INTERNATIONAL
Although 2014-15 had been a difficult year for the MMF textile industry, but despite many odds, exports of MMF textiles amounted to US $ 6340.19 million as against US $ 6219.30 million of last year registering a growth of nearly 2%, informed Mr. Anil Rajvanshi, Chairman, Synthetic & Rayon Textiles Export Promotion Council (SRTEPC). Addressing the 61st annual general meeting, Mr. Rajvanshi said that exports of fabrics dominated with a share of 37% followed by Yarn 30%, Made-ups 24% and Fibre 9% in India’s MMF textiles exports during April –March 2014-15. The exports were directed to 153 countries around the globe during 2014-15, he added.
UAE, Mr. Rajvanshi said, has emerged as the leading market for Indian MMF textiles exports with (719 million). Turkey ranks 2nd with (534 million) and neighboring market Bangladesh is the 4th largest market (338 million). MMF Exports during April-July (FY 2015-16) were US $ 1788.26 million against US $ 1904.59 million achieved during the corresponding period of previous year 0 a decline of 6.5%, which is disturbing considering the impasse in policy support, SRTEPC Chairman pointed out.
On the export target front, Mr. Rajvanshi informed that the Ministry of Textiles has set an ambitious target for the Council of US $ 6500 million for the year 2014-15, but the council could only reach US $ 6340 million. SRTEPC Chairman now looks forward to achieve an ambitious export target of US $ 5.9 billion set by the ministry during the year 2015-16.
SOURCE: The Tecoya Trend
Several domestic garment and textile companies would face more challenges from large rivals following integration, said Tran Quang Nghi, chairman of the National Garment and Textile Group (Vinatex). Nghi, speaking at a conference entitled "Garment and Textile – Opportunities and Challenges", focusing on integration and held in Ha Noi yesterday, that a shortage of capital and backwards technology, along with weak management capacities, had created difficulties for the businesses. He added that the development of Viet Nam's garment and textile industry was behind other countries. ‘This caused considerable competitive pressures in the local garment and textile industry after Viet Nam joins the free trade agreements," Nghi added.
Viet Nam has some 5,000 businesses in the sector. Most of them are small- and medium sized enterprises with weak associations. Echoing Nghi, Truong Thi Thanh Ha, general director of Dong Xuan Knitting Company, said their technology remained backwards, as several machines were purchased 20 years ago. Of note, domestic garment and textile companies have not been able to invest in modern technology lines to enjoy benefits from the FTA, especially FTA Viet Nam-EU and Trans-Pacific Partnership (PPP). Ha said domestic firms had been faced with more challenges than opportunities. This was the reason that the Government should provide supports for businesses, in terms of land rental and taxes.
Supply chain needed
In the first half of the year, Viet Nam's garment exports to markets participating in the TPP accounted for 70 per cent of its total export value. However, Phan Chi Dung, head of the Light Industry Department under the Ministry of Industry and Trade, said there were few enterprises manufacturing in all stages, from cotton to completed products. Especially, local firms have much depended upon imported materials, in combination with low productivity, thus making them difficult to enjoy benefits from FTAs. Dung said the added value in garment exports was still limited, despite high growth rates of 15-20 per cent a year. "Domestic garment and textile companies have not developed their own markets and products, which have been shortcomings for the sector," he added.
According to the development strategy for the garment and textile sector to the year of 2020, approved by the ministry, the country's exports would reach US$35 billion and up to $60 billion by 2030. Further, Deputy minister Do Thang Hai said investment in material areas and support industries would have special meaning in improving their competitiveness. Hai also said the association among businesses in this sector could create a large capital base and improve management capacities, as well as technology, which would be a decisive factor for firms to better compete with rivals.
Funding for garment, textile firms
Chairman of the Bank for Investment and Development of Viet Nam (BIDV) Tran Bac Ha has committed to provide loans of US$2 billion to support garment and textile firms over the next five years. Ha said opportunities for businesses would be considerable, including a wave of foreign investment in the garment and textile, leather shoes, bags, electronics and seafood sectors in Viet Nam. The first benefit was that Viet Nam would have a wider market and investors would gradually shift their production into the country, he noted. "The opportunity requires businesses to restructure to improve their competitiveness within the integration," he added. BIDV is to focus on material cultivation areas and investment planning for the garment and textile sector.
SOURCE: The Vietnam News
The Indian textile industry has welcomed the move of the Reserve Bank of India (RBI) to reduce the repo rate, the rate at which the central bank of a country lends money to commercial banks during shortage of funds, as it will stimulate the much needed investment in the textile industry and help in growth. RBI governor Raghuram Rajan announced a repo rate cut of 50 basis points, making it stand at 6.75 per cent from 7.25 per cent, with immediate effect in its monetary policy on September 29, 2015. This is RBI’s fourth repo rate cut in the year 2015. “The repo rate cut indicates that there is a sense of urgency to push the economic growth rate, which is welcome,” Siddhartha Rajagopal, executive director of The Cotton Textiles Export Promotion Council of India (TEXPROCIL) told Fibre2Fashion.com. “It also suggests that RBI does not view inflation as a key risk currently which is a relief to all.” The repo rate cut of 50 basis points will stimulate the much needed investment in the textile sector as the cost of funds are expected to come down. It will also give a sense of feel good to all at a time when the overall global outlook is still in the recovery mode, he stated.
On a similar note, Avinash Mayekar, MD and CEO of Suvin Advisors echoed, “It is a welcome move by the government as most of the industries are facing the burden of financial cost due to high interest rates, in spite of having an edge over competition because of lower production costs. I am sure this will boost new investments as well.” Dr A Sakthivel, president of Tirupur Exporters’ Association (TEA) also hailed the interest rate cuts in a press statement issued by TEA, and endorsed the view of the RBI that banks should pass on this benefit to their customers. This will trigger more investments and export. He also sent a letter of thanks to the RBI governor for this measure. Rajan emphasised that the RBI wishes to be accommodative with respect to its inflation targets, and this rate cut will set the ball rolling.
SOURCE: Fibre2fashion
Thirty textile-related companies would come up in the 224-acre textile park at an estimated expenditure of Rs450 crore, giving direct employment to 6,000 people. It would also have 1 crore litre capacity desalination plant to meet the water requirements. The project facilitated by Tamil Nadu Industrial Development Corporation will be funded by a Central grant of ₹70 crore, focus product scheme assistance of ₹40 crore and State Government and State Industries Promotion Corporation funding of ₹40 crore. Apart from set up textile park, the Transport Corporation of India will set up a 43-acre logistics park with an investment of ₹270 crore. This will come up in Sriperumbudur and Thiruvallur. The Chennai Trade Centre will be expanded at a cost of ₹298 crore with a 16,000 sq metre exhibition hall and a multi-tier car park.
SOURCE: Yarns&Fibers
The commerce ministry has made renewed attempt to get special economic zones (SEZ) exempted from the minimum alternate tax (MAT) and dividend distribution tax (DDT). It also wants SEZ manufacturing units to be given the benefit of a 3% interest subvention scheme for exporters. In a meeting with finance minister Arun Jaitley this week, commerce minister Nirmala Sitharaman is learnt to have said these benefits should be given to ‘manufacturing’ SEZs from the ‘Make In India’ initiative perspective, with an aim to push manufacturing-led export growth. The commerce ministry’s demands follow a stakeholders’ consultation that it held with the SEZ sector earlier this month. An 18.5% MAT on SEZ developers and units and DDT on developers were imposed by the then finance minister Pranab Mukherjee in the FY12 budget after the revenue department raised concerns on the huge revenue losses due to exemptions given to SEZs. The department and the Comptroller and Auditor General (CAG) also had concerns regarding a majority of the SEZ units belonging to the IT/ITeS sector, and not enough from the manufacturing sector.
According to the Export Promotion Council for Export-oriented Units & SEZs (EPCES), the imposition of MAT/DDT on SEZs has dented the investor-friendly image of SEZs and created uncertainty in the minds of foreign and domestic investors. It added that the removal of MAT or its reduction — to its original rate of 7.5% (which, EPCES says, can be done through an executive notification) — will help in the growth of SEZs. The commerce and finance ministries are also looking into ways to ensure that units in SEZs are not hit by India’s free trade agreements (FTA) with different countries.
SOURCE: The Financial Express
Thanks to an all-time high surplus transfer from the Reserve Bank in August and earlier spectrum receipts which boosted revenue along with a an increase in tax collections, the Centre’s fiscal deficit narrowed to 66.5% of the FY16 estimate in the first five months of the fiscal, compared with 74.9% of the corresponding target in the year-ago period. The fiscal deficit in April-August was Rs 3.69 lakh crore, while the deficit estimated in the Budget (BE) for the full year is Rs 5.56 lakh crore. The deficit was contained better than last year in the period under review despite an augmentation of capital spending to spur economic growth. Revenue receipts have been rather strong, especially the non-tax revenue. Gross tax collections grew at 22.8% to Rs 3.99 lakh crore in April-August as against just 5% in the same period a year ago. After transfers to states, the tax revenue stood at Rs 2.09 lakh crore or 22.8% of the BE compared with 19% in the year ago period.
Total revenue receipts in April-August stood at Rs 3.45 lakh crore, or 30.3% of the BE of Rs 11.41 lakh crore, thanks to the central bank’s surplus profit transfer of Rs 65,896 crore, almost the entire surplus generated in 2014-15, to the exchequer. For the same period last year, revenue receipts were 22.7% of the BE. Total expenditure in April-August was Rs 7.32 lakh crore or 41.2% of the BE, according to data compiled by the Controller General of Accounts. Total expenditure in the same period last year was 37.5% of the BE for that year.
While the deficit has been contained better than last year so far, there are some spending commitments for the governments to meet in later months. The government got Parliament’s approval in July to spend by Rs 25,500 crore more on recapitalisation of public sector banks and other entities. The narrowing of fiscal deficit in the first five months could still remove concerns about achieving the target of 3.9% of GDP in FY16. Analysts say fall in crude prices and higher indirect tax collections due to increases in tax rates in the latest budget, could create fiscal space to spend more on the capital side. In April-August, Plan capital spending stood at Rs 52,612 crore or 38.9% of the BE as compared to 31.4% of the full-year estimate during the same period last year. In April-July, the Plan capital spending was Rs 51,631 crore, indicating that the momentum has slowed in August.
Increase in Plan capital spending is crucial for the economy as it will help boost economic activity as a pick-up in private-sector investments have yet to pick up decisively. In April-August, Plan expenditure stood at Rs 1.86 lakh crore or 40.1% of the BE, which is a substantial improvement compared to30.9% of the BE in the year-ago period. Non-Plan spending during the first five months of FY16 stood at Rs 5.45 lakh crore, or 41.6% of the BE against 40.6% of the BE of FY15.
SOURCE: The Financial Express
IMF chief Christine Lagarde has said that global growth will likely be weaker this year with only a modest acceleration expected in 2016 but India remains a bright spot. “India remains a bright spot. China is slowing down as it rebalances away from export-led growth. Countries such as Russia and Brazil are facing serious economic difficulties. Growth in Latin American countries, in general, continues to slow sharply,” Lagarde said. “We are also seeing weaker activity in low-income countries, which will be increasingly affected by the worsening external environment. At the global level, there is still a drag on the economy because financial stability is not yet assured,” said she in her address Wednesday. She noted that despite progress in recent years, financial sector weaknesses remain in many countries, and financial risks are now elevated in emerging markets.
Referring to the release of World Economic Outlook numbers next week, she said global growth will likely be weaker this year with only a modest acceleration expected in 2016. “The good news is that we are seeing a modest pickup in advanced economies. The moderate recovery is strengthening in the Euro Area; Japan is returning to positive growth; and activity remains robust in the US and the UK as well,” she said. Lagarde said the prospect of rising interest rates in the US and China’s slowdown are contributing to uncertainty and higher market volatility. “There has been a sharp deceleration in the growth of global trade. And the rapid drop in commodity prices is posing problems for resource-based economies,” she said.
China, Lagarde said, is in the midst of a fundamental and welcome transformation. “It has launched deep structural reforms to lift incomes and living standards. These reforms will, by design, lead to a new normal of slower, safer, and more sustainable growth. “The new model relies more on consumption and less on commodity-intensive investment. More on services and less on manufacturing,” she said. “It also requires transitioning to a stable, more market-driven financial system. In other words, China’s policymakers are facing a delicate balancing act: they need to implement these difficult reforms while preserving demand and financial stability,” she said. This kind of major transition can create spillover effects – through trade, exchange rates, asset markets, and capital flows, the IMF chief added. “We saw some of these spillovers in recent months: investors were worried about the speed at which China’s economy is slowing. These concerns put further pressure on commodity markets and triggered sizeable currency depreciations in a number of commodity exporters. “Those countries have, for many years, relied on China as an export destination. For example, China consumes 60 per cent of the world’s iron ore. But as it invests less, China will reduce its appetite for commodities,” she said. The IMF chief said that this will contribute to what could be a prolonged period of low commodity prices, a change that will need to be managed by policymakers, particularly in the large commodity exporters.
SOURCE: The Financial Express
Foreign investment inflows during January-June 2015 stood at $19.4 billion, compared to $14.94 billion in the year-ago period. This, however, is at variance with the foreign investment inflows of $31 billion as claimed in a report published in Financial Times. According to the Department of Industrial Promotion & Policy (DIPP), during the six-month period, foreign investment inflows showed a fluctuating trend. The highest foreign direct investment (FDI) received in January was $4.48 billion, compared to $2.18 billion in the same month a year ago. FDI inflows also grew in February to $3.28 billion compared to $2.01 billion. However, the month of March saw a dip and reached $2.11 billion against $3.53 billion in the same month a year ago.
Despite a series of foreign trips undertaken by Prime Minister Narendra Modi to most developed countries of the world, investments from these continued to remain sluggish. During January-June 2015 - the latest period for which data is available - FDI from the US, Germany, Japan and France stood at $0.97 billion, 0.27 billion, $1.12 billion and $0.2, respectively, according to DIPP figures. "The figure of $31 billion (as reported by Financial Times) looks unlikely as there has been no big-ticket investment this year in any of the significant sectors of manufacturing. Even in the sectors where the government has relaxed FDI norms such as defence, railways and insurance, nothing much happened. Manufacturing is yet to receive any substantial boost," said Madan Sabnavis, chief economist, CARE Ratings.
According to Sabnavis, India continues to remain an attractive destination for foreign inflows due to the sheer size of its market and the vast scope of investment into the infrastructure sector, which in other developing countries such as Hong Kong, Brazil and South Africa have saturated. FDI inflows into India stood at $19.4 bn during Jan-June Among the top 10 investing countries, the biggest investor continues to be Mauritius that put in money to the tune of $5.23 billion during January-June 2015 compared to $3.79 billion in the corresponding period of 2014. Sectors that saw the highest foreign capital inflows during January-June 2015 were telecommunications, auto and services. FDI into these sectors stand at $3.67 billion (telecommunications), $2.08 billion (automobile industry) and $1.6 billion in services, which includes banking, insurance, outsourcing and logistics, among others.
According to Biswajit Dhar, professor of economics in Jawaharlal Nehru University, there is a difference between 'feelgood' factor and actual investments taking place. "The FDI inflows received in the calendar year were no doubt more than last year's, but these numbers do not contribute to economic growth or generation of jobs. Besides, there has been no change in the source of FDI. These inflows are not contributing to the growth dynamics." Interestingly, FDI inflows have reduced in some of the sectors during the January-June period compared to the same period last year.
SOURCE: The Business Standard
For the last fiscal year 2014-15, Maharashtra and Gujarat remain the top two states in volume of exports at Rs 4.45 lakh crore and Rs 3.64 lakh crore respectively — that works out to a compounded annual growth rate (CAGR) of over 16% for Maharashtra for the last five years and over 14% for Gujarat. But it’s Bihar that’s registered the highest CAGR — of over 78 per cent annually between 2009-10 and 2014-15, led by export of cereals, mineral fuels, edible vegetables and pharmaceutical products. According to the latest state-wise export data for the last six years available with the Commerce Ministry, exports from Bihar rose from a modest Rs 351.34 crore in 2009-10 to Rs 6,310.93 crore in 2014-15, moving from 24th position amongst state in 2009-10 to 17th position last fiscal. At Rs 6,310 crore, Bihar’s exports are still a small fraction of Maharashtra or Gujarat’s but its dramatic growth, experts said, is a combination of low base, better maintenance of export database in the last few years along with steps taken by the state government to enhance industrial activities in the state. Officials from the state’s industry department say that the rise in exports can be partly attributed to the phenomenal growth of the food processing industry over the last few years along with mineral fuels sector. “Maize is one item that has done exceptionally well over the last few years. Several mega food parks have come up and different variants of maize are being experimented with,” an official said. The official added that several small pharmaceutical units have also come up, mainly for generic drugs and herbal preparations, contributing to the growth in exports. According to the commerce ministry data, Bihar exported cereals worth Rs 982 crore in 2014-15, mineral fuels and oils worth Rs 4,534.65 crore and pharmaceutical products worth over Rs 222 crore. “Earlier, states like Bihar were not able to prepare their data correctly. Now states are better aware so there has been an improvement in the numbers. Further, the state also had a low base and the growth should be viewed accordingly. However, these factors notwithstanding, the state has done well and it is reflected in the export numbers,” Ajay Sahai, director general, Federation of Indian Export Organisation (FIEO), said. Further, apart from Bihar, Uttar Pradesh has also witnessed a compounded annual growth rate (CAGR) of 26.55 per cent in exports during the above mentioned period, growing from Rs 26,204.07 crore in 2009-10 to Rs 85,034.43 crore in last fiscal. The major exports from Uttar Pradesh last year were meat and edible meat worth Rs 14,369 crore, carpets Rs 4,050 crore, apparel Rs 5,719 crore, footwear Rs 6,109 crore, pearls and precious stones Rs 4,045 crore, copper Rs 2,402 crore, road vehicles and parts Rs 3,593 crore and cereals worth Rs 2,316 crore among other items. “Several meat processing units, and auto units have come up in Noida, Ghaziabad. That is getting reflected in the exports from UP. Also, the state had a low base,” Sahai said. Dadra and Uttaranchal also witnessed growth rates of 36.45 per cent and 59.46 per cent, respectively during the six-year period on the back of high growth in exports of organic chemical, pharmaceutical products, man-made filaments, other made up textiles, aluminium articles and medical equipment in case of Dadra while gums resins, preparations of vegetables, fruits, organic chemical, and plastics with regards to Uttaranchal
SOURCE: The Indian Express
Hundreds of workers at the Misr El-Amria Spinning and Weaving Company in Alexandria continued their open-ended strike on Tuesday to protest their employers’ failure to respond to their demands for bonuses. The workers are demanding a 10 percent allowance to be disbursed equally among their colleagues at other textile companies. They filed a complaint with the Manpower Ministry against their company’s chief who, they said, ordered the closure of the company for one month, until October 27. One worker, Mohamed Abdel-Latif, said more than 4,000 employees were supposed to receive the bonuses three months earlier, but found out they were “illegally” excluded, unlike colleagues at other companies.
SOURCE: The Egypt Independent
Cheap Chinese clothes imports almost broke the back of local garment makers, but the sector has started to recover after the government invested more than 2 billion rand ($149 million) in upgraded production lines and more innovative technology. South African retailers are now working more closely with a resurgent domestic textile industry to help keep away global fashion giants muscling in on the continent’s most lucrative market. However, the majority of clothing sold in South Africa by local brands such as The Foschini Group (TFG), Truworths, Mr Price and Edcon is still sourced from Asia. But more competition is expected from global brands such as Inditex’s Zara and Hennes & Mauritz as they expand in a sector whose value rose to more than 200 billion rand ($15 billion) at the end of 2014 from 8 billion in 2001.
Among the continent’s most brand-conscious consumers, South African households spent an average of 5.3 percent, or 582 rand, of monthly income on clothing and footwear in 2014, above spending on education at 373 rand, according to the Bureau for Market Research at the University of South Africa. Keen to tap this vibrant market, Zara opened in South Africa four years ago and now has six stores. Australian no-frills chain Cotton On has described the country as its fastest growing market while Britain’s Top Shop and Forever 21 arrived recently.
H&M is set to open a vast store next month. At 50,000 square feet (4,700 square meters) the outlet in Cape Town’s trendy V&A Waterfront mall will be one of H&M’s biggest and the Swedish retailer will open another outlet in Johannesburg in November. Inditex, which pioneered the idea of producing a constant supply of new styles from factories close to its biggest markets - a concept known as “fast fashion” - flies in clothes twice a week from suppliers in Portugal, Turkey and Spain. H&M, which produces the bulk of its garments in Asia, is expected to adopt a similar approach. Justin Barnes, chairman at B&M Analysts which advises the government and the clothing industry said that to defend their market share, South African retailers should take advantage of the faster speeds at which local suppliers can get clothes to market. The Foschini Group is aiming to work more closely with local suppliers, and about 65 percent of its women’s wear is now made in South Africa. Some South African factories can get fresh garments into stores within 32 days, and most are aiming to regularly beat a maximum cut-off target of 42 days, though not surprisingly that’s still slower than the fast fashion pioneer.
According to Inditex, depending on the availability of fabrics and the complexity of the garment production, it can race from design to the store in less than two weeks. South Africa has about 900 clothing factories left, just over half an estimated 1,600 plants at the sector’s peak in 1996, according to data from the clothing manufacturing industry bargaining council. From 2010 to 2014, productivity jumped 36 percent while employment in the clothing, textile, footwear and leather industry rose to 88,657 in the year to March 2015 from 87,386 a year earlier. That’s still a far cry from the 1996 peak of 228,000 jobs, before Chinese imports hammered local factories. But now rising wages in China and a weaker rand currency, which touched record lows of 14 rand to the dollar in September, are starting to favour local clothes production. For now, local clothes makers hope more local retailers will be turning to them to help rival the big brands coming to town. Fundamentally, the currency has effectively changed the landscape completely. The longer-term trend is for it to weaken and, given that fact, retailers want to be predisposed to an environment where you benefit and are not penalised, said Abdul Davids, research head at Kagiso Asset Management. Before taking into account any shipping costs or import tariffs, a South African factory can already produce a cotton T-shirt for just under $2, compared to 1 euro ($1.12) in Turkey and the $0.50-$0.80 in China, said Kagiso’s Davids. Global brands could eventually be tempted to source locally. H&M, which is already considering buying clothes from Ethiopia, said it has no plans for production in South Africa, but does not rule it out for the future.
SOURCE: Yarns&Fibers
The World Trade Organisation (WTO) has lowered the projection for world trade growth in 2015 to 2.8 per cent from 3.3 per cent estimated in April this year due to falling import demand from China, drop in commodity prices including oil, and exchange rate fluctuations. Estimates for 2016 have been lowered to 3.9 per cent from 4 per cent, according to figures released by the WTO on Wednesday. India, which has seen its exports fall continuously since December 2014, is unlikely to get a respite in the second half of the year, as export growth estimates for 2015 have been lowered most for Asia to 3.1 per cent from 5 per cent in April. This has been largely attributed to falling intra-regional trade because of the slowdown in China’s economy. “Volatility in financial markets, uncertainty over the changing stance of monetary policy in the US and mixed recent economic data have clouded the outlook for the world economy and trade in the second half of the year and beyond,” the WTO said in a release.
The WTO further warned that if the slowdown in emerging markets worsened, the revised forecasts could still prove to be overly optimistic and global trade growth in 2015 could be lower by half a percentage point more (2.3 per cent). If current projections are realised, 2015 will mark the fourth consecutive year in which annual trade growth has fallen below 3 per cent and the fourth year where trade has grown at roughly the same rate as world GDP, rather than twice as fast, as was the case in the 1990s and early 2000s, it added. “On the export side, shipments from developed economies should rise 3 per cent this year and 3.9 per cent next year. Developing economies’ exports are expected to grow more slowly at 2.4 per cent in 2015 and 3.8 per cent in 2016. Imports of developed economies should increase at around the same rate in 2015 (3.1 per cent) and in 2016 (3.2 per cent), while those of developing economies pick up from 2.5 per cent this year to 5.2 per cent next year,” the release said.
SOURCE: The Hindu Business Line
The IMF voiced concern today about the global economy, weakened by China’s slowdown and facing a potential “vicious cycle” from a looming US interest rate hike. “On the economic front, there is … reason to be concerned. The prospect of rising interest rates in the United States and China’s slowdown are contributing to uncertainty and higher market volatility,” IMF managing director Christine Lagarde said in a speech in Washington, according to the prepared text. Lagarde also pointed to the “sharp deceleration” in the growth of global trade and the “rapid drop” in commodity prices, which is hammering the finances of commodity-exporting emerging market economies. Many of the recent economic gains in Asia, Latin America and Asia “now seem in jeopardy,” said Lagarde, addressing the Council of the Americas ahead of next week’s IMF and World Bank annual meetings to be held in Lima, Peru. The IMF chief said that the Fund’s World Economic Outlook report, to be published Tuesday, would project weaker growth this year than in 2014 and only a slight pick up in 2016.
In her speech, Lagarde emphasized the Fund’s concern about the Federal Reserve plan to raise its benchmark interest rate, held at zero since late 2008 to support the US economy’s recovery from the Great Recession. The rate rise, still on the Fed’s track for this year, could drive investors to pull funds from emerging countries into the United States and further strengthen the strong dollar, the currency on which the debt of many companies is based. “Rising US interest rates and a stronger dollar could reveal currency mismatches, leading to corporate defaults — and a vicious cycle between corporates, banks, and sovereigns,” Lagarde said.
SOURCE: The Financial Express
