Wednesday, 11 October 2017

Catalonia, a big risk, but not the only one

Posted by Valentine at 11:40 Labels:

And so… Catalonia is again on the watch. The President of the Generalitat, Carles Puigdemont, recognized Catalonia’s right for independence but suspended the process for the moment.

“We propose the suspension of the effects of the declaration of independence for a few weeks, to open a period of dialogue,” said Puigdemont.

The Spanish prime minister, Mariano Rajoy, is due to hold an emergency cabinet meeting to evaluate possible responses to a parliamentary address by the Catalan leader, Carles Puigdemont, in which he said “Catalans won the right for independence”.

The Spanish stock benchmark IBEX closed Tuesday 0.92 percent to the downside at 10,142.30, as market participants awaited Puigdemont’s speech before parliament.

The banking sector was among the worst performers of the session, with Banco Santander and Caixabank falling 2.92 percent and 2.22 percent respectively to end at 5.61 and 4.05.

But investors are not the only ones considering the risks of a division in Spain. On Tuesday, the International Monetary Fund (IMF) issued its new forecast for global growth, outlining the world is facing two big challenges that could weigh on economic health: Catalonia and Brexit.

The economic growth forecast for 2017 and 2018 increased by one-tenth of a percentage point each year, against July’s IMF revision. According to the organization, nearly 75 percent of the world’s economy continues to accelerate in its recovery.

IMF economists explained that positive revisions in countries like Japan, Russia and in the Eurozone outperform downward adjustments for developed economist such as the US and UK.

The analysis also emphasized that economic recovery could soon be stopped if inflation, which is still weak, does not receive an impulse from wage growth. And while developed economies struggle to boost inflation, some emerging markets still try to reduce it.

The IMF believes a sooner-than-needed exit by the European Central Bank from its monetary stimulus could derail growth in key nations within the bloc.

“In an environment of high policy uncertainty and geopolitical tensions, policy missteps ... could take a toll on market confidence, resulting in tighter financial conditions and weaker asset prices,” the document said.

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