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Sri Lanka blocked access to social media platforms Sunday after authorities imposed a weekend nationwide curfew to contain protests over a worsening economic crisis.

The South Asian nation is facing severe shortages of food, fuel and other essentials, along with sharp price rises and crippling power cuts, in its most painful downturn since independence from Britain in 1948.

President Gotabaya Rajapaksa imposed a state of emergency Friday, the day after a crowd attempted to storm his home in the capital, Colombo, and a nationwide curfew is in effect until Monday morning.

Facebook, YouTube, Twitter, Instagram and WhatsApp were among the platforms shut down by internet service providers on the orders of defense authorities, the pro-government Ada Derana news channel said.

“On the request of the defense ministry, service providers advised to temporarily restrict social media platforms,” the broadcaster said, quoting Sri Lanka’s media regulator.

Anonymous activists had called for mass protests Sunday on social media before the order went into effect.

Hundreds of people defied the curfew on Saturday night and staged small demonstrations in various Colombo neighborhoods, but dispersed peacefully, police and residents said.

The anti-government hashtags “#GoHomeRajapaksas” and “#GotaGoHome” have been trending locally for days on Twitter and Facebook after severe shortages of essentials, sharp price rises and crippling power cuts.

Police said one social media activist was arrested on Friday for allegedly posting material that could cause public unrest.

Western ambassadors in Colombo have expressed concern over the use of emergency laws to stifle democratic dissent and said they were closely monitoring developments.

Armed troops have been deployed around the country to maintain order.

Foreign exchange shortage

A critical lack of foreign currency has left Sri Lanka struggling to service its ballooning $51 billion public debt, with the pandemic torpedoing vital revenue from tourism and remittances.

The crisis has also left the import-dependent country unable to pay for sorely needed goods.

Diesel shortages have sparked outrage across Sri Lanka in recent days, causing protests at empty pumps, and electricity utilities have imposed 13-hour blackouts to conserve fuel.

Many economists also say the crisis has been exacerbated by government mismanagement, years of accumulated borrowing, and ill-advised tax cuts.

Sri Lanka is in negotiations for an International Monetary Fund bailout and ratings agencies have cast doubt over the government’s ability to service its spiraling $51 billion in public debt.
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America’s employers extended a streak of robust hiring in March, adding 431,000 jobs in a sign of the economy’s resilience in the face of a still-destructive pandemic and the highest inflation in 40 years.

The Labor Department’s report Friday showed that last month’s job growth helped reduce the unemployment rate to 3.6%, the lowest level since the pandemic erupted two years ago.

Despite the inflation surge, persistent supply bottlenecks, the damaging effects of COVID-19 and now a war in Europe, employers have added at least 400,000 jobs for 11 straight months.

Inflation may be starting to weaken consumer spending, the main driver of the economy. Americans increased their spending by just 0.2% in February, down from a much larger gain in January.

Still, the job market has continued to rebound with unexpected speed from the coronavirus recession. Job openings are at a near-record level, and applications for unemployment benefits have dropped to near their lowest point since 1969.
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More than 20% of Taiwanese under the age of 40 say they lack savings and 65% report they are in debt, according to new survey findings from a Taiwanese job site, highlighting the growing generational wealth gap here.

Conducted by the job search website “yes123,” the survey further revealed that only one-third of respondents said their income exceeds their expenses, while the rest said their income either only met their monthly needs or fell below them.  

Nearly half of all debt was attributed to tuition fees, followed by debt linked to loans, credit cards and vehicle expenses, according to respondents. Some 41.8% of respondents said their debt was high enough that they felt economic pressure. 

The results highlight the long-term impact of Taiwan’s two-decade wage stagnation, said Taipei-based fair wage advocate Roy Ngerng, who also writes about Taiwan’s economy for local media.

Growth in real wages – the value of wages adjusted for inflation – slowed around 2002 as Taiwan’s manufacturing-led economy underwent major structural changes. Real wages remained roughly the same until 2019 when they finally began to recover, according to government statistics.

“For people in their 40s today, 20 years ago, they were earning higher starting pay, and managed to continue earning higher and higher pay based on annual increments if they stayed on the same job,” Ngerng told VOA.

“But then for younger workers, they started entering the workforce during a time when wages stagnated and do not have the same opportunity to see their wages grow, so there is a massive gap between those above their 40s, and those below their 40s,” he said.

Taiwan’s rising housing costs have also made it difficult for young people to climb the property ladder — a key way to accrue savings — without family help. It is not uncommon to live at home long after graduating as a means to save money as rent has also climbed in urban centers.  

Taiwanese investigative magazine Commonwealth reported last year that Taiwan is undergoing its biggest real estate boom since the 1980s, when the economy took off with advanced manufacturing.

Today, even small housing units in Taipei can command prices exceeding $1 million, depending on location within the city and certain amenities, like elevators and guards for residential buildings, while other parts of Taiwan are catching up. Surveying 70,000 transactions, the magazine found that housing prices across six cities including Taipei rose more than 30% between 2019 and 2021.  

Much of the inflated prices in housing is fueled by the long running problem of property speculation in Taiwan and very little social housing. It is also not uncommon for wealthy landlords in Taipei and elsewhere to own multiple apartments, and even leave them empty rather than face the hassle of tenants.

Last year Taiwan’s Ministry of Finance reported unoccupied houses and apartments make up nearly 12% of Taiwan’s housing stock, or 876,000 units.

Recent university graduates, by contrast, make an average of around $1,000 a month, according to another survey by yes123. The figure is not far off from the average monthly salary of about $975 for a recent graduate in 2000, according to the Labor Ministry.

“The general story over the past couple of decades has been that wage growth has been really, really flat and a lot of that also reflects that minimum wage adjustments … have also been relatively flat,” said Nick Marro, an analyst for China, Taiwan and Macau at the Economist Intelligence Unit.

At $913 a month, Taiwan’s minimum wage is considered extremely low for an advanced economy, but the government has started taking steps to address the imbalance. Last year, the government raised minimum wage 5.21%, the highest rate in 15 years, but it may take more than that to address the wage gap.

“Taiwan has just generally struggled with this culture of a really weak wage environment, and that’s one of the reasons why a lot of Taiwan youth struggle with savings and also look, to move abroad,” said Marro.

“I think a lot of the refrain over the past couple of years has been how the economy has really struggled, but in fact many economic fundamentals are better than people realize,” he also said. “But it’s the mindset, I think, which keeps businesses really, really hesitant on raising wages further.”

Marro said low inflation has kept many Taiwanese relatively complacent, but that could change if Taiwan sees U.S.-style increase in prices from rising energy costs. It could also push even more to seek opportunities abroad, adding to Taiwan’s already high level of brain drain.

The United States is undergoing its worst inflation in 40 years thanks in part to rising energy prices and fallout from the pandemic.

Prices in Taiwan are already up this year, according to the Directorate-General of Budget, Accounting and Statistics, which reported food prices were up 5.29% in February from one year earlier, while fuel prices rose 16.88%.
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In his new budget, U.S. President Joe Biden has proposed a 20 percent minimum tax on households with a net worth of more than $100 million. The proposal highlights the debate over what the government should do about the soaring fortunes of the wealthiest Americans. VOA’s Laurel Bowman reports.
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The Democratic Republic of Congo this week became the seventh country to join the East African Community. The regional trade bloc, which includes Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda, now reaches a quarter of Africa’s population, stretching from the Indian Ocean to the Atlantic.

The 90 million people in the Democratic Republic of Congo will be able to move freely and do business in six other African countries.

The leaders of Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda welcomed Congo to the East African Community in a ceremony Monday. 

Kenyan President Uhuru Kenyatta spoke, stressing cooperation as the group’s cornerstone.

“I proudly and warmly welcome our brothers and sisters from the Democratic Republic of Congo to the East African Community. We look forward to joining hands in strengthening our community together. Working together, we have more to gain than when we are separate,” Kenyatta said.

Ezra Munyambonera, an economic researcher at the Economic Policy Research Center, says Congo’s addition to the EAC will benefit all the countries in the bloc.

“It (the DRC) has a lot of resources [and it] joining the East Africa Community adds more to microeconomic conditions and microeconomic stability of the region in terms of foreign earnings and attracting investments in the region for wider economic growth,” Munyambonera said. 

The mineral-rich nation is a member of two more regional blocs, the Southern African Development Community and the Common Market for Eastern and Southern Africa, or COMESA. 

Erastus Mwencha, a former secretary-general of COMESA, says the continent needs to scale up its production capabilities to benefit from integration and take advantage of its natural resources. 

“The tradable is not that much and so the region needs to develop trade with production, to really go beyond just looking at trade within but also to cater [to] the production aspect. The economies are not deep enough, we tend to produce primary products and because of that, they are not very much integrated,” Mwencha said.

The countries in the EAC bloc have not been able to fully establish a customs union, and while they are working on having a common currency by 2023, experts say that deadline likely will not be met. 

Mwencha says the DRC technology sector will provide more opportunities for entrepreneurs.   

“Whether you are looking at banking industries, fintech, because it’s a big country, which requires the banks to communicate throughout the country, or other services such as the education sector, health sector, there is a lot, in other words, of e-services,” Mwencha said.

As part of the East African Community, the DRC will enjoy lower tariffs and administrative barriers, something it hasn’t experienced for decades, despite using the ports of Mombasa, Kenya and Dar es Salaam, Tanzania, to import most of its goods.
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An inflation gauge closely monitored by the Federal Reserve jumped 6.4% in February compared with a year ago, with sharply higher prices for food, gasoline and other necessities squeezing Americans’ finances.

The figure reported Thursday by the Commerce Department was the largest year-over-year rise since January 1982. Excluding volatile prices for food and energy, so-called core inflation increased 5.4% in February from 12 months earlier.

Robust consumer demand has combined with shortages of many goods to fuel the sharpest price jumps in four decades. Escalating the inflation pressures, Russia’s invasion of Ukraine has disrupted global oil markets and accelerated prices for wheat, nickel and other key commodities.

The inflation spike took a toll on consumers, whose spending in February rose just 0.2%, down from a much larger 2.7% gain in January. Adjusted for inflation, spending actually fell 0.4% last month.

The Federal Reserve responded this month to the inflation surge by raising its benchmark short-term interest rate by a quarter-point from near zero, and it’s likely to keep raising it well into next year. Because its rate affects many consumer and business loans, the Fed’s rate hikes will make borrowing more expensive and could weaken the economy over time.

Michael Feroli of JPMorgan is among economists who now think the Fed will raise its key rate by an aggressive half-point in both May and June. The central bank hasn’t raised its benchmark rate by a half-point in two decades, a sign of how concerned it has become about the persistent surge in inflation.

On a monthly basis, prices rose 0.6% from January to February, up slightly from the previous month’s increase of 0.5%. Core prices rose 0.4%, down from a 0.5% increase in January.

Gas prices have soared in the past month in the aftermath of Russia’s invasion, which led the United Kingdom and the Biden administration to ban Russia’s oil exports. The cost of a gallon of gas shot up to a national average of $4.24 a gallon Wednesday, according to AAA. That’s up 63 cents from a month ago, when it was $3.61.

Thursday’s report follows a more widely monitored inflation gauge, the consumer price index, that was issued earlier this month. The CPI jumped to 7.9% in February from a year ago, the sharpest such increase in four decades.

Many economists still expect inflation to peak in the coming months. In part, that’s because price spikes that occurred last year, when the economy widely reopened, will begin to make the year-over-year price increases appear smaller. Yet Fed officials project that inflation, as measured by its preferred gauge, will still be a comparatively high 4.3% by the end of this year.
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The ruble is no longer rubble.

The Russian ruble by Wednesday had bounced back from the fall it took after the U.S. and European allies moved to bury the Russian economy under thousands of new sanctions over its invasion of Ukraine. Russian President Vladimir Putin has resorted to extreme financial measures to blunt the West’s penalties and inflate his currency.

While the West has imposed unprecedented levels of sanctions against the Russian economy, Russia’s Central Bank has jacked up interest rates to 20% and the Kremlin has imposed strict capital controls on those wishing to exchange their rubles for dollars or euros.

It’s a monetary defense Putin may not be able to sustain as long-term sanctions weigh down the Russian economy. But the ruble’s recovery could be a sign that the sanctions in their current form are not working as powerfully as Ukraine’s allies counted on when it comes to pressuring Putin to pull his troops from Ukraine. It also could be a sign that Russia’s efforts to artificially prop up its currency are working by leveraging its oil and gas sector.

The ruble was trading at roughly 85 to the U.S. dollar, roughly where it was before Russia started its invasion a month ago. The ruble had fallen as low as roughly 150 to the dollar on March 7, when news emerged that the Biden administration would ban U.S. imports of Russian oil and gas.

Speaking to Norway’s parliament on Wednesday, Ukraine’s president urged Western allies to inflict still greater financial pain on Russia.

“The only means of urging Russia to look for peace are sanctions,” Volodymyr Zelenskyy said in a video message from his besieged country. He added: “The stronger the sanctions packages are going to be, the faster we’ll bring back peace.”

Increasingly, European nations’ purchases of Russian oil and natural gas are coming under scrutiny as a loophole and lifeline for the Russian economy.

“For Russia, everything is about their energy revenues. It’s half their federal budget. It’s the thing that props up Putin’s regime and the war,” said Tania Babina, an economist at Columbia University who was born in Ukraine.

Babina is currently working with a group of 200 Ukrainian economists to more accurately document how effective the West’s sanctions are in stymying Putin’s war-making capabilities.

The ruble has also risen amid reports that the Kremlin has been more open to cease-fire talks with Ukraine. U.S. and Western officials have expressed skepticism about Russia’s announcement that it would dial back operations.

President Joe Biden promoted the success of the sanctions — some of the toughest ever imposed on a nation — while he was in Poland last week. “The ruble almost is immediately reduced to rubble,” Biden said.

Sanctions on Russian financial institutions and companies, on trade and on Putin’s power brokers were crushing the country’s economic growth and prompting hundreds of international companies to stop doing business there, Biden noted.

Russian efforts to counter those sanctions by propping up the ruble can only go so far.

Russia’s Central Bank cannot keep raising interest rates because doing so will eventually choke off credit to businesses and borrowers. At some point, individuals and businesses will develop ways to go around Russia’s capital controls by moving money in smaller amounts. As the penalties depress the Russian economy, economists say that will eventually weigh down the ruble. Without these efforts, Russia’s currency would almost certainly be weaker.

But Russia’s oil and gas exports have continued to Europe as well as to China and India. Those exports have acted as an economic floor for the Russian economy, which is dominated by the energy sector. In the European Union, a dependence on Russian gas for electricity and heating has made it significantly more difficult to turn off the spigot, which the Biden administration did when it banned the relatively small amount of petroleum that the U.S. imports from Russia.

“The U.S. has already banned imports of Russian oil and natural gas, and the United Kingdom will phase them out by the end of this year. However, these decisions will not have a meaningful impact unless and until the EU follows suit,” wrote Benjamin Hilgenstock and Elina Ribakova, economists with the Institute of International Finance, in a report released Wednesday.

Hilgenstock and Ribakova estimate that if the EU, Britain and the U.S. were to ban Russian oil and gas, the Russian economy could contract more than 20% this year. That’s compared with projections for up to a 15% contraction, as sanctions stand now.

Knowing this, Putin has greatly leveraged Europe’s dependence on its energy exports to its advantage. Putin has called for Russia’s Central Bank to force foreign gas importers to purchase rubles and use them to pay state-owned gas supplier Gazprom. It’s unclear whether Putin can make good on his threat.

The White House and economists have argued that the impact of sanctions takes time, weeks or months for full effect as industries shut down due to a lack of materials or capital or both. But the administration’s critics say the ruble’s recovery shows the White House needs to do more.

“The ruble’s rebound would seem to indicate that U.S. sanctions haven’t effectively crippled Russia’s economy, which is the price Putin should have to pay for his war,” said Sen. Pat Toomey, R-Pa.

“To give Ukraine a fighting chance, the U.S. must sever Putin’s revenue stream by cutting off Russian oil and gas sales globally,” Toomey said in an email to The Associated Press.

Sen. Sherrod Brown, chairman of the Senate Banking, Housing and Urban Affairs Committee, said Wednesday that lawmakers are considering ways to expand the sanctions Biden recently imposed on members of the Russian parliament “and probably widen that to other political players.” Brown, D-Ohio, said lawmakers also are weighing more penalties against banks.

Western leaders, under Biden’s encouragement, embraced sanctions as their toughest weapon to try to compel Russia to reverse its invasion of Ukraine, which is not a member of NATO and not protected under that bloc’s mutual defense policy.

Some of the allies now acknowledge their governments may need to redouble financial punishment against Russia.

British Prime Minister Boris Johnson said Wednesday that the Group of Seven major industrial nations should “intensify sanctions with a rolling program until every single one of (Putin’s) troops is out of Ukraine.”

But that’s a tougher ask for other European countries such as Germany, which depend on Russia for vital natural gas and oil. The EU overall gets 10% of its oil from Russia and more than one-third of its natural gas.

Many of those countries have pledged to wean themselves off that dependence — but not immediately.

If European nations did move more quickly off Russian petroleum, wrote analyst Charles Lichfield of the Atlantic Council, “a more comprehensive embargo from Europe would threaten Russia’s current account surplus — suddenly making it more difficult to pay public-sector salaries and wage war.”

He noted that “such an outcome may be beyond the reach of Western consensus.”
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Russia’s military invasion of Ukraine has not only created one of the world’s most tragic humanitarian crises but resulted in economic devastation that will reverberate far beyond Ukraine’s borders.
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For Mumbai resident Shailesh Kambli a childhood dream is about to translate into reality. The 40-year-old is the third generation of his family living in a cramped, 15-square meter room along with his parents, brother and sister-in-law.

These tenements are housed in dilapidated buildings that stretch across about 37 hectares in the heart of India’s financial capital, where real estate is among the most expensive in the world.

All around the BDD Chawls, as they are called, prime commercial and residential buildings have mushroomed in recent decades as India’s financial capital, home to more than 20 million people, developed at a frenetic pace.

“Whenever I went out, I wanted to own a house, however tiny, in one these buildings,” Kambli recalls. “I even told my uncle that one day I will live in such a place.”

Now that aspiration is within his grasp.

Under a massive $2 billion redevelopment project, the 16,000 dingy settlements built over four floors will be pulled down to make way for high rise buildings in which the occupants will swap their living quarters for a 46-square meter apartment.

It is part of ambitious plans that space-starved Mumbai has long pursued with limited success — clearing up prime land on which old structures, shanties and slums sit to replace them with tall buildings that besides residential units, include office blocks and shopping malls.

Some urban planners however have raised concerns that the project will add enormous pressure in an already crowded city that is short on infrastructure.

The BDD Chawls, where the rooms built by the British a century ago for migrant cotton mill workers stretch on both sides of a corridor, are in urgent need of a revamp.

Inside most homes, a curtain separates the counter at one end that serves as a kitchen from the rest of the space that doubles as a bedroom and a living room. Televisions are mounted over the bed or in a corner. Two bathrooms serve the 20 rooms in each block. The occupants pay a meager rent to the government.

The elderly often spend their day in the corridor between the rooms where clothes hang for drying, or in a courtyard outside as they chat or look after small children, while the young go out to work.

These days, residents sometimes stop by at a sample flat that is showcased opposite one of the blocks to take a peek into what the future may hold.

“I don’t know when my turn will come. It may still take years. But it will be great to have a modern flat,” said 55-year-old Bhagwan Sawant as he proudly points to the neat kitchen, the two bedrooms and two attached toilets.

The new complexes will also have a hospital, hostels, schools, and gyms. “The work has started on the first building and it will be ready in three years,” said Prashant Dhatrak, the executive engineer of the project. “But the entire development will take seven years.”

The redevelopment project took more than two decades to get off the ground after it was first proposed.

However, some urban planners point out that Central Mumbai, where the project is coming up, is already congested with high rise buildings and question how it will bear the additional pressure of more such complexes. They say that in a city with the highest population density in the country, too much of the land is often handed over to developers for residential and commercial complexes instead of making public parks.

“Cities cannot be transformed in this way. Redevelopment is necessary but rebuilding has to be done in a sustainable and environmentally friendly manner,” said Sulakshana Mahajan, who as a member of the Mumbai Transformation Support Unit, a state government think-tank set up in 2005, was involved in initial proposals for the redevelopment of the tenements. The think tank was shut down in 2019.

“Our initial idea was not to increase density in the area and to restrict the development for existing residents. But under the new plan, there are too many buildings being constructed,” said Mahajan. “Open spaces available per person will be drastically shrunk and the distance between buildings is too little. It will also create a huge strain on services such as water supply, sanitation and transportation.”

In an island city with little space to grow except vertically, the search for land has intensified in the last two decades. Authorities have also proposed clearing out Asia’s biggest slum, Dharavi, that sits on two square kilometers of prime space to replace it with skyscrapers and shopping malls, but the plan has made little headway so far.

In the BDD Chawls, however the larger question of sustainability is not on the minds of those who have long lived with shared toilets, but only a sense of anticipation. At the same time, there is a creeping sense that a way of life that revolved around the community will end when they eventually move out.

“Here, I never have to worry about my mother. All of us work, but we know that someone will look after her if she is unwell,” said Kambli. “But when we shut the door in the new flat, no one will know what is happening inside.”

“You just give one shout here and everyone gathers,” laughs Ranjana Gurav. “When there are marriages or celebrations or a problem, we are all there to help each other.”
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Australia’s 11-year-old carbon credit scheme aims to reward farmers, landholders and other businesses to store carbon in trees, the soil or to use different methods to cut emissions.

For every ton of greenhouse gases stored or prevented, projects registered under Australia’s official $3.4 billion Emissions Reduction Fund receive a carbon credit. The credit is essentially a certificate or permit allowing the holder to emit a ton of greenhouse gas.

Most credits have been bought by the government in Canberra, while a growing number are privately traded by companies wanting to offset their own emissions.

However, new research has uncovered alleged widespread inconsistencies in the system.

The study was undertaken by Australian National University law professor Andrew Macintosh, who was involved in the development of the initial scheme.

He told the Australian Broadcasting Corp. that most of the credits do not represent a real or extra carbon abatement.

“What we have got happening at the moment is a collection of things across a range of methods; issuing credits to not clear forests that were never going to be cleared, to issue credits for growing trees that simply are not there, or issuing credits for growing trees that are already there, or in the case of that landfill gas, giving people credits for capturing and combusting methane in circumstances where it would have been done anyway because it is commercially viable to do it,” he said.

Macintosh has called for the entire program to be scrapped and for the process to start again from scratch.

In response, Australia’s Clean Energy Regulator, which runs the initiative, said it would assess the research.

It has, however, insisted the projects it manages are carefully monitored. The regulator rejected assertions in the study that between 70 to 80% of the carbon credits issued were essentially worthless.

Australia’s center-right government pledged last year to deliver net zero emissions by 2050 “in a practical, responsible way…while preserving Australian jobs and generating new opportunities for industries.”

Campaigners, however, have argued that the government’s strong support for the fossil fuel industries is environmentally irresponsible.

Australia has high rates of per capita emissions in large part because of its reliance on coal for much of its electricity generation.
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Last month, not quite two years after the COVID-19 pandemic sent the U.S. and world economies into their steepest downturn in decades, Chris and Amy Hillyard renewed the lease on their downtown Oakland coffee spot, Farley’s East.

The location had notched record sales in February 2020 and then, like all other “non-essential” local businesses, had to shut the following month as authorities moved to curb the spread of the new and deadly infection.

Two years on, most of the nearby office workers who used to pop in for lunch and lattes are still doing their jobs from home, and the cafe still doesn’t bring in enough money to cover monthly expenses, Chris Hillyard said. 

That’s despite their landlord agreeing to a slightly lower rent for the new five-year term, he said. But Hillyard is undeterred.

“Two bad years isn’t going to kill us off,” he said. “We’ll get through it… We are betting on that happening.”

On the face of it, it’s a good bet. COVID cases have dropped, schools have loosened rules, and more local businesses are bringing workers back to their offices. Last quarter, the vacancy rate for U.S. office space fell for the first time since mid-2019, figures from CBRE Econometric Advisors show.

There’s still a long way to go. CBRE economists don’t expect the vacancy rate to ease to its 30-year average of 15% until 2026.

A back-to-work barometer measuring keycard swipes and other building access data from security firm Kastle Systems registered just 40% of pre-pandemic levels across 10 major cities this week; the San Francisco metro area registered around 30%.

“This is about to jump considerably,” said Phil Ryan, director of U.S. Office Research at JLL, citing announcements from large tech and financial tenants to have employees back in the office at least half time beginning in late March. “Over the short-term, foot traffic is likely to rise.”

High inflation, scarce labor

Still, Hillyard’s optimism is challenged by inflation that’s already the highest in 40 years and could rise even more.

Consumer prices were up 7.9% in February year over year, and look set to post an even bigger gain this month as Russia’s invasion of Ukraine drives up the price of gas, wheat and other commodities.

The Hillyards are feeling the pinch. Each week brings a new notice from one supplier or another: a March 1 price hike from the bakery that supplies its pastries, a half-gallon of milk now $2.68 instead of $2.25, a 25% increase in the price of coffee beans.

To compensate, Farley’s raised its own prices last month for the first time since the start of the pandemic, about 10% for most items. And though customers seemed to take it in stride, it’s not something Hillyard says he will be able to soon repeat.

“Prices can’t keep going up or the whole system will go down,” Hillyard said.

Meanwhile, he said he can’t hire enough workers, despite offering higher pay. The Oakland-area workforce – the pool of those working or in the market for a job – has been recovering but was about 33,000 people short of its prepandemic level in January, according to the Bureau of Labor Statistics. That’s a deficit of about 2.3% from February 2020, 2 percentage points greater than the national average.

With only five employees on shifts that really need six, “it’s hard on the staff because they are asked to do more,” he said.

Nonetheless, the Hillyards are hopeful. One reason is the success of their second, smaller operation in San Francisco’s Potrero Hill neighborhood, where sales have rebounded to pre-pandemic levels thanks to plenty of foot traffic from work-from-homers and brisk sales of a new line of merchandise including T-shirts, totes and coffee mugs.

A second reason is the long-planned opening of two airport locations, one in San Francisco, where international travel is still sluggish, and a second one starting last month at Oakland airport, where Southwest Airline’s domestic business is burgeoning.

Yes, local gas prices jumped about a dollar on the gallon in the weeks after Russia’s invasion, and Hillyard says he’s probably in for fuel surcharges ahead as delivery trucks try to recoup losses.

But after two rough years, “I just can’t worry about something so specific,” he said.

“We’re just looking to move forward and sell more coffee.”
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Globalization, which has both fans and detractors alike, is being tested like never before after the one-two punch of COVID and war.

The pandemic had already raised questions about the world’s reliance on an economic model that has broken trade barriers but made countries heavily reliant on each other as production was delocalized over the decades.

Companies have been struggling to cope with major bottlenecks in the global supply chain.

Russia’s war in Ukraine has raised fears about further disruptions, with everything from energy supplies to auto parts to exports of wheat and raw materials under threat.

Larry Fink, the head of financial giant BlackRock, put it bluntly: “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades.”

“We had already seen connectivity between nations, companies and even people strained by two years of the pandemic,” Fink wrote in a letter to shareholders Thursday.

But U.S. Treasury Secretary Janet Yellen disagrees.

“I really have to push back on that,” she told CNBC in an interview. 

“We’re deeply involved in the global economy. I expect that to remain, it is something that has brought benefits to the United States, and many countries around the world.”

‘An animal that evolves’

Shortages of surgical masks at the outset of the pandemic in 2020 became a symbol of the world’s dependence on Chinese factories for all sorts of goods.

The conflict between Russia and Ukraine has raised concerns about food shortages around the globe as the two agricultural powerhouses are among the major breadbaskets of the world.

It has also put a spotlight on Europe’s — and especially Germany’s — heavy dependence on gas supplies from Russia, now a state under crippling sanctions.

“A number of vulnerabilities” have emerged that show the limits of having supply chains spread out in different locations, the former director general of the World Trade Organization, Pascal Lamy, told AFP.

The global trade tensions have prompted the European Union, for instance, to seek “strategic autonomy” in critical sectors.

The production of semiconductors — microchips that are vital to industries ranging from video games to cars — is now a priority for Europe and the United States.

“The pandemic did not bring radical changes in terms of reshoring (bringing back business from overseas),” said Ferdi De Ville, professor at Ghent Institute for International & European Studies.

“But this time it might be different because (the conflict) will have an impact on how businesses think about their investment decisions, their supply chains,” he said.

“They have realized that what was maybe unthinkable before the past month has now become realistic, in terms of far-reaching sanctions,” said de Ville, author of an article on “The end of globalization as we know it.”

The goal now is to redirect strategic dependence towards allies, what he coined as “friend-shoring” instead of “off-shoring.”

A U.S.-EU agreement Friday to create a task force to wean Europe off its reliance on Russian fossil fuels is the most recent example of friend-shoring.

For Lamy, this shows “there is no de-globalization.”

Globalization, he said, is “an animal that evolves a lot.”

Decoupling from China

Globalization had already faced an existential crisis when former U.S. President Donald Trump launched a trade war with China in 2018, triggering a tit-for-tat exchange of punitive tariffs.

His successor, Joe Biden, invoked the need to “buy American” in his sweeping investment plan to “rebuild America.”

“We will buy American to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails are made in America,” he said in his State of the Union speech.

One concept that emerged during the Trump years was “decoupling” — the idea of untangling the U.S. and Chinese economies.

The threat has not subsided, especially with China refusing to condemn Russia’s invasion of Ukraine.

The United States has warned the world’s second-biggest economy would face “consequences” if it provides material support to Russia in its war in Ukraine.

China already had other contentious issues with the West, such as Taiwan, the self-ruled democracy which Beijing has vowed to seize one day, by force if necessary.

“It is not in China’s interest for now to go into competition with the West,” said Xiaodong Bao, portfolio manager at the Edmond de Rothschild Asset Management firm.

But the war in Ukraine is a chance for China to reduce its reliance on the U.S. dollar. The Wall Street Journal reported that Beijing is in talks with Saudi Arabia to buy oil in yuan instead of dollars.

“China will continue to build foundations for the future,” Bao said. “The financial decoupling is accelerating.” 
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President Joe Biden intends to propose a spending plan for the 2023 budget year that would cut projected deficits by more than $1 trillion over the next decade, according to a fact sheet released Saturday by the White House budget office. 

In his proposal, expected Monday, the lower deficits reflect the economy’s resurgence as the United States emerges from the pandemic, as well as likely tax law changes that would raise more than enough revenue to offset additional investments planned by the Biden administration. It’s a sign that the government’s balance sheet will improve after a historic burst of spending to combat the coronavirus. 

The fading of the pandemic and the growth has enabled the deficit to fall from $3.1 trillion in fiscal 2020 to $2.8 trillion last year and a projected $1.4 trillion this year. That deficit spending paid off in the form of the economy expanding at a 5.7% pace last year, the strongest growth since 1984. But inflation at a 40-year high also accompanied those robust gains as high prices have weighed on Biden’s popularity. 

For the Biden administration, the proposal for the budget year that begins October 1 shows that the burst of spending helped to fuel growth and put government finances in a more stable place for years to come as a result. One White House official, insisting on anonymity because the budget has yet to be released, said the proposal shows that Democrats can deliver on what Republicans have often promised without much success: faster growth and falling deficits. 

Republicans focus on inflation

But Republican lawmakers contend that the Biden administration’s spending has led to greater economic pain in the form of higher prices. The inflation that came with reopening the U.S. economy as the closures from the pandemic began to end has been amplified by supply chain issues, low interest rates and, now, disruptions in the oil and natural gas markets because of Russia’s invasion of Ukraine. 

Senate Republican leader Mitch McConnell of Kentucky pinned the blame on Biden’s coronavirus relief as well as his push to move away from fossil fuels. 

“Washington Democrats’ response to these hardships has been as misguided as the war on American energy and runaway spending that helped create them,” McConnell said last week. “The Biden administration seems to be willing to try anything but walking back their own disastrous economic policies.” 

Biden inherited from the Trump administration a budget deficit that was equal in size to 14.9% of the entire U.S. economy. But the deficit starting in the upcoming budget year will be below 5% of the economy, putting the country on a more sustainable path, according to people familiar with the budget proposal who insisted on anonymity to discuss forthcoming details. 

The planned deficit reduction is relative to current law, which assumes that some of the 2017 tax cuts signed into law by former President Donald Trump will expire after 2025. The lower deficit totals will also be easier to manage even if interest rates rise. Still, Biden’s is offering a blueprint for spending and taxes that will eventually be decided by Congress and could vary from the president’s intentions. 

Economy expands

The expected deficit decrease for fiscal 2022 reflects the solid recovery in hiring that occurred in large part because of Biden’s $1.9 trillion coronavirus relief package. The added jobs mean additional tax revenue, with the government likely collecting $300 billion more in revenues compared to fiscal 2021, a 10% increase. 

Still, the country will face several uncertainties that could reshape Biden’s proposed budget, which will have figures that don’t include the spending in the omnibus bill recently signed into law. Biden and U.S. allies are also providing aid to Ukrainians who are fighting against Russian forces, a war that could possibly reshape spending priorities and the broader economic outlook. 
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The announcement Friday that the United States will help Europe find alternative sources for the 15 billion cubic meters of liquefied natural gas (LNG) that it imports from Russia every year sparked hopes that the region can reduce its reliance on Russia for energy — but it does nothing to reduce the vastly larger amount of pipeline gas that Europe buys from Moscow.

European Commission President Ursula von der Leyen and U.S. President Joe Biden announced the agreement in a joint appearance. Biden is in Europe for a series of meetings with other leaders to coordinate further responses to Russia’s invasion of Ukraine.

In prepared remarks, Biden said that Russian President Vladimir Putin “has used Russia’s energy resources to coerce and manipulate its neighbors.” He said reducing European demand for Russian gas would increase pressure on Russia to stop the war.

He noted that the U.S. had already banned all imports of Russian energy, saying that “the American people would not be part of subsidizing Putin’s brutal, unjustified war against the people of Ukraine.”

“The trans-Atlantic partnership stands stronger and more united than ever,” von der Leyen said. “And we are determined to stand up against Russia’s brutal war. This war will be a strategic failure for Putin.”

A mammoth task

In the wake of Russia’s invasion of Ukraine, countries across Europe have been reassessing their dependence on Russia for energy. Most notable was Germany’s decision to scrap the controversial Nord Stream 2 pipeline, which would have doubled the flow of Russian gas directly to Europe under the Baltic Sea.

Completely detaching Europe from Russian energy supplies will be extremely difficult, however.

While the 15 billion cubic meters (15 bcm) of LNG that the U.S. has pledged to help Europe find would replace virtually all the LNG that comes in from Russia, the countries of Europe buy an additional 150 bcm of Russian natural gas that is delivered via pipeline.

LNG and pipeline gas are the same product in different forms. LNG is compressed into a liquid for storage and transport and is “re-gasified” for use.

Europe ‘at capacity’ for LNG

Experts said that while the new sources of LNG could replace existing Russian LNG imports, they wouldn’t be able to reduce the region’s reliance on pipeline gas.

“Europe has an import capability that is limited, and they don’t have any additional infrastructure that is going to come online,” Charlie Riedl, executive director of the Center for Liquefied Natural Gas, told VOA. “Infrastructure that’s currently operational is basically running at capacity right now, and I would expect that it will run at capacity for the remainder of this year.”

Riedl said that coming into 2022, the amount of gas held in storage by European countries was well below recent averages, making the region especially vulnerable to potential supply disruptions.

In the longer term, Europe will be able to increase its capacity to import LNG, and the U.S. in turn can then increase the amount of LNG it produces and ships to Europe. On Friday, the Biden administration said that it would commit to “maintaining an enabling regulatory environment” with regard to “any additional export LNG capacities that would be needed to meet this emergency energy security objective.”

US energy industry

U.S. energy industry representatives appeared pleased with the announcement.

In a statement sent to VOA, American Petroleum Institute President and CEO Mike Sommers said, “We stand ready to work with the administration to follow this announcement with meaningful policy actions to support global energy security, including further addressing the backlog of LNG permits, reforming the permitting process, and advancing more natural gas pipeline infrastructure.”

He said that the industry had already begun the process of supplying Europe with more U.S.-sourced fuel.

“Over the past few months, American producers have significantly expanded LNG shipments to our allies, establishing Europe as the top U.S. LNG export destination,” Sommers said. “With effective policies on both sides of the Atlantic, we could do even more to support Europe’s long-term energy security and reduce their reliance on Russian energy.”

Reconciling with climate strategy

The creation of new fossil fuel infrastructure might seem difficult to square with pledges by both the European Union and the U.S. to move toward a carbon-neutral future.

However, Biden and von der Leyen on Friday reiterated their commitment to climate pledges and said that new LNG facilities will be constructed in a way that will allow them to be converted for a transition to hydrogen-based power.

In a statement, the White House said, “The United States and the European Commission will undertake efforts to reduce the greenhouse gas intensity of all new LNG infrastructure and associated pipelines, including through using clean energy to power onsite operations, reducing methane leakage, and building clean and renewable hydrogen-ready infrastructure.”

The U.S. and the European Commission also indicated that Europe, with U.S. assistance, will take other steps to reduce reliance on Russian gas, including reducing demand by bringing more renewable power resources online.
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U.N. economists warn prospects for global growth this year are rapidly fading as the adverse impact of the war in Ukraine kicks in.

The U.N. Conference on Trade and Development, UNCTAD, has downgraded a previous more optimistic projection of the world economy to reflect the new reality.

UNCTAD’S updated trade and development report estimates global economic growth will decrease to 2.6% from 3.6% in 2022. It said the main factor behind the significant downgrade is the great uncertainty surrounding the war in Ukraine.

The report said the extent of military destruction, the duration of the war and sanctions against the Russian Federation will compound the ongoing economic slowdown globally and weaken the recovery from the COVID-19 pandemic. It said Russia will experience a deep recession this year.

Director of UNCTAD’s division on globalization and development strategies, Richard Kozul-Wright, said the war likely will increase geopolitical tensions, determine national monetary policies, add to inflationary pressures and hike fuel and commodity prices. He said all regions of the global economy will be adversely affected by the crisis, some more than others.

European Union faces downgrade

“The European Union will see a fairly significant downgrade in its growth performance this year, but so will parts of central and southern Asia as well,” Kozul-Wright said. “… And countries that might not see a very significant downgrade in their growth performance, such as sub-Saharan Africa, are particularly vulnerable to some of the commodity price hikes that we see in those countries that are very large food importers, particularly wheat.”

Kozul-Wright said the very large level of external debt facing developing countries is of particular concern. The report projects developing countries will require $310 billion to service their external public debt this year.

“Partly as a consequence of the additional debt that was acquired during the COVID-19 shock … developing countries still cannot get the necessary fiscal support from the multilateral financial institutions that they need to be able to respond to unanticipated economic shocks,” Kozul-Wright said.

U.N. economists said measures to help developing countries cope with the crisis must be strengthened. They said there must be a more rigorous, serious, effective attempt to restructure their external debt so they can get back to a reasonable growth path.

 
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The number of Americans applying for unemployment benefits last week fell to its lowest level in 52 years as the U.S. job market continues to show strength in the midst of rising costs and an ongoing virus pandemic.

Jobless claims fell by 28,000 to 187,000 for the week ending March 19, the lowest since September of 1969, the Labor Department reported Thursday. First-time applications for jobless aid generally track the pace of layoffs.

The four-week average for claims, which compensates for weekly volatility, also fell to levels not seen in five decades. The Labor Department reported that the four week moving average tumbled to 211,750 from the previous week’s 223,250.

In total, 1,350,000 Americans were collecting jobless aid the week that ended March 12, another five-decade low.

Earlier this month, the government reported that employers added a robust 678,000 jobs in February, the largest monthly total since July. The unemployment rate dropped to 3.8%, from 4% in January, extending a sharp decline in joblessness to its lowest level since before the pandemic erupted two years ago.

U.S. businesses posted a near-record level of open jobs in January — 11.3 million — a trend has helped pad workers’ pay and added to inflationary pressures.

The Federal Reserve launched a high-risk effort last week to tame the worst inflation since the early 1980s, raising its benchmark short-term interest rate and signaling up to six additional rate hikes this year.

The central bank’s policymakers have projected that inflation will remain elevated, ending 2022 at 4.3%.

Earlier this month, the government reported that consumer inflation jumped 7.9% over the past year, the sharpest spike since 1982.
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The world is feeling the effects of the war in Ukraine from the gas pump all the way to the dinner table.

Food prices are climbing just about everywhere, raising the risk of civil unrest, especially in countries dependent on imported wheat from Russia and Ukraine. That includes much of the Middle East and North Africa.

Experts say the food price increases are happening at an especially bad time.

“It’s kind of a perfect storm,” said Cornell University economics professor Chris Barrett. “It’s not just a matter of, food prices are going high. It’s food prices are going high at a moment when many places are already crippled by the challenges posed by COVID, by political disruptions elsewhere, by droughts and floods and other natural disasters.”

“And there’s only so much that people can take before they grow displeased with their political leadership if it’s failing to take care of them,” he added. “So, unrest is, unfortunately, increasingly likely right now.”

Conflict worsens inflation

Russia is the world’s leading wheat exporter. Ukraine is number five. Together, they grow up to a third of the world’s wheat exports.

But when war broke out, the Black Sea became a combat zone. Some cargo ships took fire. It didn’t take sanctions to cut off exports.

“There wasn’t a ban on grain trade, but in effect the ports were closed. And so shipment has stopped,” said Texas A&M University economist Mark Welch.

“Countries that import from Ukraine and Russia have suddenly found their contracts canceled and they’re not getting food shipments they were expecting, which forces them into the market to pay a premium to replace food shipments that just aren’t going to arrive,” Barrett said. “And that bids up the price of food around the world.”

But food prices have been rising for almost two years.

Bad weather cut harvests in some of the world’s breadbaskets. Reserves are low.

That’s helped push prices to record highs even before the conflict started.

“We’ve tipped over that edge where every change, every little thing, has a very large impact,” University of Illinois economist Joe Janzen said.

More problems coming

Now, Ukraine’s next harvest is in doubt. Farmers should be getting ready for the next growing season. But that’s hard to do right now.

“Logistical lines are obviously heavily disrupted right now,” Barrett said. “Seeds aren’t arriving. Fuel isn’t arriving. Fertilizer isn’t arriving.”

Russia’s farmers are getting hit, too. They’re not under sanctions. But Russia’s banks are. That basically shuts Russian farmers out of the financial system.

“We’re not going to say, ‘You can’t ship grain,'” Welch said. “But will they ship it if they can’t get paid?”

Then there’s the sharp increase in energy prices that makes shipping everything more expensive.

Also, natural gas is a main ingredient in fertilizers commonly used to boost grain yields. So fertilizer costs more to make.

“Fertilizer prices last year were already quite high. They had come down somewhat in the last few months and now are very high again,” Janzen said, “in part because Russia and its ally Belarus are major fertilizer exporters.”

And Russia and Belarus are both under sanctions for the Ukraine invasion.

But those are problems for the next crop. People in parts of the Middle East and North Africa are feeling the effects now.

Fragile situations

“Yemen is a good case in point,” Barrett said. “There’s not a lot of wheat being grown in Yemen. They depend entirely upon wheat imports, and that requires transportation to get there.”

“The spike in global wheat prices plus the spike in global oil prices mean that prices for flour and for bread products in Yemen are already increasing significantly in a place where people really can’t afford to face an even higher cost of feeding their family basic daily rations,” he added.

In 2011, rising bread prices were one of the factors that set off the Arab Spring protests. When people already have grievances with their government, food inflation can tip them over the edge. A lot of places fit that description, according to U.N. World Food Program Chief Economist Arif Husain.

“If you look at Yemen, if you look at Lebanon, if you look at Syria, if you look at South Sudan, if you look at Ethiopia, and I can keep going,” Husain said in an interview with The Associated Press. “These countries are already in trouble because of conflicts.”

On the plus side, spring planting hasn’t started yet in some big wheat-growing countries. Farmers will probably switch some land where they planned to grow corn or soybeans to planting wheat. That should eventually bring the price down.

“That seems to be the main way that these crises are inevitably resolved is by production somewhere else in the world responding,” Janzen said. “We are fortunate that we have a global food system. We have the ability to produce and consume commodities like wheat all around the world.”

It will be months before the markets have a sense of how big the new crop will be, however. Those will be nail-biting months of watching the weather. Experts say, be ready for a wild ride.
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