Risk Outlook: Plenty to worry about beyond Covid - Bizweek
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GLACIERS OF GLOBAL FINANCE
The Currency
Composition of
Central Banks’
Reserve Holdings
ÉDITION 323
ÉDITION 151 –– VENDREDI
VENDREDI01
23JANVIER 2021
JUIN 2017 L’HEBDOMADAIRE DIGITAL GRATUIT
L’ HEBDOMADAIRE ÉLECTRONIQUE GRATUIT
A REPORT BY THE ECONOMIST INTELLIGENCE UNIT
Risk Outlook:
Plenty to worry
about beyond Covid
2021
VENDREDI 01 JANVIER 2021 | BIZWEEK | ÉDITION 323 3
LA TOUR
A REPORT BY THE ECONOMIST INTELLIGENCE UNIT
Risk Outlook: Plenty to worry
about beyond Covid
Managing risk in an increasingly bifurcated world in the midst and aftermath of the Covid-19 pandemic will continue to dominate the thoughts of
risk managers. Divergent recovery speeds, differing policy responses, global supply-chain readjustments and ever-present political instability create an
enormously challenging global business environment. Looking beyond that, there is a long tail of country risks, not directly related to—but many
clearly exacerbated by—Covid-19 that businesses are going to have to understand to ensure that they can be managed
W
e are forecasting glob- to accept higher production costs.
al economic growth 3. Political instability continues
of 4.2% year on year to be a threat – joblessness, poverty lev-
in 2021, on the back els and rising inequality have only been
of an anticipated 4.7% worsened by Covid-19.
contraction in global output this year. Of 4. Many countries are newly pri-
course, this number masks enormous re- oritising substantial investment in
gional disparities. We are forecasting huge infrastructure – financing models will
divergence in the speed of recovery for indi- vary amid widespread fiscal constraints,
vidual economies, based on multiple factors: but with record-low interest rates in
fiscal space and commitment; monetary pol- many places helping. Infrastructure in-
icy flexibility; sectoral composition; severity vestment will be pursued to facilitate
and timing of lockdown measures; export job creation and, in some cases, to try
market exposure; and labor market dynam- to keep the potential for social unrest at
ics and demographics. This divergence, bay.
straddling as it does already inflame global Risks to our core country forecasts
trade tensions, cements our expectation of abound. Accelerated vaccine rollout and
an increasingly bifurcated world. We have an unleashing of pentup demand could
produced a series of analyses that spotlight cause several countries to surge ahead on
key issues to watch at a country level in 2021 this chart. Conversely, in other countries
(Things to watch in 2021). Our core scenar- the labour market may be severely dimin-
io for these countries, in terms of their re- ished for an extended period, weighing
covery, is informed by the above checklist. on post-pandemic demand and creating
However, there are other recurring themes recovery laggards.
that will shape the growth outlook and the turing investment, while companies are versus specialism—will create new in-
business environment for these markets in concurrently seeking to diversify their vestment hotspots and strengthen some
NOTE: The Economist Intelligence
the coming years. supply chains. existing investment centres. There will
2. The reassessment of the risk versus be some limits on supply-chain rebalanc- Unit (The EIU) is the research and
1. Global trade and supply chains are analysis division of The Economist
being reshaped – countries are striv- reward equation – as companies weigh ing: the benefits of specialisation will be
up labour costs, political stability, FDI hard for both companies and economies Group, the sister company to The
ing to diversify their export markets and
jostling to capture redirected manufac- policy and the benefits of localisation to give up, and companies will also have Economist newspaper.
VENDREDI 01 JANVIER 2021 | BIZWEEK | ÉDITION 323 4
ACTA PUBLICA
GLACIERS OF GLOBAL FINANCE
The Currency Composition of
Central Banks’ Reserve Holdings
The currencies that are being held by central banks as foreign exchange reserves have remained largely steady over decades. Changes in the composi-
tion of these holdings can, at best, be described as glacial in pace. But geopolitical shifts and technological revolutions are reshaping the global econo-
my and the international use of currencies. These forces, and the fallout from the COVID-19 pandemic, could further accelerate the transformations
T
in the reserve holdings of central banks
here are currently around 180 drivers of central banks’ reserve currency has the potential to undergo a sudden, un- economic policies to preserve their growth
national currencies, but only a holdings over recent decades, and how these expected, and accelerated transformation. potential.
few are widely used for inter- drivers have changed. The international use of currencies can
national transactions, such as One key finding is that, given the dollar’s The future of reserve also reflect strategic considerations. For in-
invoicing, paying for imports,
and issuing debt or investing abroad. These
(and to some extent, the euro’s) internation-
al dominance, to date, any shifts in central
currencies stance, reserve currency portfolio decisions
may be influenced by foreign policy consid-
currencies are the U.S. dollar, the euro, and, bank reserve holdings have been minimal. erations and security ties. The fallout from
Our paper suggests a number of econom-
to a lesser extent, the Japanese yen, the Brit- For example, despite China’s growing role trade tensions and international sanctions
ic and financial trends that could impact the
ish pound, and a few others. When crises in the global economy, the Chinese renmin- can prompt countries to consider changes in
future composition of reserve holdings. Ge-
hit, companies and investors usually seek bi has gained only a small foothold in global their reserve holdings and potential issuers
opolitical and technological developments
safety in dollars. transactions, such as issuing foreign debt or to seek to internationalize their currencies.
might prove as significant as economic
Central banks have long held internation- trading in the global foreign exchange mar- The pandemic has accelerated advanc-
considerations, and, together with the cur-
al reserves in these same currencies. This ket. es in financial and payment technol-
rent COVID-19 pandemic, could accelerate
is unsurprising as reserves are intended to The paper also found that financial links ogies. Potential competition from pri-
future transformations. Potential drivers of
back up international transactions as de- seem to be a key driver of reserve currency vate issuers such as Diem – Facebook’s
change include:
scribed above, allowing country authorities holdings, and increasingly so in the last dec- blockchain-based payment system – has
Shifts in international finance: the
to finance balance of payments needs, inter- ade. This would suggest that, as long as the spurred major central banks to acceler-
strong response to the European Commis-
vene in foreign exchange markets, and pro- dollar continues to dominate global finance ate work on central bank digital currencies
sion’s large-scale bond issuance in October
vide foreign exchange to domestic agents. and trade, its dominance as a reserve curren- and cross-border payments. The European
highlights potential demand for alternatives
The slow pace of change in reserve hold- cy looks set to endure. Central Bank and People’s Bank of China,
to dollar-denominated debt. Emerging mar-
ings But, just as slow-moving glaciers can among others, are exploring the issuance of
ket and developing countries could also is-
Building on a novel dataset, a new IMF sometimes unexpectedly surge forward, the central bank digital currencies which could
sue more debt in the currencies of emerg-
staff paper analyzes the composition and currency composition of reserve holdings increase demand for their currencies.
ing creditors, such as China, to help meet
Superior technology platforms could also
increased financing needs. Our paper finds
help new currencies overcome some of the
that the currency denomination of public
advantages of incumbent currencies. De-
debt is an especially important determi-
pending on the adoption and use of public
nant of emerging market and developing
or private digital money, central banks might
countries’ reserve holdings, likely reflecting
have to rethink what constitutes, and how to
central banks’ desire to hedge against risks
hold, reserves going forward.
associated with debt obligations.
There is currently no sign of major shifts
Changing trade links and invoicing
in the composition of central bank reserve
practices could also alter demand for inter-
currencies. However, the glacial pace of
national currencies. Both the pandemic and
change over recent decades should not be
recent trade tensions have highlighted the
taken as an indication of the future. There is
fragility of global supply chains. Countries
considerable uncertainty around global eco-
are now more interested than ever in ensur-
nomic and financial trends, as well as geopo-
ing critical supplies. A shift toward localized
litical and technological developments, and
production would reduce the demand for
so scope for more dynamic transformation
international currencies. Meanwhile, lower
in the future.
reliance on any single trading partner might
diversify demand for currencies. The recent
conclusion of the Regional Comprehensive A Paper by the IMF’s IMF’s Strategy,
Economic Partnership in Asia – a free trade Policy, and Review Department.
agreement between fifteen nation states in Authors:
the region – may signify a larger role for al- ALINA IANCU,
ternate currencies that currently account for Deputy Unit Chief;
a small share in international reserves. NEIL MEADS,
The credibility of the policies of debt-is- Senior Economist;
suing countries is fundamental for trust in MARTIN MÜHLEISEN,
their currencies. The COVID-19 pandemic former Director;
has highlighted the need for current and
YIQUN WU,
potential issuers to enact sound health and
Economist
VENDREDI 01 JANVIER 2021 | BIZWEEK | ÉDITION 323 5
POST SCRIPTUM
CRISTIAN ALONSO FUTURE
How Artificial Intelligence
(economist in the
IMF’s Fiscal Affairs
Department)
SIDDHARTH KOTHARI
(economist in the
IMF’s Asia and Pacific
Department)
Could Widen the Gap Between
SIDRA REHMAN
(economist in the IMF’s
Middle East and Central
Rich and Poor Nations
Asia Department) The International Monetary Fund’s (IMF) recent staff research finds that new technology risks
widening the gap between rich and poor countries by shifting more investment to advanced
economies where automation is already established. This could in turn have negative conse-
quences for jobs in developing countries by threatening to replace rather than complement
their growing labor force, which has traditionally provided an advantage to less developed econ-
omies. To prevent this growing divergence, policymakers in developing economies will need to
take actions to raise productivity and improve skills among workers
N
ew technologies like artificial larger in advanced economies due to robots ments will tend to increase incomes but also
intelligence (AI), machine being used more intensively there (the increase income inequality, at least during
learning, robotics, big data, and “share-in-production” channel discussed the transition and possibly in the long run
networks are expected to revo- above). As a result, investment gets diverted for some groups of workers, in both ad-
lutionize production processes, from developing countries to finance this vanced and developing economies.
but they could also have a major impact on capital and robot accumulation in advanced There is no silver bullet for averting di-
developing economies. The opportunities economies, thus resulting in a transitional vergence. Given the fast pace of the robot
and potential sources of growth that, for decline in GDP in the developing country. revolution, developing countries need to
example, the United States and China en- Terms-of-trade: A developing economy will invest in raising aggregate productivity and
joyed during their early stages of economic likely specialize in sectors that rely more on skill levels more urgently than ever before,
development are remarkably different from unskilled labor, which it has more of com- so that their labor force is complement-
what Cambodia and Tanzania are facing in pared to an advanced economy. Assuming ed rather than substituted by robots. Of
today’s world robots replace unskilled labor but comple- course, this is easier said than done. In our
ment skilled workers, a permanent decline model, increases in total factor productiv-
Results from a Model in the terms of trade in the developing re- ity—which account for the many institu-
gion may emerge after the robot revolution. tional and other fundamental differences
Our model looks at two countries (one This is because robots will disproportion- between developing and advanced countries
advanced, the other developing) that both ately displace unskilled workers, reducing not captured by labor and capital inputs—
produce goods using three factors of pro- their relative wages and lowering the price are especially beneficial as they incentivize
duction: labor, capital, and “robots.” We of the good that uses unskilled labor more more robots and physical capital accu-
interpret “robots” broadly, to encompass the intensively. The drop in relative price of its mulation. Such improvements are always
whole range of new technologies mentioned main output, in turn, acts as a further neg- beneficial, but the gains are stronger in the
above. Our main assumption is that robots ative shock, reducing the incentive to invest context of the AI revolution.
substitute for workers. The AI revolution in and potentially leading to a fall not just in Our findings also underscore the impor-
our framework is an increase in the produc- relative but in absolute GDP. tance of human capital accumulation to
tivity of robots. prevent divergence and point to potentially
We find that divergence between developing Robots and wages different growth dynamics among devel-
and advanced economies can occur along oping economies with different skill levels.
three distinct channels: share-in production, Our results critically depend on whether ro- The landscape is likely going to be much
investment-flows, and terms-of-trade. bots indeed substitute for workers. While it more challenging for developing countries
Share-in-production: Advanced economies may be too early to predict the extent of this which have hoped for high dividends from a
have higher wages because total factor substitution in the future, we find suggestive much-anticipated demographic transition.
productivity is higher. These higher wages evidence that this is the case. In particular, The growing youth population in develop-
induce firms in advanced economies to we find that higher wages coincide with ing countries was hailed by policymakers
use robots more intensively to begin with, significantly higher use of robots, con- as possibly a big chance to benefit from a
especially when robots easily substitute for sistent with the idea that firms substitute transition of jobs from China as a result of
workers. Then, when robot productivity ris- away from workers and towards robots in its graduating middle-income status. Our
es, the advanced economy will benefit more response to higher labor costs. findings show that robots may steal these
in the long run. This divergence grows larg- jobs. Policymakers should act to mitigate
er, the more robots substitute for workers. Implications those risks. Especially in the face of these
Investment-flows: The increase in pro- new technologically-driven pressures, a
ductivity of robots fuels strong demand Improvements in the productivity of robots drastic shift to rapidly improve productivity
to invest in robots and traditional capital drive divergence between advanced and de- gains and invest in education and skills de-
(which is assumed to be complementa- veloping countries if robots substitute easily velopment will capitalize on the much-an-
ry to robots and labor). This demand is for workers. In addition, those improve- ticipated demographic transition.
VENDREDI 01 JANVIER 2021 | BIZWEEK | ÉDITION 323 6
DEBRIEF
TOURISM INDUSTRY
Beachcomber secures
Rs 2.5 billion from Mauritius
Investment Corporation
The proceeds from the Bonds will be used principally for the working capital
requirements of the Company’s Mauritian operations and payment of interests in
respect of the Company’s existing indebtedness. The Board is of the view that the
Loterie Shell : Bruno Couve fera le
injection of MUR 2.5 billion, together with other strategic initiatives, will stabilise
the Company’s financial position, pending a gradual return to profitability following
plein gratuitement pendant une
the full re-opening of our borders and a sustained volume of tourist arrivals to our année pour une valeur de Rs 120 000
La campagne promotionnelle de Vivo Energy Mauritius, société
destination détentrice de la franchise Shell à Maurice, entame sa dernière ligne
T he Board of New Mauritius droite. En attendant que soit désigné le grand gagnant de décembre,
Hotels (NMH) has engaged qui repartira avec une BMW 218i Gran Coupé Lounge, le tirage de
in discussions with the Mau- novembre a fait remporter à Bruno Couve douze bons de carburant
ritius Investment Corporation Ltd Shell FuelSave d’une valeur totale de Rs 120 000. Client régulier de
(MIC), and issued a communiqué la station-service Shell Curepipe et membre de Shell SmartClub, pro-
to inform its shareholders and the gramme de fidélité de Vivo Energy Mauritius, Bruno Couve pourra
public at large that, on 29 Decem- faire le plein gratuitement pendant une année pour une valeur de Rs
ber 2020, the Company has signed a 10 000 par mois.
binding term sheet for the issue of
redeemable and convertible bonds El Diablo renaît au LUX* Grand
to the MIC for a total subscription
amount of MUR 2.5 billion (Bonds), Gaube le temps d’un week-end
secured by a floating charge on the
assets of the Company.
The Company retains the option
to redeem some or all of the Bonds as published by the Stock Exchange have evolved the sanitary protocols in our
any time prior to their maturity, of Mauritius during the period of resorts to cater for the safety of our guests
which will be on the ninth (9th) an- 01 January 2020 to 30 June 2020. In and employees. To minimize cash outflows
niversary of the first subscription case of a covenant breach that is not and preserve the jobs of our employees, we
of the Bonds. In the event that remedied, the MIC would have the have initiated cost reduction initiatives and
the Bonds are not redeemed on or right to convert the Bonds pursuant salary cuts and have also received support
before maturity, any outstanding to the abovementioned terms and from the Government in the form of the
Bonds would be converted into or- conditions. Government Wage Assistance Scheme.
dinary shares of the Company at a “Over the past nine months, we have Nevertheless, the significant investments
pre-agreed fixed valuation of MUR put in place several measures to sustain the made in our hotels and the obligations to
7.4529 per share, being computed as business and to actively contribute to the na- our lenders and suppliers continue to impact
the volume-weighted average price tional sanitary response. We have provided on our short-term liquidity position”, says
of ordinary shares of the Company assistance through quarantine facilities and the Company in the communiqué.
Ré-ouverture du Tamarina Golf
& Spa Boutique Hotel L’une des boîtes de nuit les plus populaires de Maurice s’apprête à
Après quelques mois de fermeture pour rénovation, Boma ou encore observer les dauphins qui se balad- renaître de ses cendres en 2021. LUX* Grand Gaube mettra sur pied
le Tamarina Golf & Spa Boutique Hotel a rouvert ses ent dans la baie le matin au petit déjeuner, l’espace l’incontournable El Diablo, discothèque mythique dans le nord du
portes au public ce décembre avec un espace com- principal, avec son magnifique deck perché au cœur pays, le temps de deux soirées… d’enfer. L’hôtel n’a pas voulu faire
mun complètement revisité et agrandi. Son restaurant d’une nature luxuriante, font de Tamarina un des lieux dans la demi-mesure : les adeptes de l’ancienne discothèque y retro-
principal, « L’escale » a en effet été totalement rénové préférés de ceux qui souhaitent profiter du meilleur uveront le même décor, les mêmes deejays, les mêmes équipes et les
offrant plus d’espace au restaurant, ainsi qu’au bar, de la côte ouest. Dans le cadre de sa réouverture, et mêmes barmen, les 8 et 9 janvier prochain. Trois pistes de danse, à
pour profiter de la vue imprenable sur la magnifique pour la période festive, Tamarina Golf and Spa Bou- savoir Le Lounge, El Diablo et Pass Out, ont été aménagées pour ac-
baie de Tamarin. Que ce soit pour admirer le couch- tique offre tout un éventail de forfaits exclusifs. Le cueillir les fêtards. Si vous êtes fan de El Diablo, ne manquez surtout
er de soleil, regarder les surfers qui s’attaquent aux séjour en demi-pension est actuellement à partir de pas l’offre Early Bird disponible jusqu’au 31 décembre.
vagues mythiques de la baie, se réchauffer autour d’un Rs 2,500 par personne et par nuit.
Une nouvelle salle de classe pour
La grande famille ABC les enfants du Centre d’Amitié
Les Medine Volunteers, étaient une fois de plus sur le terrain pour
solidaire avec les plus démunis venir en aide à la communauté, cette fois ci au Centre d’Amitié à
Bambous. Pendant trois après-midis consécutives, à l’initiative de
la Fondation Medine Horizons, les employés volontaires de Medine,
Offrir un peu de magie de Noël et aidés d’étudiants de Uniciti Education Hub, se sont ainsi relayés
de joie à des enfants nécessiteux et pour redonner un coup de neuf et réorganiser les salles de classe de
leur redonner le sourire en cette fin cette école pré-primaire qui accueille des enfants issus de milieux vul-
d’année. C’est dans cet optique que nérables, ce, afin de créer un nouvel espace pouvant accueillir une
le Groupe ABC, à travers la Fonda- classe additionnelle.
tion Sir J. Moilin Ah-Chuen, a récem-
ment organisé une distribution de
cadeaux à l’attention de 200 enfants Des promos et des cadeaux à gogo
issus de familles défavorisées. Cette
distribution, organisée avec l’appui
avec MC Vision/CANAL+ Maurice
Terminer l’année sur une note festive. C’est dans cette optique que
d’ONG partenaires dont Caritas
MC Vision/CANAL+ Maurice est allé à la rencontre de ses abonnées
Tranquebar, Caritas Roche Bois et
à Quay 11, Port-Louis, le 23 décembre. Cette journée a également
Ki Fer Pas Mwa, a bénéficié, comme
ployés du Groupe ABC qui ont fait par le biais d’une collecte organisée à vu la présence du Père Noël avec des valises pleines de promos et de
pour les années précédentes du sou-
don de jouets et de matériel scolaire travers le Groupe. cadeaux.
tien des directeurs, cadres et em-
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