1 Fitch eyes South Africa downgrade (BBC) Credit ratings agency Fitch has warned South Africa that its credit rating may be lowered following a five-month platinum strike in the country. Fitch was followed by Standard & Poor who also downgraded their rating. Fitch changed the country’s outlook from stable to negative, citing poor economic prospects and rising public debt.
Its economy contracted by 0.6% in the first quarter, in part because of a fall in platinum production. A negative outlook can indicate that a country’s credit rating could be downgraded. A downgrade can influence a country’s borrowing costs, as some investors are restricted from lending to borrowers that do not have a high rating.
South Africa’s Treasury said that it was committed to the plans laid out in the country’s budget. Fitch kept South Africa’s credit rating at BBB, but raised concerns about a poor economic growth outlook and persistent budget shortfalls.
The strike by up to 80,000 platinum miners has been going on since late January and is the longest in South Africa’s history. The stoppage has affected about 40% of the global supply of platinum, which is used in jewellery and vehicle catalytic converters.
2 Perils of please-all economics (Andy Mukherjee in Straits Times) Singapore is confronting the perils of please-all economics. Ageing citizens are pushing the Government for bigger nest eggs and more subsidised health care and housing. There is also popular resentment against letting more foreigners in, and not much appetite for increasing the 7 per cent consumption tax. Squaring this fiscal circle will be a long-term challenge.
People protested last year when the Government unveiled a plan to boost the resident population by 30 per cent to 6.9 million by 2030, with immigration compensating for a drooping birth rate. The multifaceted discontent puts Singapore’s fiscally conservative Government in a quandary. Expanding the economy – and the tax base – with less foreign labour will mean improving the productivity of the local workforce. That’s a long shot.
Another way to pay for everything people want is to tax companies more heavily. But Singapore’s business costs are already quite high. A third strategy could be for the city-state to try to earn more on its substantial sovereign wealth by buying riskier assets. That could backfire, leaving less money for welfare. Alternatively, the Government could skimp on investing.
Slowing the pace might be a mistake, however. Pricey real estate would swoon if Singapore loses its urban buzz and stops attracting investors and tourists. That will make Singapore’s property- loving citizens less wealthy and more miserable. The trade-offs are difficult. But Singapore has some advantages.
Rival Hong Kong is facing an existential threat as China tightens its grip on the former British colony and boosts alternatives like Shanghai. By contrast, Singapore offers investors proximity to India and Indonesia, neither of which will boast a global city soon. For all the grumbling, the majority of Singaporeans are too pragmatic to opt for unbridled welfarism at the next elections, which will take place by 2016. Still, please-all economics is scratching at the door. If it finds a way in, prosperity could be in jeopardy.
3 Counting the wealthy (Khaleej Times) The growth of private wealth has accelerated across most regions in 2013. As in 2012, the Asia-Pacific region (excluding Japan) represented the region in which such private wealth has grown fastest — and this means not only that the ‘ultra high net worth’ households have become richer, but that there are more of them crowding into what used to be, two generations ago, a small and fairly quiet club.
Looking ahead to 2018, wealth project global private wealth to post a compound annual growth rate of 5.4 per cent. What this means, for the rest of a world which ponders the question of income inequality and the soaring cost of living, is that global private wealth is expected to reach around $198 trillion in 2018 (half of this will be in the Asia-Pacific region). When that happens, global private wealth will be more than three times as large as the combined GDPs, in 2018, of the world’s ten largest economies.
Such wealth-watching brings with it curious factlets. The highest density of millionaire households is in Qatar (175 out of every 1,000 households), followed by Switzerland (127) and Singapore (100). The US has the largest number of billionaires, but the highest density of billionaire households is in Hong Kong (15.3 per million), followed by Switzerland (8.5 per million). In terms of growth rate India will show the highest rise, as the wealth of the richest households is forecast to grow 129 per cent, to go up from $ 2 trillion to $ 5 trillion.
For the private bankers and wealth managers, the latest in a growing number of ‘rich list’ studies shows yet again that all’s well that spends well.