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Indonesia’s GDP growth set to slow in Q3 as COVID-19 curbs bite

(Corrects third bullet and fourth paragraph to note release time of data as 0200 GMT.)

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Indonesia's GDP growth set to slow in Q3 as COVID-19 curbs bite
© Reuters. A general view of the city skyline of Jakarta, the capital city of Indonesia, August 5, 2021. REUTERS/Ajeng Dinar Ulfiana

(Corrects third bullet and fourth paragraph to note release time of data as 0200 GMT.)

By Vivek Mishra

BENGALURU (Reuters) – Indonesia’s economic growth is expected to have slowed significantly in the third quarter as restrictions imposed to prevent the spread of the coronavirus Delta variant put the brakes on a nascent recovery, a Reuters poll found.

After reporting annual growth of 7.07% in the second quarter https://www.reuters.com/world/asia-pacific/indonesia-exits-recession-with-7-gdp-growth-q2-virus-clouds-recovery-2021-08-05, the strongest in nearly two decades, southeast Asia’s biggest economy only grew 3.76% in the July-September period compared with the same three months a year earlier, according to the median forecast of 21 economists in the poll.

If realised, it would also be well below the latest government forecast https://www.reuters.com/world/asia-pacific/official-update-1-indonesia-sees-q3-gdp-growth-45-yy-warns-future-headwinds-2021-10-25 for the third-quarter growth of 4.5%.

Forecasts in the poll for gross domestic product (GDP) growth, due to be released on Nov. 5 at 0200 GMT, ranged from 1.6% to 5.2%, underscoring the widespread uncertainty around the impact of the pandemic on the economy.

On a quarter-on-quarter basis, growth was expected to have slowed to 1.80% from 3.31% in the second quarter. That was based on a smaller sample of forecasts.

“The government was forced to tighten measures last quarter to stem the surge in virus cases, and we expect the services sector will have been hit especially hard,” said Alex Holmes, emerging Asia economist at Capital Economics.

“Even after the pandemic is over, the crisis will leave behind it a legacy of higher debt, impaired balance sheets and bankruptcies which mean GDP is unlikely to ever regain its pre-crisis path,” he said.

Although the government has gradually eased lockdown restrictions after a sharp fall in coronavirus cases since July, when Indonesia was Asia’s COVID-19 epicentre, the country is still not completely free from the virus.

With year-end holidays just around the corner, festive gatherings and increased mobility could trigger a third wave of COVID-19 infections. That, along with an economic slowdown in China, Indonesia’s biggest trade partner, would pose a significant risk to the resource-rich country.

For now, Indonesia is benefiting from a surge in exports thanks to booming demand for commodities. The accompanying jump in prices meant Indonesia’s trade surplus https://www.reuters.com/world/asia-pacific/indonesia-trade-surplus-shrinks-less-than-expected-september-437-bln-2021-10-15 was larger than expected in September, according to government data.

Strong exports may help cushion some of the negative economic impact of the pandemic, economists say.

“Economic activity has started to recover following the easing of virus curbs in the later part of Q3, with indicators such as mobility, consumer confidence, loan demand and the PMI showing improvement,” said Krystal Tan, economist at ANZ.

“The upshot is that Indonesia’s economy is gradually regaining a better footing and rising commodity prices are a boon for the resource-rich economy,” Tan said.

A larger trade surplus may also help the country narrow its current account deficit, making its financial markets less vulnerable to capital outflows and allowing Bank Indonesia to keep monetary policy accommodative for longer.

The central bank is expected to keep its main policy rate unchanged at a record low of 3.50% until the third quarter of 2022, a separate Reuters poll https://www.reuters.com/world/asia-pacific/bank-indonesia-hold-rates-until-late-2022-awaiting-economic-resurgence-2021-10-15 showed.

Economy

Futures rise as easing China COVID curbs lift travel, leisure stocks

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© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal

(Reuters) – Travel and leisure shares propped up U.S. stock index futures after China relaxed some COVID-19 quarantine requirements for international travelers, raising hopes of a revival in global growth.

Airlines, cruises, casinos and hotels were among the gainers in premarket trading after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.

Shares of Walt Disney (NYSE:DIS) Inc rose 2.5% to top the list of gainers on the Dow Jones Industrial Average, after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.

Spirit Airlines (NYSE:SAVE) and American Airlines (NASDAQ:AAL) Group Inc were the biggest gainers in the sector, rising 4% and 2% respectively.

Melco Resorts jumped 10% and led the rise in the casino sector, closely followed by Wynn Resorts (NASDAQ:WYNN), MGM Resorts (NYSE:MGM) International.

Wall Street’s main indexes started the week on soft footing after worries of surging inflation and an aggressive Federal Reserve dominated sentiment amid few market moving catalysts till the start of earnings season in two weeks.

Investors are now looking at data to determine whether the economy can withstand large interest rate hikes by the U.S. central bank to stamp out inflation.

A survey from the Conference Board is expected to show its consumer confidence index slipped to a reading of 100.4 in June, from 106.4 in May, at 10 a.m. ET.

The S&P 500 and the Nasdaq are set to post losses in June and are on course to log two straight quarterly declines for the first time since 2015.

At 6:49 a.m. ET, Dow e-minis were up 175 points, or 0.56%, S&P 500 e-minis were up 20 points, or 0.51%, and Nasdaq 100 e-minis were up 52.25 points, or 0.43%.

Nike Inc (NYSE:NKE) shed 2.8% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.

Occidental Petroleum Corp (NYSE:OXY) climbed 3.1% after top investor Warren Buffett raised stake in the shale producer.

China ADRs also rose on Beijing easing its COVID curbs, with e-commerce firms Alibaba (NYSE:BABA).com, JD (NASDAQ:JD).com and Pinduoduo (NASDAQ:PDD) up between 1.2% and 1.4%

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Economy

Euro below $1.06 as Lagarde keeps July policy options open

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© Reuters. A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

By Saikat Chatterjee

LONDON (Reuters) – The Aussie and the Canadian dollar climbed on Tuesday on firmer oil prices while the euro held below $1.06 as European Central Bank (ECB) President Christine Lagarde offered no fresh insight on the central bank’s policy outlook.

The ECB is widely expected to follow its global peers by raising interest rates in July to check soaring inflation though economists are divided on the magnitude of the rate hike to protect a struggling economic recovery due to high oil prices.

Oil prices are up 10% in barely a week on supply constraint concerns with Brent crude holding above $117, pushing the Canadian dollar and the Australian dollar up 0.3% and 0.4% respectively. [O/R]

“Oil is helping the Norwegian crown and the Canadian dollar to outperform and the euro is again running into resistance at the 1.06 level,” said Kenneth Broux, an FX strategist at Societe Generale (OTC:SCGLY) in London.

The euro held below $1.06 after the ECB’s Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

Money markets are pricing in about 238 basis points (bps) of cumulative rate hikes by mid-2023 compared to around 280 bps two weeks ago.

Broader currency market moves were contained in a big week for markets in economic data terms. German inflation figures are due on Wednesday, French data on Thursday and euro zone numbers on Friday.

At the other end of the dial, higher oil prices caused the partially convertible Indian rupee to open at a record low, and fall further to 78.67 per dollar.

The U.S. dollar index struck a two-decade high of 105.79 this month and was last steady at 103.93.

Elsewhere, the offshore Chinese yuan moved higher after China reduced COVID quarantine for international travellers.

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Economy

China’s economy recovering but foundation not solid, premier says

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© Reuters. FILE PHOTO: Chinese Premier Li Keqiang is seen on a screen as he attends a news conference via video link after the closing session of the National People’s Congress (NPC) in Beijing, China March 11, 2022. REUTERS/Ryan Woo

BEIJING (Reuters) -China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilise the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

“The task of stabilising employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

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