South Australia’s economy has topped the country’s regional rankings for the first time in 15 years. This is according to the CommSec report. The document looked at the quarterly growth dynamics of each state.
CommSec is one of the divisions of the Bank of Australia that assesses year-on-year changes by region. It does this by comparing current data to a 10-year average.
The paper includes analyses of 8 vital economic indicators, including:
– real economic growth;
– unemployment rate;
– the construction sector;
– the number of new housing developments.
In the previous report, Victoria was the leading state in Australia. However, South Australia has managed to push it into second place. New South Wales is third, followed by Western Australia. The Capital Region is sixth, and Tasmania is fifth.
CommSec’s Craig James said that Australia has shown a stable position in the labour market. In addition, the country’s population is growing steadily, suggesting favourable living conditions. At the same time, economic indicators have slowed in response to the rise in interest rates. As a result, borrowing costs, consumer goods and commodity prices have risen.
In terms of South Australia’s success, the state has shown excellent development dynamics. Its population has tripled in the last two years. This factor has had a positive impact on the housing sector, with demand for buying and renting property increasing significantly. Experts have also noted growth in overall economic activity.

Review of indicators by state

South Australia performed best in 4 out of 8 indicators. The most important of these were the volume of construction work and the unemployment rate. Victoria outperformed the other state economies in three areas, including retail spending. It is also worth noting that Western Australia led the way in relative population growth. At the same time, Tasmania was the top performer in equipment expenditure. The analysis showed the highest retail spending in the Capital Region (ACT). Queensland led in mortgage lending. The Northern Territories performed well in terms of population growth.
Economic dynamism is an essential indicator of growth. Western Australia performed best on this measure. It is followed by Queensland and Victoria, with South Australia in 5th place.
Experts note that South Australia’s top ranking does not mean the region is free of problems. The state’s economy is still struggling due to rising inflation. In addition, other jurisdictions, such as Victoria, have also performed excellently.

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Great Britain and Denmark are continuing to work on the Viking Link project. The aim is to provide high-quality electricity to around 2.5 million homes in the UK.
This project involves laying a 1.4GW undersea power cable. According to experts, the construction of Viking Link will enable the uninterrupted transport of electricity generated by renewable energy sources. It will also save the UK around £500 million over the first 10 years of the project.
The cable route starts in Lincolnshire, east of the UK, and runs west to Jutland in Denmark. Work has been progressing rapidly since 2019. Siemens is responsible for the design and installation of all the electrical equipment.
Once the main work has been completed, the project will be ready for operation. However, it will initially operate at 800 MW, gradually increasing to 1.4 GW. According to preliminary plans, British and Danish specialists will upgrade the plant within a year. This way, they will eliminate all problematic points, and the power will reach its maximum indicators.
Viking Link primarily provides clean energy to the population, according to the project’s authors. They believe that by 2030, the submarine cable will be an effective tool in the fight against climate change:
– it could reduce carbon dioxide emissions in the UK by around 100 million tonnes;
– about 90% of the energy transported through the system will be CO2 emission-free.
The project is, therefore, of enormous value to two specific countries and the world as a whole.

Benefits for the UK and Denmark

The realisation of the project is significant for the UK. Thanks to Viking Link, the country will be able to:
– strengthen energy security;
– import clean energy;
– lower the risk of energy shortages;
– reduce resource costs for the public.
In the first year of operation, the submarine cable should reduce UK emissions by 600,000 tonnes. This is equivalent to taking 280,000 cars off the road.
As for Denmark, it will increase its ability to export the electricity it produces in surplus. This will allow the country to strengthen its status as a reliable clean energy supplier.
It is worth noting that similar submarine cable projects are already in operation around the world. However, Viking Link is the longest. Its length is approximately 765 kilometres. In addition, the system crosses two separate markets that can work together effectively despite the distance. The authors hope to expand the infrastructure over time for even greater coverage.

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The Spanish government has sent a report to the European Commission assessing the local market. According to the document, the country is working to reduce its budget deficit and curb inflation. In addition, the Spain’s economic growth is expected in 2024, driven by recovery processes in various sectors.
The authorities noted that the economy has been performing well since 2021, following the downturn during the pandemic. The same pace will be maintained in 2023. GDP growth should reach 2% in 2024, above the EU average. The main drivers of growth in the Spanish economy are:
– increased activity in the labour sector;
– household wealth accumulation;
– interest from foreign investors;
– the implementation of the economic recovery plan.
At the same time, two factors – geopolitical conflicts and EU monetary policy – will have a direct impact on the local market in the near future. The latter, on the one hand, contributes to curbing inflation and, on the other, reduces economic activity not only in the Spanish market but also in Europe as a whole.

Revenue forecasts in the budget

2024 budget development follows the inertia scenario, which does not imply introducing new measures. However, they may be introduced in the future if necessary. The government intends to revise the pension accrual this year. This will make it possible to maintain purchasing power at a certain level despite the instability of the global energy market.
As for public administration revenues, their share in GDP will reach 42%, with an increase of 0.1% compared to 2023. Total tax revenues should reach €382.8 billion, an increase of 7.5% compared to previous figures. According to the authorities, the main drivers of this increase are rising employment and higher pensions.
The government plans to increase social contributions by 6.4% in 2024 due to the improvement in the labour market and the implementation of the pension reform.

Deficit and debt projections

One of the government’s main targets is to reduce the budget deficit by 3%. The regional deficit should be 0.1% lower, with the rest of the reduction coming from the central government. In addition, the good dynamics of the Spanish economy will reduce the dependence of the external debt on GDP. It is worth noting that this ratio is already 108% (the country reached 110% earlier than planned). The authorities hope to reduce this to 106.3% in 2024.
According to financial analytic Chaslau Koniukh opinion, the government is paying particular attention to implementing sustainable development points, which implies the transformation of several sectors.

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South Korea is an advanced country in terms of the development of its industrial and technological sectors. Government support plays an essential role in this, with the government making serious efforts to strengthen businesses. According to Euractiv, South Korea’s venture capital investment is growing thanks to government support.
At first glance, Korea may appear dominated by the private sector, but this is not the case. The country has adopted a system of state-led industrial development, which involves active government involvement in the economy. This approach has been used for more than 50 years and has produced excellent results.

Formation of the Korean economic model

In the 1960s, the local government adopted a model of industrial development based on five-year plans. In this way, the authorities stimulated a declining economy. To do this, they took over the financing of all the industrial conglomerates – chaebols – which became the main drivers of the market. The state took over strategy development, control of business development and entry into the global arena. This approach took the Korean economy to the next level and continues to yield positive results.

Over time, the government’s role in shaping the industrial sector has changed. The authorities now focus mainly on supporting young companies. The government provides venture capital to develop innovative projects and promising companies in IT and related sectors. The Korea Venture Investment Corporation (KVIC) manages the following investments:
– in venture capital funds;
– in startups that have previously received funding from certain government-trusted venture capital funds.
In this way, the authorities help startups to get a large amount of investment to develop their idea.

Disadvantages of the system

The South Korean economic model has helped the country to achieve a high position on the world stage despite the difficult post-war years and crises. However, experts also point out the strategy’s weaknesses, largely based on the desire to catch up with the superpowers. Instead, the focus should be on sectors with a promising future, such as technology and semiconductor production. This focus increases the importance of government support for new ventures and investment in innovative startups.
Moreover, public funding can help to finance risky investments and encourage unique projects to emerge. In this respect, the country has notable advantages over other countries, such as members of the European Union. European government funding has a history of conservatism and bureaucracy, an obstacle to developing innovative sectors. And Korea can offer an excellent alternative, supporting businesses and helping to increase the number of startups.

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The challenges facing the world in 2022-2023 had a significant impact on Bulgaria’s economy. The main cause of the global crisis was the geopolitical conflict in Europe, which led to higher energy prices, a record inflation increase and other problems.
For Bulgaria, as for the global economy as a whole, the inflation rate was the highest in the last 40 years. This led to a decline in consumer solvency and a record rise in interest rates. As a result, business activity in the country has declined, and the technological lag in a number of advanced industries has become extremely acute.
Bulgaria’s economy is directly linked to the European economy, and any fluctuations have an immediate impact on the country’s market. For a long time, the EU had hoped that China would become a driving force for German industry. This would have given a boost to sectors across the EU.
However, as a result of the strict measures to prevent COVID-19, the Chinese economy has slowed down considerably. The lifting of the restrictions at the end of 2022 was an improvement, but in July 2023, exports were 14. 5% compared to the same month in 2022. The decline in the first half of 2023 was 5%.

Overview of GDP dynamics in European countries

The slowdown in the Chinese economy has also had a negative impact on the pace of development in the European Union. According to the data for the 2nd quarter of 2023, the situation in the EU is as follows:
– EU GDP grew by 0.2%, after 0.6% in the first quarter of 2023;
– German GDP fell by 0.3%;
– Italy’s GDP fell by 0.3%.
The index that reflects the situation in the manufacturing sector also fell. In Germany, the index fell by 1.5% in July, while in Italy, it rose by 0.7%.
The output price index for the EU is also in negative territory, falling by 0.4%, pointing to a general trend of economic slowdown in the region.

How the situation in the EU affects the Bulgarian economy

Reduced demand for manufactured goods and raw materials on the world market reduces Bulgaria’s exports and, consequently, the industry volume. The value of the country’s exports has declined for four months, and the first half of 2023 fell by 3.1%. The decline is mainly due to a drop in exports of sunflower oil, fuel and electricity. At the same time, analysts note that some of the slowdown in momentum is related to the process of market normalisation after the fluctuations of 2022 when exports reached record highs in a number of sectors. However, there are still segments where sales to foreign markets continue to grow. These include consumer goods and equipment.
Growth in domestic consumption should also come into play. Retail sales rose 2.4% in Q2, with food sales up 4.2%. According to analysts, the main reason for this is an increase in wages.

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After lengthy discussions, the Bank of Latvia and the Ministry of Finance have concluded that regulating the income of financial institutions is necessary. To this end, they will introduce a tax on banks’ profits, which will apply irrespective of the presence of dividends. The new tax system will apply to commercial banks, which will have to pay a rate of 20 percent of profits.

Reasons for introducing a tax on profits

In 2022-2023, European countries, including Latvia, experienced an increase in interest rates. This, in turn, led to a significant increase in bank profits. According to the Latvian regulator, in the first six months of 2023 alone, financial institutions’ profits amounted to approximately EUR 336 million, which is 2.6 times higher than in the first half of 2022.
Such dynamics forced the Ministry of Finance and the Central Bank to make changes to the current tax system. Initially, the government planned to introduce a special tax that would apply only to excess profits, but the regulators agreed on a mandatory rate of 20 percent.

According to the minister responsible, Arvils Asheradens, such a measure will allow the budget to legally receive part of the funds from the activities of financial institutions. The Central Bank also agrees with the need to introduce a profit tax. According to the regulator’s representatives, the high growth of commercial banks’ profits is ensured primarily by increasing the amount of borrowers’ monthly payments, not by increasing the number of clients.
The government believes that the tax is the optimal measure to regulate the excessive profits of commercial financial institutions. As a result, banks will regularly contribute funds to the state budget, regardless of whether they pay dividends or not. Analysts predict the innovation will bring Latvia around 140 million euros in 2024.

Overview of Latvia’s economic development

The income tax is one of the options to support the local economy after the difficult years of 2022 and 2023. However, the forecast for the current period has been revised upwards, mainly due to expectations of a recovery in exports and domestic demand. According to the central bank, GDP growth will be as follows:
– 3.1% in 2024;
– 3.5% in 2025.
By comparison, GDP growth in 2023 will be 1.2%.
As far as inflation is concerned, it is gradually coming down to the level of early 2022, but it remains high. Consumer goods prices will continue to rise this year but slower than in 2023. At the same time, if transport goods and services were the drivers of inflation growth in the previous period, now they are restraining its growth.

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The Kingdom of Saudi Arabia has unveiled a strategic development plan. According to it, 59 new logistics zones will appear in the country by 2030, thanks to which the service market will likely grow. The government hopes to make the Saudi economy more attractive to foreign investors and companies.
According to projections in the master development plan, the kingdom’s logistics sector will reach USD 60 billion by 2024. In addition, the country should be among the top 10 countries in terms of the value of this market by 2030. To achieve these goals, the government is negotiating the entry of the New Development Bank into the association. It currently has eight member states.
The NDB Association was established to support projects in the BRICS and emerging economies. The bank’s authorised capital is USD 100 billion. In addition to the original members, such as China, Brazil, India and South Africa, the UAE, Egypt, and several other countries became members of the NDB in 2021.

A strategy for kingdom development

In 2016, Saudi Arabia decided to reduce the economy’s dependence on fossil fuels. To this end, the authorities adopted the Kingdom’s Vision 2030 development strategy, including transforming various market sectors. Several projects are in the pipeline as part of this plan, and some ideas are grandiose. There are currently 15 major projects underway, each at a different completion stage. The list includes the construction of real estate: skyscrapers, architectural structures of various kinds, as well as the modernisation of infrastructure. The government has already allocated more than USD 1 trillion to these areas. The country is also building autonomous cities – future places where people will live off machines and innovative technologies. The emphasis here is on the environmental friendliness and energy efficiency of every site element.
The changes in the economic landscape of the country’s cities are the first results of the Vision strategy. The real estate market in Saudi Arabia is actively evolving, and new projects are under development. Shortly, the following projects will be available for sale and lease:
– 555,000 residential units;
– 272,000 hotel rooms;
– 4.3 million square metres of retail space;
– over 6 million square metres of office space.
The scale of change is impressive. The country’s territory is one big construction site, with new properties always being built.
In addition to real estate, the Saudi authorities are paying attention to other sectors of the economy, including the logistics market. The country will soon launch new projects to attract foreign investors.

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UK banks and property developers are abandoning mortgage deals due to record inflation and tighter monetary policy. At the same time, fixed interest rates continue to rise. In addition, the number of people seeking 35-year mortgages has increased to a record high. As a result, bank customers are trying to reduce their monthly payments by spreading them over longer periods.
In June 2023, the average mortgage rate in the UK reached 5.7%, but in May, it was 5.3%. This means that bank customers who borrowed £200,000 in June will pay £648 more per year than those who borrowed in May. The additional annual payment has risen by around £3,600.
UK banks and builders have started to reduce the number of mortgages they issue after forecasts of lower inflation failed to materialise. The inflation rate is now 8.7%, although experts had expected a lower figure. Such a result is likely to force the Bank of England to continue its interest rate policy. It could be as high as 5% by the end of 2023.

The situation in the mortgage lending sector

Interest rates on new loans continue to rise, affecting purchasing power. Unstable and increasing loan amounts are forcing consumers to look at other options for buying a home. For example, while the most popular and optimal mortgage term used to be 25 years, more people are now opting for a longer-term loan. UK bank statistics for March show that:
– 19% of the total number of mortgages were granted for 35 years or more;
– more than 50% of the loans were given for more than 30 years.
These figures are a record for the country. According to the UK Finance report, the number of 35-year loans is more than double what it was at the end of 2021 when the share of loans with that term was 9%. That’s when the UK regulator started to raise interest rates. They had been at 0.1% for a long time.
Consumers are opting for 35-year mortgages to reduce their monthly payments. However, they will have to pay a large amount over the life of the loan, which could lead to an increase in household debt.
According to official figures, more than 100,000 fixed-rate mortgages were taken out in June. A total of 371,000 fixed-rate loans were repaid between April and the end of June, a record for the country for the quarter.

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Analysts at Morgan Stanley are confident that Asia’s growth will exceed that of the US and Europe in 2023. The main factor for this will be an increase in domestic demand.
According to Chetan Ahya, Morgan Stanley’s lead economist for Asia, China is recovering from the slowdown associated with the zero-tolerance Covid-19 policy. Since the beginning of this year, the authorities have changed how they organize fiscal policy and mainstreamed monetary measures, which has yielded positive results. Other regions are not inferior, with stable demand growth in various economic sectors. This applies to Japan, India and Indonesia, where the market is strengthening. Chetan Ahya estimates that economic growth in Asia will be around 500 bp by the end of the fourth quarter.
Analysts from the IMF also agree with Morgan Stanley’s forecasts. They believe the region will continue to grow strongly, although overall, 2023 will be an extremely challenging year for the global market. One factor in this assessment was that several Asian countries had tightened monetary policy. However, this has not affected domestic demand – it continues to grow.
The IMF believes Asia will account for around 70% of global economic development this year. The region’s GDP is expected to grow by 4.6%, up from 3.8% in 2022.

China’s economic recovery

The country’s GDP increased by 4% in the first quarter, which aligned with experts’ expectations in a Reuters poll. According to Ahya, the Chinese economy is recovering even better than analysts predicted. At the same time, he believes inflation is not a severe risk to the Chinese market. In this case, paying attention to the recovery in individual sectors of the local economy is essential. The key for China will be the improvement in the real estate market, which survived the crisis in 2022. A positive dynamic here provides a good impetus for an overall recovery.
According to a survey by the People’s Bank, more and more Chinese desire to buy a house. Analysts suggest that several factors have contributed to the change:
– the number of such people has increased significantly since the country’s authorities relaxed measures to prevent the coronavirus;
– the Chinese government has introduced programmes to support the purchase of real estate.
China remains one of the main drivers of economic growth in Asia, and the economy here has shown excellent growth rates since the start of 2023. Overall, the region has felt less of the recent global stresses in the banking system.

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Despite countries’ efforts to meet climate targets, Australian coal exports are growing globally. According to Bloomberg analysis, thermal coal shipments will increase by 7.3 per cent and metallurgical coal by 2.6 per cent by 2023.
Australia is the world’s second-largest coal exporter, which is used in the steel industry and for power generation. According to the agency, fossil fuel supply increases due to growing demand from India and South East Asian countries. Demand for Australian coal will continue until 2025.
Australia has long been considered one of China’s biggest suppliers of commodities. But in 2020, the Chinese authorities severely restricted exports due to disagreements over trade issues. In 2023, the export ban expires, which also helps to increase the number of coal sold. Unlike most developed economies, Australia has long remained aloof from climate change issues, prioritising its domestic coal and gas industries. The country has now launched several programmes to reduce carbon dioxide emissions.

Fossil fuels as the mainstay of Australian exports

Experts note a decline in coal prices on the world market despite the increase in exports. This is putting pressure on the Australian economy, in which the supply of commodities plays a key role. Another problem for the local market could be a decline in sales of liquefied natural gas, Australia’s third-largest export. Although LNG is a more environmentally friendly energy source, experts predict a decrease in supply by the summer of 2024.
At the same time, demand for the resources used in green energy – nickel, lithium and copper – will increase slightly. Lithium supply, for example, is expected to increase by 20-30%. However, increased sales of these commodities will not generate the same income for the Australian economy as coal, iron ore and liquefied natural gas. Iron ore exports are the main source of income for the local economy and will remain so for some years to come. Increases in production by major producers BHP and Rio Tinto are evidence of this.

Coal market forecasts

The forecast for the price of coking coal from Australia is USD 200 per tonne by 2025. At the same time, the country’s government expects the commodity to cost USD 273 per tonne by the end of 2023. On the other hand, Fitch expects prices of USD 300-350 per tonne in 2023.
The global coking coal market:
– supply will increase over the next two years;
– reduced investment in new mine development could limit production growth;
– a small coal deficit on the world market is expected in 2024-2025.
These factors will put pressure on the commodity’s price, which will exceed the 2019 figures. Experts predict the global coking coal trade will reach 318 million tonnes in 2025, up from 297 million tonnes in 2022.

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