon exports, which account for 60-80 per cent of fiscal revenues across the region, as per International Monetary Fund (IMF) data. Lower oil prices could curb public investment in projects like Saudi Arabia's Vision 2030, dampening growth in both oil and non-oil sectors. The IMF projected GCC GDP growth at 3.2 per cent for 2025 before the tariff escalation, but analysts now warn of a potential downgrade to 2.5 per cent if oil prices fall further. A sustained drop below $60 per barrel could exacerbate fiscal deficits, with Saudi Arabia's breakeven oil price estimated at $80-$85 per barrel by Bloomberg Economics. Reduced government spending may also pressure corporate earnings and consumer confidence, indirectly straining banks' asset quality. In a recent report, Fitch Ratings noted that GCC exports to the US are predominantly hydrocarbons, which are exempt from tariffs. Non-hydrocarbon exports, facing a 10 per cent tariff (or 25 per cent for aluminium and steel), constitute a small fraction of trade, insulating banks from direct tariff-related shocks. 'However, the real threat lies in declining oil prices and reduced global demand, which could curb government spending — a critical driver of banking activity in the GCC. Lower oil prices and weaker global economic activity could lead to reduced government spending, which strongly affects bank operating conditions in most GCC countries,' Fitch stated. Despite these headwinds, GCC banks are entering the turmoil from a position of strength. At year-end 2024, the region's top 45 banks reported an average nonperforming loan (NPL) ratio of 2.9 per cent, significantly below the global banking average of 4.5 per cent, according to World Bank data. Provisions exceeding 150 per cent of NPLs provide a substantial buffer against potential loan defaults. Additionally, banks' profitability remains solid, with a 1.7 per cent return on assets, and capitalization is robust, with an average Tier 1 capital ratio of 17.2 per cent, well above Basel III requirements. S&P's stress tests underscore this resilience. In a moderate scenario, assuming a 30 per cent NPL increase or a minimum 5.0 per cent NPL ratio, 16 banks could face $5.3 billion in losses. A harsher scenario, with a 50 per cent NPL spike or a 7.0 per cent NPL ratio, projects $30.3 billion in losses across 26 banks. These figures remain below the $60 billion in net income generated by these banks in 2024, suggesting that profitability, not solvency, would take the hit. Damak notes that banks' liquidity and conservative investment portfolios — dominated by high-quality fixed-income assets comprising 20-25% of total assets — further mitigate risks. While the overall outlook is positive, vulnerabilities exist. Qatari banks, with significant net external debt, are more exposed to capital outflows, though government support, backed by Qatar's $475 billion sovereign wealth fund (per Sovereign Wealth Fund Institute), reduces systemic risks. Saudi banks, critical to financing Vision 2030's $1.25 trillion in projects, could face constraints if capital market access tightens. In contrast, UAE banks, with the region's strongest net external asset position, exhibit the highest resilience to hypothetical outflows of 50 per cent of nonresident interbank deposits and 30 per cent of nonresident deposits. Market volatility also poses risks to banks with exposure to capital markets or private-equity investments, though these activities contribute modestly to revenues. Margin lending, tied to declining asset valuations, is another concern, but conservative collateral coverage limits potential losses. The US Federal Reserve's expected 25-basis-point rate cut in 2025, likely mirrored by GCC central banks, should support bank margins. However, sharper rate reductions could compress profitability and slow lending growth. Historical precedent suggests GCC regulators may step in to ease pressures. During the Covid-19 crisis, forbearance measures like loan moratoriums helped banks navigate uncertainty, and similar interventions are anticipated if trade tensions escalate. The 90-day tariff pause for non-China countries, announced by the US, adds uncertainty, potentially undermining business and consumer confidence further. A full tariff implementation could deepen the economic fallout, with Goldman Sachs estimating a 0.5 per cent drag on global GDP.
