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WASHINGTON — The U.S. economy grew at an unexpectedly brisk 3.3% annual pace from October through December as Americans showed a continued willingness to spend freely despite high interest rates and price levels that have frustrated many households. 

Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated from its sizzling 4.9% growth rate the previous quarter. But the latest figures still reflected the surprising durability of the world’s largest economy, marking the sixth straight quarter in which GDP has grown at an annual pace of 2% or more. 

Consumers, who account for about 70% of the total economy, drove the fourth-quarter growth. Their spending expanded at a 2.8% annual rate, for items ranging from clothing, furniture, recreational vehicles and other goods to services like hotels and restaurant meals. 

The GDP report also showed that despite the robust pace of growth in the October-December quarter, inflationary measures continued to ease. Consumer prices rose at a 1.7% annual rate, down from 2.6% in the third quarter. And excluding volatile food and energy prices, so-called core inflation came in at a 2% annual rate. 

Those inflation numbers could reassure the Federal Reserve’s policymakers, who have already signaled that they expect to cut their benchmark interest rate three times in 2024, reversing their 2022-2023 policy of aggressively raising rates to fight inflation. 

“Although GDP growth came in hotter than expected in the fourth quarter, underlying inflation continued to slow,” said Paul Ashworth, chief North America economist at Capital Economics. “The upshot is that an early spring rate cut by the Fed is still the most likely outcome.” 

The state of the economy is sure to weigh on people’s minds ahead of the November elections. After an extended period of gloom, Americans are starting to feel somewhat better about inflation and the economy — a trend that could sustain consumer spending, fuel economic growth and potentially affect voters’ decisions. A measure of consumer sentiment by the University of Michigan, for example, has jumped in the past two months by the most since 1991. 

There is growing optimism that the Fed is on track to deliver a rare “soft landing” — keeping borrowing rates high enough to cool growth, hiring and inflation yet not so much as to send the economy into a tailspin. Inflation touched a four-decade high in 2022 but has since edged steadily lower without the painful layoffs that most economists had thought would be necessary to slow the acceleration of prices. 

The economy has repeatedly defied predictions that the Fed’s aggressive rate hikes would trigger a recession. Far from collapsing last year, the economy accelerated — expanding 2.5%, up from 1.9% in 2022. 

“Our expectation is for a soft landing, and it looks like things are moving that way,” said Beth Ann Bovino, chief economist at U.S. Bank. Still, Bovino expects the economy to slow somewhat this year as higher rates weaken borrowing and spending. 

“People are going to get squeezed,” she said. 

The economy’s outlook had looked far bleaker a year ago. As recently as April 2023, an economic model published by the Conference Board, a business group, had pegged the likelihood of a U.S. recession over the next 12 months at close to 99%. 

Even as inflation in the United States has slowed significantly, overall prices remain nearly 17% above where they were before the pandemic erupted three years ago, which has exasperated many Americans. That fact will likely raise a pivotal question for the nation’s voters, many of whom are still feeling the lingering financial and psychological effects of the worst bout of inflation in four decades. Which will carry more weight in the presidential election: The sharp drop in inflation or the fact that most prices are well above where they were three years ago? 

The Fed began raising its benchmark rate in March 2022 in response to the resurgence in inflation that accompanied the economy’s recovery from the pandemic recession. By the time its hikes ended in July last year, the central bank had raised its influential rate from near zero to roughly 5.4%, the highest level since 2001. 

As the Fed’s rate hikes worked their way through the economy, year-over-year inflation slowed from 9.1% in June 2022, the fastest rate in four decades, to 3.4% as of last month. That marked a striking improvement but still leaves that inflation measure above the Fed’s 2% target. 

The progress so far has come at surprisingly little economic cost. Employers have added a healthy 225,000 jobs a month over the past year. And unemployment has remained below 4% for 23 straight months, the longest such streak since the 1960s. 

The once red-hot job market has cooled somewhat, easing pressure on companies to raise pay to keep or attract employees and then pass on their higher labor costs to their customers through price hikes. 

It’s happened in perhaps the least painful way: Employers are generally posting fewer job openings rather than laying off workers. That is partly because many companies are reluctant to risk losing workers after having been caught flat-footed when the economy roared back from the brief but brutal 2020 pandemic recession. 

“Businesses are getting rid of job openings, but they’re holding onto workers,” Bovino said. 

Another reason for the economy’s sturdiness is that consumers emerged from the pandemic in surprisingly good financial shape, partly because tens of millions of households had received government stimulus checks. As a result, many consumers have managed to keep spending even in the face of rising prices and high interest rates. 

Some economists have suggested that the economy will weaken in the coming months as pandemic savings are exhausted, credit card use nears its limits and higher borrowing rates curtail spending. Still, the government reported last week that consumers stepped up their spending at retailers in December, an upbeat end to the holiday shopping season. 
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BRUSSELS — The European Union on Wednesday unveiled plans to strengthen the bloc’s economic security, including measures to protect sensitive technology from falling into the hands of geopolitical rivals such as China. 

Brussels has bolstered its armory of trade restrictions to tackle what it deems to be risks to European economic security, following Moscow’s invasion of Ukraine and global trade tensions. 

The fallout from the war in Ukraine hit Europe particularly hard, forcing the bloc to find alternative energy sources. Now, it wants to avoid a similar over-reliance on China, which dominates in green technology production and critical raw materials. 

On Wednesday, EU officials outlined an economic security package containing five initiatives, including toughening rules on the screening of foreign direct investment and launching discussions on coordination around export controls. 

The EU has already proposed new rules that it says are necessary to keep the bloc competitive during the global transition to clean technology and to bring more production to Europe. 

“In this competition, Europe cannot just be the playground for bigger players, we need to be able to play ourselves,” said the EU’s most senior competition official, Margrethe Vestager. 

“By doing what we are proposing to do, we can de-risk our economic interdependencies,” she told reporters in Brussels. 

Wednesday’s package is part of the EU’s focus on de-risking but not decoupling from China, pushed strongly by European Commission President Ursula von der Leyen. 

“The change in EU-China relations has been the driving force of this embrace of economic security, which is something extremely new for the EU,” said Mathieu Duchatel, director of international studies at the Institut Montaigne think tank. 

“Focus on riskier transactions” 

EU officials also pushed back on claims that the package had been watered down and that some of the initiatives would kick in too late. 

One of the initiatives is to revise the EU’s regulation on screening foreign direct investment, but others recommend further discussions, raising concerns that action could come too late. 

For example, the commission said it wanted to promote further discussions on how to better support research and development of technologies that can be used for civil and defense purposes. 

The EU also wants all member states to establish screening mechanisms, which could later lead to investments being blocked if they are believed to pose a risk. 

“I would not agree that the package is watered down,” the EU’s trade commissioner, Valdis Dombrovskis, said. 

He later said the EU wanted “to focus on riskier transactions and spend less time and resources on low-risk ones.” 

The negotiations are likely to prove a delicate balancing act for the commission. Investment and export control decisions are up to national governments; therefore, it must avoid overstepping its mark. 
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BANGKOK — China’s central bank said Wednesday it will cut the amount of reserves it holds for banks as part of a slew of measures to support the slowing economy.

The announcement by the governor of the People’s Bank of China prompted a surge in share prices, with Hong Kong’s benchmark jumping 3.6%.

Chinese stock markets have languished in recent months as investors pulled money out, discouraged by a faltering recovery from the shocks of the COVID-19 pandemic.

A sell-off earlier in the week was followed by unconfirmed reports that the government planned to get state-owned investment companies to funnel offshore funds into the markets to help staunch the losses. The central bank’s moves appear to be part of a concerted effort to stabilize the markets and instill greater confidence in the outlook for the world’s second-largest economy.

Central bank Gov. Pan Gongsheng told reporters in Beijing that the deposit reserve requirement would be cut by 0.5 percentage points as of Feb. 5. Pan said that would inject about 1 trillion yuan or $141 billion into the economy. As of December, the reserve requirement ratio was 7.4%.

Unlike bank reserves — the cash banks must keep on hand to cover unexpected demand — these reserves are held by the central bank and used mainly as a monetary policy tool.

Such changes are usually conveyed in a written notice by the central bank, not at a news conference.

Pan said the central bank also plans to issue a policy soon on lending to property developers to help support the industry.

China’s economy is recovering, he said, allowing ample room for policy maneuvers.

“At present, our country’s financial risks are generally controllable, the overall operations of financial institutions are sound, and financial markets are operating smoothly,” the government website China.com cited Pan as saying.

The economy expanded at a 5.2% annual pace in the October-December quarter, enabling the government to attain its target of about 5% annual growth for 2023. But the recovery remains uneven, and most forecasts say the economy will grow more slowly in 2024.

Chinese leaders have been talking up the economy in an all-out effort to counter such expectations.

Initial reactions were cautious.

Mark Williams of Capital Economics said the latest moves would “provide only a small boost for China’s economy.”

“Meaningful improvements in household or corporate borrowing would require substantial rate cuts or a significant change in economic sentiment. Neither seems likely in the near future,” he said in a commentary.

The slow pace of the recovery after China dropped stringent anti-virus precautions in late 2022 has added to gloom over a crisis in the once-booming property market as dozens of developers defaulted on loans after the government cracked down on excessive borrowing a few years ago.

That has left many Chinese families who had invested their life savings in unbuilt homes in limbo, unsure if the developers would deliver those apartments.

There have been some signs of improvement: Last week, the government resumed its reporting on the rate of unemployment among young people, which stood at a record 21.3% in June. According to a revised methodology, the latest youth unemployment rate was 15%. Overall unemployment stood at 5.1%.

Many youths also were left without work after the government cracked down on technology companies, which tended to hire younger workers. More recently, moves to impose more controls on online gaming spurred massive sell-offs of game company shares, leading the authorities to apparently backpedal on that plan.

The Federal Reserve and other major central banks have been raising interest rates and finding other ways to raise the cost of borrowing to help stem inflation, which peaked at 9.1% in mid-2022 in the United States. Central banks are now easing their monetary policies as price pressures abate.

In China, regulators are grappling with the opposite problem, a risk that weak demand will cause prices to spiral lower, discouraging investment and hobbling growth. The moves by the central bank this week will ease credit and pump money into the economy to try to spur businesses and consumers to start spending more.

China’s loan prime rate is now 3.45%. It’s the lending rate commercial banks give their highest quality customers and is a benchmark for other loans. The Federal Reserve’s benchmark rate is about 5.4%.

The central bank cut the reserve requirement twice in 2023, by 0.25 percentage points each time. A key policy tool for controlling the amount of money circulating in the economy, it peaked at more than 20% in 2011 and now is at its lowest level since the early 2000s.

“The authorities will likely launch more measures to stabilize market sentiment, such as mobilizing state resources to support the stock market,” Raymond Yeung of ANZ said in a report. “The authorities are clearly concerned about market sentiment.”

He noted that the central bank is also acting to avoid a weakening in the Chinese currency, the yuan. Pan told reporters in Beijing that the PBOC would ensure the yuan’s value remains stable.

Like many other analysts, Yeung said the latest moves might not be enough to fully reassure investors and that more needs to be done to foster wider reforms.

“This requires some structural measures to boost private sector confidence and the long-term outlook of the real estate sector,” he said. “The measures announced so far do not seem sufficient.”
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ALBUQUERQUE, NEW MEXICO — A federal judge is being asked to issue a stop-work order on a $10 billion transmission line being built through a remote southeastern Arizona valley to carry wind-generated electricity to customers as far away as California. 

A 32-page lawsuit filed on January 17 in U.S. District Court in Tucson, Arizona, accuses the U.S. Interior Department and Bureau of Land Management of refusing for nearly 15 years to recognize “overwhelming evidence of the cultural significance” of the remote San Pedro Valley to Native American tribes, including the Tohono O’odham, Hopi, Zuni and San Carlos Apache Tribe. 

The suit was filed shortly after Pattern Energy received approval to transmit electricity generated by its SunZia wind farm in central New Mexico through the San Pedro Valley east of Tucson and north of Interstate 10. 

The lawsuit calls the valley “one of the most intact, prehistoric and historical … landscapes in southern Arizona” and asks the court to issue restraining orders or permanent injunctions to halt construction. 

“The San Pedro Valley will be irreparably harmed if construction proceeds,” it says. 

Government representatives declined to comment Tuesday on the pending litigation. They are expected to respond in court. The project has been touted as the biggest U.S. electricity infrastructure undertaking since the Hoover Dam. 

Pattern Energy officials said Tuesday that the time has passed to reconsider the route, which was approved in 2015 following a review process. 

“It is unfortunate and regrettable that after a lengthy consultation process, where certain parties did not participate repeatedly since 2009, this is the path chosen at this late stage,” Pattern Energy spokesperson Matt Dallas said in an email. 

Plaintiffs in the lawsuit are the Tohono O’odham Nation, the San Carlos Apache Tribe and the nonprofit organizations Center for Biological Diversity and Archaeology Southwest. 

“The case for protecting this landscape is clear,” Archaeology Southwest said in a statement that calls the San Pedro Arizona’s last free-flowing river and the valley the embodiment of a “unique and timely story of social and ecological sustainability across more than 12,000 years of cultural and environmental change.” 

The valley represents an 80-kilometer (50-mile) stretch of the planned 885-kilometer (550-mile) conduit expected to carry electricity from new wind farms in central New Mexico to existing transmission lines in Arizona to serve populated areas as far away as California. The project has been called an important part of President Joe Biden’s goal for a carbon pollution-free power sector by 2035. 

Work started in September in New Mexico after negotiations that spanned years and resulted in approval from the Bureau of Land Management, the federal agency with authority over vast parts of the U.S. West. 

The route in New Mexico was modified after the U.S. Defense Department raised concerns about the effects of high-voltage lines on radar systems and military training operations. 

Work halted briefly in November amid pleas by tribes to review environmental approvals for the San Pedro Valley and resumed weeks later in what Tohono O’odham Chairman Verlon M. Jose characterized as “a punch to the gut.” 

SunZia expects the transmission line to begin commercial service in 2026, carrying more than 3,500 megawatts of wind power to 3 million people. Project officials say they conducted surveys and worked with tribes over the years to identify cultural resources in the area. 

A photo included in the court filing shows an aerial view in November of ridgetop access roads and tower sites being built west of the San Pedro River near Redrock Canyon. Tribal officials and environmentalists say the region is otherwise relatively untouched. 

The transmission line also is being challenged before the Arizona Court of Appeals. The court is being asked to consider whether state regulatory officials there properly considered the benefits and consequences of the project. 
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WASHINGTON — China brought a large delegation to this year’s World Economic Forum in Davos to try to convince the world that the globe’s second-largest economy is still open for business and a reliable place to invest. But analysts say Premier Li Qiang’s speech on Tuesday was short on specifics that might have reassured investors.

Li led a delegation of 140 people to this week’s five-day meeting of global political and business leaders. China brought as many as 10 ministerial-level officials related to China’s economic affairs, according to the U.S. news website Politico. Li is the highest-ranking Chinese leader to attend the annual meeting since 2017, reflecting the importance Beijing attaches to it.

Anna Ashton, director of China corporate affairs and U.S.-China at Eurasia Group, a New York-based global political risk consulting firm, told VOA in an email that China’s attention to the meeting “underscores 1) Beijing’s continued interest in shaping global economic relations and development efforts, and 2) the importance Beijing places on reviving its international trade and investment relationships.”

In his speech, Li assured investors and politicians that China’s economy has “huge potential” and remains an “important engine” of global growth despite the serious economic headwinds the country has seen over the past year.

Signs of trouble

China’s economy has been struggling to recover post-pandemic with the property market tanking, high youth unemployment and a drop last year in exports for the first time since 2016.

In the third quarter of last year, China recorded its first quarterly foreign direct investment deficit of $11.8 billion, the first time that has happened since records began in 1998. That means divestments and business downsizing were $11.8 billion greater than new investment, according to Bloomberg.

China’s official gross domestic product growth for 2023 was 5.2%, meeting its target of around 5% but lower than analysts’ expectations and one of its lowest annual growth rates in decades.

Despite the challenges, Li on Tuesday said that the economy’s long-term positive trend would not change, and that China would continue to contribute to world economic development. He also promised China would stay committed to its fundamental policy of opening its door wider to the world.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told VOA that Li’s speech was generally positive and showed that he hoped to eliminate outsiders’ negative views of China’s economy.

But he added that Li’s speech did not list any specific measures Beijing would take that would attract Western companies, doing little to alleviate their concerns about where China’s economy is headed.

“I think the business community, especially firms that have big operations in China, would have the mood of ‘show me,’ because they can recite all sorts of regulations and restrictions that hamper their ability to do business, take their intellectual property, and make it really not such a friendly environment,” he said.

“So this speech did not have anything that I would call ‘concrete measures’ that would really appeal to the business community. So they will be more skeptical.”

Reasons for concern

Some trade groups say there is a shift away from investment in China’s economy in response to tightened political controls, including raids on firms and exit bans on foreign executives.

A November survey by the Conference Board, a U.S.-based nonprofit business membership and research group, showed that CEOs of multinational companies with operations in China are quickly losing confidence in that country.

The survey’s confidence index dropped to 54 on a scale of 0-100 from a record high of 72 in April. Forty percent of CEOs surveyed also expected capital investments in China to decrease, and almost as many expected to lay off employees in the next six months, compared with 9% in the first half of last year.

Japan’s Chamber of Commerce in China on Monday published figures showing 48% of companies surveyed said they did not invest in China or reduced their investment in 2023 compared with a year earlier.

According to Reuters news agency, Li said at a luncheon after his speech Tuesday, “We will take active steps to address reasonable concerns of the global business community.”

Just as Li was telling the world that China’s door would only open wider, China’s President Xi Jinping was sending a different message that emphasized the primacy of the Chinese Communist Party.

In a speech on January 16, Xi reiterated that China should advance economic development with “Chinese characteristics” that is different from Western financial models, adhering to the party’s centralized and unified leadership over economic work.

Eurasia Group’s Ashton said business thrives on predictability.

“The significance of Li’s words will be best assessed in the follow-through,” she said. “China’s own actions have and will continue to factor into the turbulent geopolitical atmosphere that Li described. Divergent priorities, interests and convictions cannot just be wished away, and cooperating effectively to address them is easier said than done.”

Just days before its annual meeting in Davos, Switzerland, the World Economic Forum released a survey of economists showing that none of them anticipate anything more than moderate expansion in China’s economy this year.
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The health of the economy often plays a big role in how Americans vote in general elections, including for the next president. This year, there are early signs that other issues are equally important to people as they prepare to cast their ballots in November. VOA’s Veronica Balderas Iglesias has the story from Washington.
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Abuja, Nigeria — Human rights group Amnesty International and other advocacy groups raised concerns Tuesday over British oil giant Shell’s sale of its onshore businesses in Nigeria.

Shell announced Tuesday it had concluded plans to sell the assets for $2.4 billion, but Amnesty said authorities should ensure the company addresses decades’ worth of oil spills before closing the deal.

In a post on the social media site X, Amnesty said, “Shell should not be allowed to wash its hands of the problems and leave.”

The international rights group called on Nigerian authorities to request a full assessment of existing pollution from Shell and the state of its infrastructure before allowing them to transfer ownership.

After nearly a century in Nigeria, Shell said it plans to sell its assets to a consortium of mainly local companies. The sales require the approval of Nigerian authorities.

Aminu Hayatu, a conflict researcher at Amnesty International, said the organization has been concerned about environmental degradation in the Niger Delta area.

“Activities of multinational organizations have for quite some time deteriorated that environment, Hayatu said. “Amnesty International is set to really observe the emergence of the new company as well as the leaving of the old ones and the exchanges between government and those companies in terms of their operations in those areas.”

Shell said that it will continue to operate less-challenging offshore businesses and that the new owner, Renaissance, will assume responsibility for the onshore assets.

For decades Shell has struggled with oil spills, vandalism, theft and sabotage in the troubled Niger Delta region, leading to lawsuits against the company.

Faith Nwadishi, founder of the Center for Transparency Advocacy, said, “One of the reasons why Shell is running away is because communities are becoming wiser, more knowledgeable, going to sue Shell in their home country and getting favorable judgment for the community. They’re just leaving their liabilities and responsibilities behind for the people who are going to take it up.”

Shell’s exit from onshore business in Nigeria follows other Western energy companies seeking more viable and profitable operations.

The company said its staff will be retained by the new leadership.

But Nwadishi says concerns remain.

“Anybody that is taking over … now should know that they’re taking over their liabilities,” she said. “These negotiations, did they take into consideration all of those liabilities for cleanup? Did it take into consideration loss and damages to the community? The terms of the negotiation or agreement should actually be made public.”

It’s not clear how Nigerian authorities will respond.
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Although India’s economy is growing at a fast rate, it is still not creating enough employment for its massive young population. The government is wooing global manufacturers to generate more jobs, but opportunities are not keeping pace with demand. As Anjana Pasricha reports from New Delhi, the challenge of finding good jobs is greatest for young college graduates. VOA footage by Darshan Singh.
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The world is on course to see its first trillionaire by the end of the decade, according to a report by Oxfam. The charity is warning of a big increase in global inequality, fueled by growing corporate power – as hundreds of world leaders and chief executives head to the Swiss ski resort of Davos for this year’s meeting of the World Economic Forum. Henry Ridgwell reports
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Washington — Artificial intelligence poses risks to job security around the world but also offers a “tremendous opportunity” to boost flagging productivity levels and fuel global growth, the IMF chief told AFP.

AI will affect 60% of jobs in advanced economies, the International Monetary Fund’s managing director, Kristalina Georgieva, said in an interview in Washington, shortly before departing for the annual World Economic Forum in Davos, Switzerland.

With AI expected to have less effect in developing countries, around “4o% of jobs globally are likely to be impacted,” she said, citing a new IMF report.

“And the more you have higher skilled jobs, the higher the impact,” she added.

However, the IMF report published Sunday evening notes that only half of the jobs impacted by AI will be negatively affected; the rest may actually benefit from enhanced productivity gains due to AI. 

“Your job may disappear altogether – not good – or artificial intelligence may enhance your job, so you actually will be more productive and your income level may go up,” Georgieva said. 

Uneven effects

The IMF report predicted that, while labor markets in emerging markets and developing economies will see a smaller initial impact from AI, they are also less likely to benefit from the enhanced productivity that will arise through its integration in the workplace.   

“We must focus on helping low income countries in particular to move faster to be able to catch the opportunities that artificial intelligence will present,” Georgieva told AFP.  

“So artificial intelligence, yes, a little scary. But it is also a tremendous opportunity for everyone,” she said. 

The IMF is due to publish updated economic forecasts later this month which will show the global economy is broadly on track to meet its previous forecasts, she said.  

It is “poised for a soft landing,” she said, adding that “monetary policy is doing a good job, inflation is going down, but the job is not quite done.”

“So we are in this trickiest place of not easing too fast or too slow,” she said.

The global economy could use an AI-related productivity boost, as the IMF predicts it will continue growing at historically muted levels over the medium term. 

“God, how much we need it,” Georgieva said. “Unless we figure out a way to unlock productivity, we as the world are not for a great story.” 

‘Tough’ year ahead

Georgieva said 2024 is likely to be “a very tough year” for fiscal policy worldwide, as countries look to tackle debt burdens accumulated during the Covid-19 pandemic, and rebuild depleted buffers.

Billions of people are also due to go to the polls this year, putting additional pressure on governments to either raise spending or cut taxes to win popular support.  

“About 80 countries are going to have elections, and we know what happens with pressure on spending during election cycles,” she added. 

The concern at the IMF, Georgieva said, is that governments around the world spend big this year and undermine the hard-won progress they have made in the fight against high inflation.

“If monetary policy tightens and fiscal policy expands, going against the objective of bringing inflation down, we might be for a longer ride,” she added. 

Concentrating on the job

Georgieva, whose five-year term at the IMF’s helm is set to end this year, refused to be drawn on whether she intends to run for a second stint leading the international financial institution.  

“I have a job to do right now and my concentration is on doing that job,” she said. 

“It has been a tremendous privilege to be the head of the IMF during a very turbulent time, and I can tell you I’m quite proud of how the institution coped,” she continued. 

“But let me do what is in front of me right now.
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Frankfurt — The German economy shrank slightly in 2023, official data showed Monday, as costly energy, high interest rates and cooling foreign demand took their toll on Europe’s export giant.

Output contracted by 0.3 percent year-on-year, federal statistics agency Destatis said in preliminary figures.

“Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises,” the agency’s Ruth Brand told a Berlin press conference.

Europe’s largest economy likely saw a 0.3-percent drop in gross domestic output in the final quarter of the year, the agency calculated, again in preliminary figures.

It also revised the data for the third quarter from a 0.1-percent contraction to a stagnation, meaning Germany avoided a year-end technical recession of two successive quarters of negative growth.

The German economy has faced severe headwinds since Russia’s war in Ukraine sent inflation, particularly the cost of energy, soaring.

The price spikes contributed to a steep downturn in Germany’s energy-hungry manufacturing sector, while the construction sector also took a hit.

Increasing competition from China, once a reliable destination for “made in Germany” goods, as well as aggressive eurozone rate hikes to tame inflation further added to Germany’s woes.

The limp economic performance was widely expected, with the International Monetary Fund predicting that Germany would be the only major advanced economy not to grow in 2023.

If confirmed in the final figures, the 2023 contraction makes it Germany’s weakest year since the coronavirus pandemic battered the economy in 2020. 

“Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth” in 2023, said Brand.  

“Unfavorable financing conditions due to rising interest rates and weaker domestic and foreign demand also took their toll.”

Uncertain outlook

A modest recovery is expected to get under way in 2024, with Germany’s Bundesbank central bank recently forecasting growth of 0.4 percent.

“We see a silver lining for the economy in 2024,” said KfW chief economist Fritzi Koehler-Geib.

“Thanks to strong real wage growth, private consumption in particular is likely to pick up again. Together with an expected recovery in export demand, gross domestic product is likely to grow,” she added.

But ING bank economist Carsten Brzeski was less optimistic, pointing to fresh uncertainty stemming from the German government’s recent budget upset and shipping delays in the Suez Canal as a result of conflict in the Middle East.

“Looking ahead, at least in the first months of 2024, many of the recent drags on growth will still be around and will, in some cases, have an even stronger impact than in 2023,” Brzeski said.

He predicted that gross domestic product would shrink again this year, in what would “be the first time since the early 2000s that Germany has gone through a two-year recession, even though it could prove to be a shallow one.”

Concerns about slowing exports and the slump in the crucial manufacturing sector, coupled with a chronic shortage of skilled labourers, have begun to raise fears of a “deindustrialisation” in Germany.

Chancellor Olaf Scholz’s government, whose popularity has been sliding in the polls, has sought to counter those concerns with pledges to invest heavily in the transition to green energy and in modernising infrastructure. 

But a shock court ruling at the end of last year blew a multi-billion-euro hole in the government’s budget, upending its spending plans and leaving Scholz and his coalition partners scrambling to find savings.

Anger over Berlin’s proposal to cut some subsidies for agriculture prompted farmers to stage tractor blockades across the country last week, culminating in a major demonstration in Berlin on Monday.
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BEIJING — Trade between China and Russia hit a record high in 2023, official data from Beijing showed on Friday, as commerce with the United States fell for the first time in four years on the back of geopolitical tensions.

China-Russia trade reached more than $240 billion, customs figures showed, overshooting a goal of $200 billion set by the neighbors in bilateral meetings last year.

The figure is a record for the two countries, who have grown closer politically and economically since Moscow’s invasion of Ukraine in 2022.

Beijing has drawn criticism from Western countries for its stance on the Ukraine war, on which China insists it is neutral.

It has refused to criticize Moscow’s invasion.

The trade figures represented a year-on-year increase of 26.3%, according to the data.

In contrast, trade between the U.S. and China fell for the first time since 2019.

Commerce with the United States was valued at $664 billion last year, down 11.6% from 2022.

Wang Lingjun, vice minister of the General Administration of Customs, told a news conference that the country’s trade would face more hurdles in 2024.

“The complexity, severity and uncertainty of the external environment are on the rise, and we need to overcome the difficulties and make more efforts to further promote the growth of foreign trade,” he said.

The figures also showed China’s exports fell 4.6% over the year, the first retreat since 2016, while imports were down 5.5%.

Friday also saw gloomy economic figures on the domestic front, with data from the National Bureau of Statistics (NBS) showing deflation in China continued for the third straight month in December.

The consumer price index (CPI) fell 0.3% on-year.

China slipped into deflation in July for the first time since 2021 and following a brief rebound the following month, prices have been in constant decline since September.

Analysts surveyed by Bloomberg expected a drop of 0.4% last month, having sunk 0.5% in November.

While deflation suggests goods were cheaper, it poses a threat to the broader economy as consumers tend to postpone purchases, hoping for further reductions.

A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks — dampening profitability even as costs remain the same.

By way of comparison, inflation in the United States stood at 3.4% in December.

Inflation in China for the whole of 2023 rose by an average of 0.2%, in contrast to other major economies, which saw prices soar once again.

The NBS also said producer prices sank 2.7%, the 15th consecutive month of declines.

The PPI index, which measures the cost of goods leaving factories and provides an insight into the health of the economy, fell 3% in November.
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London — More than 60 world leaders will join hundreds of business executives and campaigners at the Swiss ski resort of Davos Monday for the five-day annual meeting of the World Economic Forum, where they will discuss some of the biggest global challenges.  

Critics say the summit is a meeting of the super-rich and that it fails to tackle growing global inequality. 

The issues on the Davos agenda appear daunting: in the immediate term, worsening conflicts in many parts of the world along with Houthi attacks on commercial shipping in the Red Sea; and wider threats including potentially catastrophic climate change, a weak global economy and fears over the adverse impacts of artificial intelligence. 

In its Global Risks Report 2024, published Wednesday, summit organizers highlighted misinformation and disinformation as the biggest short-term risk.

“The potential impact on elections worldwide over the next two years is significant, and that could lead to elected governments’ legitimacy being put in question. And this, in turn, could, of course, threaten democratic processes that lead to further social polarization, riots, strikes, or even intra-state violence,” report co-author Carolina Klint of the risk consultancy Marsh McLennan, told a London press conference Wednesday. 

The report labeled extreme weather events and climate change as the top long-term risks over a 10-year time frame.  

“Yes, it’s a very gloomy outlook, but by no means is it a hard, fast, set prediction of the future,” Saadia Zahidi, the economic forum’s managing director said. “The future is very much in our hands. Yes, there are structural shifts under way but most of these things are very much in the hands of decision-makers across different stakeholders and that’s where the effort really needs to be,” she told reporters. 

The Davos summit takes place against the backdrop of two major wars, in Ukraine and Gaza. 

Among those due at the Alpine ski resort are Israeli President Isaac Herzog, Ukrainian President Volodymyr Zelenskyy, Chinese Premier Li Qiang and U.S. Secretary of State Antony Blinken.  

United Nations Secretary General Antonio Guterres will attend, along with EU Commission President Ursula von der Leyen and French President Emmanuel Macron. 

Alongside the political leaders will be hundreds of the world’s most powerful chief executives, including the head of OpenAI, Sam Altman, and Microsoft’s chief executive officer, Satya Nadella.   

Critics say the wealth of the world’s super-rich has increased, while billions around the world have become poorer over the past decade – and Davos will do little to reverse that trend. 

“Across the world people are feeling extraordinary hardship. And at the same time there’s a few sprinting off at the very top into the distance. And some of them will be in Davos,” said Nabil Ahmed of aid agency Oxfam International. 

“It is, yes, a space for dialogue, for important discussions, even for holding political and business leaders to account. It’s why organizations like Oxfam take part. But it’s also not an international, democratic space in which transparent, accountable decisions are being made,” Ahmed told VOA. 

The summit organizers say it’s vital to bring together political and business leaders to find solutions to the world’s myriad challenges.
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More than 60 world leaders will join hundreds of business executives and campaigners at the Swiss ski resort of Davos for the five-day annual meeting of the World Economic Forum, starting Monday. On the agenda at this year’s meeting are some of the biggest global challenges including the impact of disinformation worldwide. Henry Ridgwell reports.
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Geneva — The International Labor Organization warns global unemployment is set to rise this year, putting a brake on the gradual recovery of nations from the dire economic straits brought about by the COVID-19 pandemic.  

Data from the ILO’s World Employment and Social Outlook: Trends 2024 report finds global unemployment in 2023, which stood at 5.1%, was at its lowest level since the start of the pandemic in 2019. That rate is projected to increase to 5.2% in 2024.

While the report finds labor markets in 2023 showed “surprising resilience despite deteriorating economic conditions,” it says a deeper analysis of economic trends finds worrying signs of growing fragility and imbalances in labor markets.

“In a time of interacting and multiple crises, this is eroding progress toward greater social justice in the world,” said Gilbert Houngbo, ILO director-general, at the launch of the report in Geneva Wednesday.

“There is still a significant shortage of decent work, jobs in which employees are secure and treated with respect…We believe high quality, decent work is a pre-requisite for sustainable development and for building social justice.”

The ILO chief said an area of great concern was the worsening jobs gap rate, that is, the number of people who would like to work but cannot find employment.  

“In 2023, 189 million people were officially reported as being unemployed worldwide. However, more than double that number, 435 million people, wanted employment but could not find it,” he said.

The report finds high income countries are doing better than lower income countries in narrowing the jobs gap rate, which stood at 8.2% in the richer countries compared to 20.5% in the poorer ones. Similarly, it notes unemployment in rich countries stood at 4.5% in 2023, while it was 5.7% in low-income countries.

The ILO reports the absolute number of workers living in extreme poverty grew by about one million last year to more than 241 million people, each of whom earned less than $2.15 a day.

On a slightly more positive note, the report observed that the rates of informal work have returned to close to pre-pandemic levels, “though the number of informal workers reached two billion people in 2023 because of the growing labor force.” 

It notes that informal work will account for around 58% of the global workforce in 2024.

The return to pre-pandemic labor market participation rates has varied between different groups. While women’s participation has bounced back quickly, the report found that “a notable gender gap still persists,” especially in emerging and developing nations.

“The gap between men and women is not improving and that is very worrisome,” said Houngbo. “In the post-COVID environment, women workers have gone more in the informal sector than in the formal economy which in itself has a direct impact on the quality of the job.”

The report also found that youth unemployment rates continue to present a challenge for long-term employment prospects.

“Youth unemployment is a particular problem in Africa,” said Richard Samans, director of research at the ILO.  “Worldwide, young people — that is people in the workforce of working age, but less than 24 years old — they have an unemployment rate three-and-a-half times that of working age adults. 

“Part of the problem here is that in Africa, the number of youths who are not in education, employment, and training is high and is going up quite strongly. So, this is also a worrying development in the case of Africa,” he said.

After a brief post-pandemic boost, the ILO report notes labor productivity has returned to the low level seen in the previous decade. It finds that despite technological advances and increased investment, productivity growth has continued to slow.

Samans blames under-investment in addressing skills shortages as a main reason for technology’s failure to boost productivity.

“We see in countries like the United States a historic under investment in active labor market policies, which is to say skilling as well as employment services and income support during that period.  

“All of these things, the low pay, precarity, health issues, ageing populations, and particularly under investment in skills in a very dynamic and changing economic environment are some of the most salient issues that will persist and arguably and potentially even grow larger in the U.S. and a number of other high-income countries,” he said.
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