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Category: Економіка

How Displaced Ukrainians in Poland Find Work While Benefiting Its Economy

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Poland, far from being overwhelmed by the hundreds of thousands of Ukrainians seeking refuge from Russia’s invasion of their country, is seeing its economy grow, according to economists.

The latest available figures from early August show about half of the working-age people who fled Ukraine for Poland are now employed.

In an interview with VOA, World Bank economist Reena Badiani-Magnusson, who specializes in the region, called the employment statistics for the temporarily displaced people, or TDPs, released by the Polish government “impressive.”

Badiani-Magnusson quotes a National Bank of Poland study that found between 2013 and 2018, during the first wave of Ukrainian migration, the presence of Ukrainian migrants in the country had a .5% positive impact on growth.

“On top of that, we’ve done some analysis of the current crisis, and we find that should 500,000 Ukrainian displaced people be integrated into the labor market successfully, we anticipate a medium-term impact on the growth of 1.5%,” she said.

Experts interviewed by VOA said there are three main reasons why the “refugee crisis” quickly filled the Polish market with needed labor. First, Ukrainians who arrived in Poland, including many mothers with children, had high professional qualifications and wanted to work. Second, Polish authorities quickly removed most barriers to Ukrainian TDP employment. And third, the sizeable Ukrainian diaspora facilitated the adjustment and labor engagement of the newly arrived compatriots fleeing the war.

Ukrainians working below their qualifications

For many newly arrived Ukrainian women, says Ludmila Dymitrow, a coordinator at the Information Center for Foreigners in Krakow, low-skilled work is only the first step.

“We explain that even if you had a good job and a high status in your homeland, you could find it here, too, but start with something simpler. A good start can begin in different ways, even from the checkout in a store. Learn the language, and life will give you other opportunities.”

One of many Ukrainian TDPs in Krakow, Olena Kurta, a mother of two, cleans hotel rooms. She used to teach law in the city of Horlivka, in the Russia-supported so-called Donetsk People’s Republic in 2014, and later opened and ran a daycare in Kryvyi Rih.

“I want to learn the language and find another job. I haven’t decided what I want to do. I have to start everything from the beginning,” said Kurta.

Tatyana Potapova, another Ukrainian woman, came to Krakow from the village of Lyptsi near Kharkiv, captured by Russians in the early days of the invasion. In her 60s and a chemist by education and employment, she enrolled in Polish-language classes as soon as she arrived.

“I imagine that I can work as a concierge in some institution. It is my dream. I am willing even to work in a store, but preferably not in a grocery store,” said Potapova in an interview with VOA.

Polish authorities provide immediate job assistance

On March 12, 2022, the Polish parliament passed a law on assistance to Ukrainian citizens, which gave the TDPs from Ukraine the right to stay legally in Poland for 18 months and access its health care system, education, social services and labor market.

The government and local authorities assist Ukrainian TDPs in finding employment. For example, the provincial Employment Administration helps connect job seekers with employers. It also began some programs, available only to Polish citizens and Ukrainian TDPs, that included financing 85% of the cost of job training, said its director. 

The administration sent their representative to the Center for Foreigners, located in the Krakow shopping mall, to help job seekers find opportunities and apply for vacancies.

Badiani-Magnusson points to a comprehensive approach to facilitating access of Ukrainian women to the labor market.

“The Polish government and society need to be recognized and commended for their generous and open-armed support to the populations arriving, the speed and rapidity at which populations that wanted to work were able to have registered temporary protection” that provided services that allowed to integrate them into the labor market, said the economist.

Ukrainian diaspora helps new arrivals find jobs

Maciej Bukowski, president of the Warsaw-based research institute Wise-Europa, draws attention to another aspect – before the arrival of a new wave of TDPs after February 24, Ukrainians were already in Poland, arriving especially after 2014, when Russia annexed Crimea, and instigated and supported aggression in Donbas.

The presence of Ukrainians helped absorb the sudden and significant wave of new refugees from Ukraine.

Barriers for Ukrainians in the Polish labor market

Still, obstacles to the employment of the Ukrainian TDPs remain. The language barrier is one of them. Even though Ukrainian and Polish are linguistically close, it still takes time and effort to be able to speak Polish fluently.

The Zustricz Foundation, an organization of Ukrainians in Krakow, offers classes for Polish-language learners, one of the popular ways to assist Ukrainian TDPs.

A second barrier is the need to care for children. Almost half of those who arrived from Ukraine after February 24 and remained in Poland (600,000) are children.

Badiani-Magnusson of the World Bank points to the need to find employment that matches the qualifications of the Ukrainian job seekers. Zustricz Foundation founder Aleksandra Zapolska agrees – there is still a need to connect employers and job seekers, especially among the most qualified.

“In the medical field, there is a great need for nurses and doctors; for example, there is a shortage of psychiatrists. On the other hand, doctors do not fully know where to turn because not every hospital is interested at that moment; there is no such path for them to meet,” she explained.

The World Bank also says that Ukrainian entrepreneurs need help with adaptation to Polish legislation and access to finance. “You can imagine that you can have a very successful business in Ukraine, and you’d like to be able to bring those same skills into the Polish labor market,” says Badiani-Magnusson.

An uncertain outcome

Zapolska points to another problem – uncertainty about the future.

Will these people return to Ukraine? Mykhailo Podolyak, an adviser to Ukrainian President Volodymyr Zelenskyy, said Ukrainians will return with the liberation of Ukrainian territories; the critical moment here will be the liberation of Kherson. That is why, he said, it is essential to end the war in such a way that Russia cannot continue posing a threat to Ukrainian territories.

“Many Ukrainians do not know whether they will return, and their decision often changes,” said Zapolska.

According to the United Nations Refugee Agency (UNHCR), more than 7 million Ukrainian TDPs remain in European countries – 1.3 million in Poland. Since the start of the full-scale offensive, more than 6 million people have crossed the border from Ukraine to Poland.

VOA’s Georgian Service contributed to this report.

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UK Train Strikes, Energy Hikes Add to Week of Turmoil

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Trains in Britain all but ground to a halt Saturday as coordinated strikes by rail workers added to a week of turmoil caused by soaring energy prices and unfunded tax cuts that roiled financial markets.

Only about 11% of train services were expected to operate across the U.K. Saturday, according to Network Rail. Unions said they called the latest in a series of one-day strikes to demand that wage increases keep pace with inflation that is expected to peak at around 11% this month.

Consumers were also hit with a jump in their energy bills Saturday as the fallout from the Russian invasion of Ukraine pushes gas and electricity prices higher. Household bills are expected to rise by about 20%, even after the government stepped in to cap prices.

Prime Minister Liz Truss, who has been in office less than a month, cited the cost-of-living crisis as the reason she moved swiftly to introduce a controversial economic stimulus program, which includes 45 billion pounds ($48 billion) of unfunded tax cuts.

Concern that the plans would push government debt to unsustainable levels sent the pound tumbling to a record low against the dollar this week and forced the Bank of England to intervene in the bond market.

“We need to get things done in this country more quickly,” Truss said in an unapologetic column for The Sun newspaper published Saturday. “So, I am going to do things differently. It involves difficult decisions and does involve disruption in the short term.”

Many workers aren’t convinced.

Four labor unions have called three, 24-hour strikes over the next eight days, ensuring service disruptions for much of the week.

The timing is of particular concern for runners and fans trying to get to the capital for Sunday’s London Marathon, with is expected to attract 42,000 competitors.

Mick Lynch, general secretary of the Rail, Maritime and Transport Workers Union, said the strikes were designed to target the annual conference of Truss’s Conservative Party, which begins Sunday in Birmingham, England.

“We don’t want to inconvenience the public, and we’re really sorry that that’s happening,’’ Lynch said. “But the government has brought this dispute on. They (put) the challenges down to us, to cut our jobs, to cut our pensions and to cut our wages against inflation.”

Lynch urged Transport Secretary Anne-Marie Trevelyan to take “urgent steps to allow a negotiated settlement.” The union said the latest figures showed railway bosses benefiting from government tax cuts.

As a result of the strike, there will be no service between London and major cities such as Birmingham, Manchester and Newcastle Saturday. Lingering disruptions are likely to affect service Sunday morning as well.

Runners and spectators traveling to London for the marathon, which begins at 9:30 a.m., have been warned they are likely to be frustrated by the strike.

“It is particularly disheartening that this weekend’s strike will hit the plans of thousands of runners who have trained for months to take part in the iconic London Marathon,’’ said Daniel Mann, director of industry operations at Rail Delivery Group. “That will also punish the many charities, large and small, who depend on sponsorship money raised by such events to support the most vulnerable in our community.”

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Допомога «важлива як ніколи»: Зеленський подякував США за додаткові 12,3 млрд доларів підтримки

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Президент вказав на те, що закон передбачає фінансування оборонних програм для України, а також надання прямої бюджетної підтримки

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Запрацював газопровід із Греції до Болгарії, який має знизити залежність Європи від газу з РФ

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Трубопровід довжиною в 182 кілометри з’єднується з Трансадріатичним газопроводом, який постачає природний газ з Азербайджану

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Dining in the Dark: Brussels Eateries Tackle Energy Crunch

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While European Union nations are still mulling a cap on gas prices, some businesses are more in a hurry for solutions to the continent’s energy crisis.

In Brussels, the epicenter of the EU, restaurant owners have imagined how a future without gas and electricity would look like for gourmets.

The guests at the dinner served at the Brasserie Surrealiste and cooked by Racines employees this week were the first to experience it: No ovens, no stoves, no hot plates, no coffee machines and no light bulbs.

Still, great food.

Just cold entrees, or slightly grilled over the flaming charcoal grill of a Japanese barbecue, served at candle-lit tables.

“The idea is to go back to the cave age,” said Francesco Cury, the Racines owner. “We prepared a whole series of dishes that just need to be grilled for a few seconds … But the search for taste, for the amazing, for the stunning, is still part of our business.”

On the menu: brioche with anchovies, porchetta and focaccia cooked on a wood fire, raw white tuna, grilled pork with beans, and ricotta cream with pumpkin jam and pistachios as desert.

But what sounds like a romantic atmosphere and a one-time experience is actually what customers could face more permanently if energy bills keep increasing.

“People see price increases of 30% to 40% in the supermarket. And we, restaurant owners, buy the same raw material, the same products. So what do we do? We increase the prices. But then on top comes the price of gas and electricity. Can we do our job without energy sources? The answer is no,” Cury said. “So we have to think a little bit more, and society has to realize how critical the situation is.”

The dramatic rise of inflation in Belgium could have been a deterrent, but 50 guests took part in the dinner Thursday organized as part of the “Brussels in the Dark” initiative involving a dozen of restaurants.

“We are at a point when one needs to choose between being warm at home or eating out,” said Stephane Lepla, on a night out with his girlfriend. “Finding the balance is complicated. So yes, of course, there is a reflection on a daily basis. There are habits that need to change, that we try to change anyway, even if it is not always easy.”

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Harris, Yellen Focus on Community Finance at Freedman Forum

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Vice President Kamala Harris and Treasury Secretary Janet Yellen plan to use this year’s Freedman’s Bank Forum to highlight how federal coronavirus pandemic relief program funds have helped support Black- and minority-owned businesses.

The Treasury Department said in a statement that “the importance of expanding the community finance system will be front and center” at the Oct. 4 forum. In 2015, then-Treasury Secretary Jack Lew launched the annual Freedman’s conference to develop strategies to address persistent racial economic disparities.

Roughly 96% of Black-owned businesses are sole proprietorships and single-employee companies. These businesses have the hardest time finding funding and are often the first to suffer during economic downturns. They often turn to financial institutions for the underserved and other non-traditional lenders for micro-loans and grants.

Earlier this month, Treasury announced that it had disbursed roughly $8.28 billion in relief funds to 162 community financial institutions across the country through its Emergency Capital Investment Program.

The forum will include a panel on new support for community finance institutions, small businesses and low wealth communities, “all in an effort to unlock the economic potential of communities of color, rural areas, and others that have experienced limits on economic opportunity,” the department said.

A February Government Accountability Office report outlined how various agencies could improve efforts to increase banking access for people who don’t have access to bank accounts.

The Federal Deposit Insurance Corp., the National Credit Union Administration and the Office of the Comptroller of the Currency were all identified for improvements.

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Nobel Prize Season Arrives Amid War, Nuclear Fears, Hunger 

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This year’s Nobel Prize season approaches as Russia’s invasion of Ukraine has shattered decades of almost uninterrupted peace in Europe and raised the risks of a nuclear disaster.

The secretive Nobel committees never hint who will win the prizes in medicine, physics, chemistry, literature, economics or peace. It’s anyone’s guess who might win the awards being announced starting Monday.

Yet there’s no lack of urgent causes deserving the attention that comes with winning the world’s most prestigious prize: wars in Ukraine and Ethiopia, disruptions to supplies of energy and food, rising inequality, the climate crisis, the fallout from the COVID-19 pandemic.

The science prizes reward complex achievements beyond the understanding of most. But the recipients of the prizes in peace and literature are often known by a global audience, and the choices — or perceived omissions — have sometimes stirred emotional reactions.

Members of the European Parliament have called for Ukrainian President Volodymyr Zelenskyy and the people of Ukraine to be recognized this year by the Nobel Peace Prize committee for their resistance to the Russian invasion.

While that desire is understandable, that choice is unlikely because the Nobel committee has a history of honoring figures who end conflicts, not wartime leaders, said Dan Smith, director of the Stockholm International Peace Research Institute.

Smith believes more likely peace prize candidates would be those fighting climate change or the International Atomic Energy Agency, a past recipient. Honoring the IAEA again would recognize its efforts to prevent a radioactive catastrophe at the Russian-occupied Zaporizhzhia nuclear power plant amid fighting in Ukraine, and its work in fighting nuclear proliferation, Smith said.

“This is a really difficult period in world history, and there is not a lot of peace being made,” he said.

Promoting peace isn’t always rewarded with a Nobel. India’s Mohandas Gandhi, a prominent symbol of nonviolence, was never so honored.

In some cases, the winners have not lived out the values enshrined in the peace prize. 

Just this week the Vatican acknowledged imposing disciplinary sanctions on Nobel Peace Prize-winning Bishop Carlos Ximenes Belo following allegations he sexually abused boys in East Timor in the 1990s.

Ethiopian Prime Minister Abiy Ahmed won in 2019 for making peace with neighboring Eritrea. A year later, a largely ethnic conflict erupted in the country’s Tigray region. Some accuse Abiy of stoking the tensions, which have resulted in widespread atrocities. Critics have called for his Nobel to be revoked, and the Nobel committee has issued a rare admonition to him.

The Myanmar activist Aung San Suu Kyi won in 1991 for her opposition to military rule but decades later has been viewed as failing to oppose atrocities committed against the mostly Muslim Rohingya minority.

In some years, no peace prize has been awarded. The Norwegian Nobel Committee paused them during World War I, except to honor the International Committee of the Red Cross in 1917. It didn’t hand out any from 1939 to 1943 because of World War II. In 1948, the year Gandhi died, the committee made no award, citing a lack of a suitable living candidate.

The peace prize also does not always confer protection.

Last year journalists Maria Ressa of the Philippines and Dmitry Muratov of Russia were awarded “for their courageous fight for freedom of expression” in the face of authoritarian governments.

Following the invasion of Ukraine, the Kremlin has cracked down even harder on independent media, including Muratov’s Novaya Gazeta, Russia’s most renowned independent newspaper. Muratov himself was attacked on a Russian train by an assailant who poured red paint over him, injuring his eyes.

The Philippines government this year ordered the shutdown of Ressa’s news organization, Rappler.

The literature prize, meanwhile, has been anything but predictable.

Few had bet on last year’s winner, Zanzibar-born, U.K.-based writer Abdulrazak Gurnah, whose books explore the personal and societal impacts of colonialism and migration.

Gurnah was only the sixth Nobel literature laureate born in Africa, and the prize has long faced criticism that it is too focused on European and North American writers. It is also male dominated, with just 16 women among its 118 laureates.

A clear contender is Salman Rushdie, the India-born writer and free-speech advocate who spent years in hiding after Iran’s clerical rulers called for his death over his 1988 novel The Satanic Verses. Rushdie, 75, was stabbed and seriously injured in August at a festival in New York state.

The list of possible winners includes literary giants from around the world: Kenyan writer Ngugi Wa Thiong’o, Japan’s Haruki Murakami, Norway’s Jon Fosse, Antigua-born Jamaica Kincaid and France’s Annie Ernaux.

The prizes to Gurnah in 2021 and U.S. poet Louise Gluck in 2020 have helped the literature prize move on from years of controversy and scandal.

In 2018, the award was postponed after sex abuse allegations rocked the Swedish Academy, which names the Nobel literature committee, and sparked an exodus of members. The academy revamped itself but faced more criticism for giving the 2019 literature award to Austria’s Peter Handke, who has been called an apologist for Serbian war crimes.

Some scientists hope the award for physiology or medicine honors colleagues instrumental in the development of the mRNA technology that went into COVID-19 vaccines, which saved millions of lives around the world.

“When we think of Nobel prizes, we think of things that are paradigm shifting, and in a way I see mRNA vaccines and their success with COVID-19 as a turning point for us,” said Deborah Fuller, a microbiology professor at the University of Washington.

Physics at times can seem arcane and difficult for the public to understand. But the last three years, the physics Nobel has honored more accessible topics: climate change computer models, black holes and planets outside our solar system.

Some harder-to-understand topics in physics — like stopping light, quantum physics and carbon nanotubes — could capture a Nobel award this year.

The Nobel announcements kick off Monday with the prize in physiology or medicine, followed by physics on Tuesday, chemistry on Wednesday and literature on Thursday. The 2022 Nobel Peace Prize will be announced on October 7 and the economics award on October 10.

The prizes carry a cash award of 10 million Swedish kronor (nearly $900,000) and will be handed out on December 10.

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Indian Proposal Threatens Nepal’s $61 Million Tea Industry

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Nepali tea producers are increasingly worried about a proposal in India’s parliament that could make it much harder for them to sell tea to their giant southern neighbor and most important customer.

The proposal, contained in a June 2022 recommendation from India’s Parliamentary Standing Committee on Commerce, calls for much stricter standards on the certificates of origin required for all Nepali tea imported into India.

Nepali tea exporters say they already face exacting requirements for entry to the Indian market, even when their products have met certification standards maintained by Japan, the United States and the international Certification of Environmental Standards organization.

“There have been constant policy changes that we have to comply [with], which makes it difficult to export tea to India,” said Shanta Banskota Koirala, co-owner and managing director of the Kanchanjangha Tea Estate and Research Center.

“Usually there is also a lot of hassle on borders, things such as asking for more documents than what was initially required, and even if provided the required documents, the work doesn’t get done on time,” Koirala told VOA.

The stakes are high for Nepal, which sells about 90% of its high-grade orthodox tea – loose-leaf tea produced by traditional methods — and about 50% of its lower-grade crush, tear and curl tea – tea whose leaves have been crushed torn and curled into pellets — to India. The industry employs almost 200,000 people in Nepal and contributes more than $40 million a year to its economy.

The orthodox tea, grown at higher altitudes in the Himalayan nation, is especially prized around the world, with its taste and quality attributed to the region’s climatic conditions, soil, the type of bushes planted and even the quality of the air.

But critics in India accuse the Nepalese exporters of mixing their product with similar-tasting tea from the neighboring Indian region of Darjeeling, which sells in India for a much higher price. The recommendation from the parliamentary committee calls for much stricter measures to ensure that all tea sold from Nepal was indeed grown in Nepal.

For the Nepalese growers, the threat of new bureaucratic hurdles is compounded by indignation over the suggestion that their tea is of lower quality than the Darjeeling variety.

“The comments from the committee on the quality of the tea has hurt the traders and farmers in Nepal,” said Bishnu Prasad Bhattarai, executive director of the National Tea and Coffee Development Board Nepal.

“We have raised our concern with the counterpart Indian government officials. We are hopeful that the trade between the two countries will go on smoothly as the two countries share good relation with each other on many fronts including trade,” Bhattarai added.

Suresh Mittal, president of the Nepal Tea Producers Association, also rejected the parliamentary committee’s complaints, pointing out that the quality of all the tea sold into India is certified by India’s Food Safety and Standards Authority.

“Without this proof of origin, we cannot sell even a single leaf abroad. We are exporting tea that has been grown and processed here in Nepal,” Mittal insisted.

Mittal said discussions on the proposal are continuing between the two countries, and that, so far, the trade in tea is proceeding smoothly.

“However, sooner or later it can be a problem for the Nepalese tea industry and will have an adverse effect to over 70% of tea industry of Nepal. We have to start looking for alternate markets,” he said.

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Report Calls Switzerland, US, Sweden World’s Most Innovative Economies

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The World Intellectual Property Organization (WIPO) cites top-ranked Switzerland, followed by the United States and Sweden, as the world’s most innovative economies. 

WIPO uses some 80 indicators to rank the innovative performance of 132 economies. These include measures on the political environment, education, infrastructure, business sophistication and knowledge creation of each economy.

The latest annual report shows some interesting moves in the rankings and the emergence of new powerhouses. Switzerland, once again, comes out on top. The United States moves up one position in the rankings to second place, followed by Sweden, the United Kingdom and the Netherlands.

A co-editor of the Global Index, Sacha Wunsch-Vincent, said 11th-ranked China is the only middle-income country to have made it this far. He said other emerging economies, such as Turkey and India, have put in strong performances, and countries in Latin America and sub-Saharan Africa have made some significant upward moves.

“Several developing countries are performing above expectations relative to their level of development,” Wunsch-Vincent said. “So, these are, of course, countries which have GDP capita which are lower. Eight of [the] innovation over-performers, and that is good news, are from sub-Saharan Africa, with Kenya, Rwanda and Mozambique in the lead.”

The Global Index also focuses on the impact of the COVID-19 pandemic on innovation. The report shows that research and development, as well as other investments that drive worldwide innovative activity, continued to boom in 2021. This despite the pandemic.

WIPO Director General Daren Tang said this result defied expectations. He noted that after the dot-com bust in 2001, the 2008 global financial crisis, the matrix for innovation dropped, but that was not the case for the last two years.

“In fact, the report shows that investments in global research and development in 2020, two years ago, grew at a rate of 3.3 percent,” he said. “Top corporate R&D spenders — in other words, the most innovative firms worldwide — increased their R&D spending by nearly 10 percent last year, in 2021, which is higher than pre-pandemic growth.”

On a more sobering note, Tang warned that conditions may take a turn for the worse as the pandemic recedes, as high inflation and geopolitical tensions pose new economic and social challenges. He said innovative approaches will have to be developed to help people worldwide navigate through tough times ahead.

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Міжнародний бізнес, який лишається в РФ, буде змушений допомагати владі в мобілізації – Кулеба

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Тепер ці компанії «зобов’язані за законом допомагати владі в призові своїх працівників», заявив голова МЗС

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Dow Hits 2022 Low as Markets Sell Off on Recession Fears

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Markets sold off around the world on mounting signs the global economy is weakening just as central banks raise the pressure even more with additional hikes of interest rates. 

The Dow Jones Industrial Average closed Friday at its lowest point of the year. The S&P 500 fell 1.7%, close to its 2022 low.  

Energy prices also closed sharply lower as traders worried about a possible recession. Treasury yields, which affect rates on mortgages and other kinds of loans, remained at multiyear highs. British government bond yields snapped higher after that country’s new government announced a sweeping plan of tax cuts. 

European stocks fell just as sharply or more after preliminary data there suggested business activity had its worst monthly contraction since the start of 2021. Adding to the pressure was a new plan announced in London to cut taxes, which sent U.K. yields soaring because it could ultimately force its central bank to raise rates even more sharply.

The Federal Reserve and other central banks around the world aggressively hiked interest rates this week in hopes of undercutting high inflation, with more big increases promised for the future. But such moves also put the brakes on their economies, threatening recessions as growth slows worldwide. Besides Friday’s discouraging data on European business activity, a separate report suggested U.S. activity is also still shrinking, though not quite as badly as in earlier months.  

“Financial markets are now fully absorbing the Fed’s harsh message that there will be no retreat from the inflation fight,” Douglas Porter, chief economist at BMO Capital Markets, wrote in a research report. 

Crude oil prices tumbled to their lowest levels since early this year on worries that a weaker global economy will burn less fuel. Cryptocurrency prices also fell sharply because higher interest rates tend to hit hardest the investments that look the priciest or the most risky. 

Even gold fell in the worldwide rout, as bonds paying higher yields make investments that pay no interest look less attractive. 

 

The Dow Jones Industrial Average fell 505 points, or 1.7%, to 29,572 and the Nasdaq fell 1.9% as of 3:43 p.m. Eastern. Smaller company stocks did even worse. The Russell 2000 fell 3%. U.S. crude oil prices slid 5.7% and weighed heavily on energy stocks. 

More than 90% of stocks in the S&P 500 were in the red, with technology companies, retailers and banks among the biggest weights on the benchmark index. The major indexes are on pace for their fifth weekly loss in six weeks. 

The Federal Reserve on Wednesday lifted its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%. It was at virtually zero at the start of the year. The Fed also released a forecast suggesting its benchmark rate could be 4.4% by the year’s end, a full point higher than envisioned in June. 

Treasury yields have climbed to multiyear highs as interest rates rise. The yield on the 2-year Treasury, which tends to follow expectations for Federal Reserve action, rose to 4.19% from 4.12% late Thursday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, slipped to 3.68% from 3.71%. 

The higher rates mean Goldman Sachs strategists say a majority of their clients now see a “hard landing” that pulls the economy sharply lower as inevitable. The question for them is on the timing, magnitude and length of a potential recession. 

In the U.S., the jobs market has remained remarkably solid, and many analysts think the economy grew in the summer quarter after shrinking in the first six months of the year. But the encouraging signs also suggest the Fed may have to raise rates even higher to get the cooling needed to bring down inflation. 

Some key areas of the economy are already weakening. Mortgage rates have reached 14-year highs, causing sales of existing homes to drop 20% in the past year. But other areas that do best when rates are low are also hurting. 

In Europe, meanwhile, the already fragile economy is dealing with the effects of war on its eastern front following Russia’s invasion of Ukraine. The European Central Bank is hiking its key interest rate to combat inflation even as the region’s economy is already expected to plunge into a recession. And in Asia, China’s economy is contending with still-strict measures meant to limit COVID infections that also hurt businesses. 

 

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Inflation, Unrest Challenge Bangladesh’s ‘Miracle Economy’

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Standing in line to try to buy food, Rekha Begum is distraught. Like many others in Bangladesh, she is struggling to find affordable daily essentials like rice, lentils and onions.

“I went to two other places, but they told me they don’t have supplies. Then I came here and stood at the end of the queue,” said Begum, 60, as she waited for nearly two hours to buy what she needed from a truck selling food at subsidized prices in the capital, Dhaka.

Bangladesh’s economic miracle is under severe strain as fuel price hikes amplify public frustrations over rising costs for food and other necessities. Fierce opposition criticism and small street protests have erupted in recent weeks, adding to pressures on the government of Prime Minister Sheikh Hasina, which has sought help from the International Monetary Fund to safeguard the country’s finances.

Experts say Bangladesh’s predicament is nowhere nearly as severe as Sri Lanka’s, where months’ long unrest led its long-time president to flee the country and people are enduring outright shortages of food, fuel and medicines, spending days in queues for essentials. But it faces similar troubles: excessive spending on ambitious development projects, public anger over corruption and cronyism and a weakening trade balance.

Such trends are undermining Bangladesh’s impressive progress, fueled largely by its success as a garment manufacturing hub, toward becoming a more affluent, middle-income country.

The government raised fuel prices by more than 50% last month to counter soaring costs due to high oil prices, triggering protests over the rising cost of living. That led authorities to order the subsidized sales of rice and other staples by government-appointed dealers.

The latest phase of the program, which began Sept. 1, should help about 50 million people, said Commerce Minister Tipu Munshi.

“The government has taken a number of measures to reduce pressures on low-income earners. That is impacting the market and keeping prices of daily commodities competitive,” he said.

The policies are a stopgap for bigger global and domestic challenges.

The war in Ukraine has pushed higher prices of many commodities at a time when they already were surging as demand recovered with a waning of the coronavirus pandemic. In the meantime, countries like Bangladesh, Sri Lanka and Laos — among many — have seen their currencies weaken against the dollar, adding to the costs for dollar-denominated imports of oil and other goods.

To ease the strain on public finances and foreign reserves, the authorities put a moratorium on big, new projects, cut office hours to save energy and imposed limits on imports of luxury goods and non-essential items, such as sedans and SUVs.

“The Bangladesh economy is facing strong headwinds and turbulence,” said Ahmad Ahsan, an economist and director of the Dhaka-based Policy Research Institute, a think tank. “Suddenly we are back to the era of rolling power cuts, with the taka and the forex reserves under pressure,” he said.

Millions of low-income Bangladeshis, like Begum, whose family of five can barely afford to eat fish or meat even once a month, still struggle to put food on the table.

Bangladesh has made huge strides in the past two decades in growing its economy and fighting poverty. Investments in garment manufacturing have provided jobs for tens of millions of workers, mostly women. Exports of apparel and related products account for more than 80% of its exports.

But with fuel costs so high, authorities shut diesel-run power plants that produced at least 6% of total production, cutting daily power generation by 1,500 megawatts and disrupting manufacturing.

Imports in the last fiscal year, ending in June, 2022, rose to $84 billion, while exports have fluctuated, leaving a record current account deficit of $17 billion.

More challenges are ahead.

Deadlines are fast approaching for repaying foreign loans related to at least 20 mega infrastructure projects, including the $3.6 billion River Padma bridge built by China and a nuclear power plant mostly funded by Russia. Experts say Bangladesh needs to prepare for when repayment schedules ramp up between 2024 and 2026.

In July, in a move economists view as a precautionary measure, Bangladesh sought a $4.5 billion loan from the International Monetary Fund, becoming the third country in South Asia to recently seek its help after Sri Lanka and Pakistan.

Finance Minister A.H.M. Mustafa Kamal said that the government asked the IMF to begin formal negotiations on loans “for balance of payments and budgetary assistance.” The IMF said it was working with Bangladesh to draw up a plan.

Bangladesh’s foreign reserves have been falling, potentially undermining its ability to meet its loan obligations. By Wednesday they had dropped to $36.9 billion from $45.5 billion a year earlier, according to the central bank.

Usable foreign reserves would be about $30 billion, said Zahid Hussain, a former chief economist of the World Bank’s Dhaka office.

“I would not say this is a crisis situation. This is still enough to meet three months of imports, three and half months of imports. But it also means that … you do not have a lot of room for maneuvering on the reserve front,” he said.

Still, despite what some economists say is excessive spending on some costly projects, Bangladesh is better equipped to weather hard times than some other countries in the region.

Its farm sector — tea, rice and jute are major exports — is an effective “shock absorber,” and its economy, four to five times larger than Sri Lanka’s, is less vulnerable to outside calamities like a downturn in tourism.

The economy is forecast to grow at a 6.6% pace this fiscal year, according to the Asia Development Bank’s latest forecast, and the country’s total debt is still relatively small.

“I think in the current context, the most important difference between Sri Lanka and Bangladesh is the debt burden, particularly the external debt,” said Hussain.

Bangladesh’s external debt is under 20% of its gross domestic product, while Sri Lanka’s was around 126% in the first quarter of 2022.

“So, we have some space. I mean debt as a source of stress on the macroeconomy is not much of a much problem yet,” he said.

Waiting in a line to buy subsidized food, 48-year-old Mohammed Jamal said he was not feeling such leeway for his own family.

“It has become unbearable trying to maintain our standard of living,” Jamal said. “Prices are just out of reach for the common people,” he said. “It’s tough living this way.”

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Росія «грає в «голодні ігри» зі світом» – Кулеба закликає змусити Москву продовжити зернову угоду

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«Ми в одному човні, всі ми – європейці, азіати, африканці, арабські та латиноамериканські країни. Ми маємо дати відсіч цим загрозам спільно»

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US Federal Reserve Raises Interest Rates, Promises More Pain 

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As the United States heads into November’s midterm elections, the Federal Reserve on Wednesday announced another sharp increase in interest rates as it continues its struggle against stubbornly high inflation. The increase of three-quarters of a percentage point raised the benchmark federal funds rate target to between 3% and 3.25%, the highest it has been in nearly 15 years. 

 

In announcing the change, the Fed said that further increases in the target rate would be “appropriate.” On average, the members of the central bank’s Open Market Committee projected that the midpoint of the target range by year end would be about 4.25%. 

 

The Fed’s battle against inflation has been less effective than policymakers had hoped. Annualized inflation in August was 8.3%, only slightly lower than it had been in July, and more than four times the Fed’s target rate of 2%.  

 

Fed Chair Jerome Powell said in a press conference Wednesday that the Fed was committed to reducing inflation, even though doing so would require an extended period of slow economic growth and would likely increase the unemployment rate. 

 

He characterized the Fed’s choice as being between two evils. 

 

“Higher interest rates, slower growth and a softening labor market are all painful for the public that we serve, but they’re not as painful as failing to restore price stability,” Powell said.

Political uncertainty

The fight against inflation is taking place amid political uncertainty in the U.S. As for the midterms, some experts say Republicans stand a strong chance of taking over one of the two chambers of Congress, which would break Democrats’ unified control of the legislative and executive branches of government and allow Republicans to block much of President Joe Biden’s agenda. 

 

The choice between rising prices and rising interest rates combined with higher unemployment may not be particularly appealing to voters, and neither alternative will likely benefit the incumbent president or his Democratic Party. 

 

Pointing out how Americans are suffering from persistently high inflation has been a major part of Republicans’ campaign strategy this year, and with good reason. In early September, according to a poll taken by the Gallup organization, 56% of Americans reported that their families were experiencing at least “moderate hardship” because of rising prices, with 12% characterizing the hardship as “severe.” 

 

In remarks on the Senate floor this week, Senate Minority Leader Mitch McConnell hammered home the GOP message, saying, “Month after month after month, Democrats’ policy failures are continuing to add inflation on top of inflation. The inflation rate plateauing above 8% does not mean that families are catching a break. It means exactly the opposite. It means that families are continuing to see prices go up, and up, and up all the time.”  

Biden’s response

Biden, meanwhile, has been touting price decreases when they occur and deflecting blame for the increases when possible. After Russia’s invasion of Ukraine in February drove up gasoline prices — the most visible signal of inflation for many Americans — Biden publicly blamed Russian President Vladimir Putin for consumers’ pain. 

 

This week, with gas prices falling, the president declared on Twitter, “Folks, gas prices are now back to levels they were at in early March. That means nearly all of the increases since the beginning of Russia’s war in Ukraine have been wiped out.” 

 

While some prices have fallen, however, others remain stubbornly high. Groceries, housing and electricity, in particular, are much more expensive now than they were a year ago.

Effect on voters

Mark Hamrick, Washington bureau chief for Bankrate.com, told VOA that gauging the political impact of the Fed’s decisions is tricky. 

 

“I’m not sure that voters are going to be spending a lot of time parsing the nuances of monetary policy with respect to their voting decisions, but clearly, the state of the economy is something that affects everyone,” he said. “The impacts of a variety of influences, including high and sustained inflation, the failure of wages to keep up with the rate of inflation, are things that voters and everyone else are very much mindful of.” 

 

He added, “I think that you have to say that to some degree, the current environment does not necessarily help incumbents, per se. But you have to handicap that in the context of, ‘What is the prism through which a voter is looking at the current situation?’ And that’s where it becomes much more murky.”  

Fed actions so far

The Federal Reserve is raising rates to reduce demand in the economy. High demand tends to drive inflation as buyers bid up the price of increasingly scarce goods. As interest rates go higher, though, money becomes more “expensive.” That means a dollar in a savings account earns a higher return than it did before the rate increase and makes account holders somewhat less likely to spend it.

While higher rates might eventually tame inflation, they carry a different kind of cost. When rates rise, it becomes more expensive to borrow money, meaning that businesses may be less willing to invest, and prospective homebuyers may face higher mortgage payments. Incurring credit card debt also becomes more costly, which may tame consumer purchases.

Higher rates are likely to slow economic growth and to increase unemployment. The current rate of unemployment is now low by historical standards, at 3.7%. Members of the Federal Open Market Committee, in Wednesday’s report, indicated that they expect that rate to be as high as 4.5% by the end of next year, which translates into well over 1 million people losing their jobs. 

 

The Fed’s rate increase on Wednesday marks the fifth time the central bank has raised rates in calendar year 2022. After starting the year with a target rate of between 0% and 0.25%, the Open Market Committee began with a modest quarter-percentage-point increase in March, followed by a half-percentage-point increase in May. With inflation continuing to rise, the rate hikes became sharper, with a three-quarter-percentage-point increase in June and then another three-quarter-percentage-point jump in July. 

 

Global phenomenon

While inflation is a major political issue among Americans, who tend to blame it on the current president’s administration, analysts note that the inflation the U.S. is experiencing is part of a global phenomenon. 

 

Annualized inflation in other parts of the world has been on the rise as well. In the European Union in August, it was above 9%, though the differences across countries could be dramatic. Poland, for example, has experienced 16.2% inflation in the year ending in August, while in France, the rate has been a more modest 5.9%. 

 

Prices are also rising in other parts of the world, though at different rates. In the Americas, Canada has seen rates rise 7%, compared with 8.7% in both Mexico and Brazil. In Asia, India has experienced a 7% increase, while China and Japan have seen only 2.5% and 3% increases, respectively.

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