Iran’s predictable budget. President Hassan Rouhani has presented parliament with a $113 billion budget for next year, and it is very much a product of the times. U.S. sanctions, drought and poor living conditions are taking a toll on the economy. According to the Statistical Center of Iran, gross national product grew by just 0.3 percent in the first half of the year (totaling $374 billion), down from 5.6 percent the previous year. Agriculture and industry contracted, though oil and services grew slightly. Inflation stands between 18 percent and 35 percent, depending on which estimates you believe. Yet Rouhani vowed to maintain state subsidies for water, electricity, fuel, education and health, all of which will cost some $90 billion, and to increase the budget of the Islamic Revolutionary Guard Corps to $6 billion – a 26 percent rise. (Iran’s overall defense budget, however, will shrink by 27 percent.) But Rouhani’s appropriations make sense; cutting certain subsidies led to nationwide protests earlier this year, and the IRGC will be indispensable for keeping the peace in these dire economic circumstances.
U.S.-China trade. A U.S. trade delegation will head to China in early January for the first face-to-face talks since Washington and Beijing agreed to a 90-day trade “truce” at the G-20 summit in Argentina. The two sides are in no danger of a breakthrough; if they were, they would send a higher-level delegation than the deputy-level one they plan to. Still, now that China has completed its Economic Work Conference – its most important economic planning meeting each year – it’s worth watching for signs of Chinese concession. Beijing may be neither willing nor able to concede anything, though, as cracks in the Chinese economy become more apparent. According to official government data, Chinese industrial profits fell for the first time in almost three years in November, dropping 1.8 percent year on year compared to a 3.6 percent rise year on year in October. There is also mounting anecdotal evidence that manufacturing jobs are scarce and that the services sector is losing its capacity to absorb more workers.
India, a potential economic bright spot. According to the International Monetary Fund, the Indian economy will surpass the United Kingdom’s in size next year, placing fifth on the list of the world’s largest economies. It owes its rise to a combination of strong economic growth (7.4 percent) and the losses incurred from Brexit. India’s composite Purchasing Managers’ Index rose to 54.5 last month, up from 53 in October, with services also performing positively. A Bloomberg indicator used to measure overall activity also showed signs of a rebound in liquidity and increased lending. The country’s public sector banks also reported recovering 60,700 crores worth of nonperforming assets in the first half of this year, which is more than double last year’s amount for the same period. Like any emerging economy, India is not without its challenges, but it currently stands out as one of the strongest emerging performers.
- The EU budget commissioner said Brussels will give a one-time exception to France for having a budget deficit in 2019 higher than EU regulations allow but noted France lost authority with the move.
- Russia successfully tested its Avangard hypersonic missile system. The missile reportedly has intercontinental range, travels at 20 times the speed of sound and can tolerate extreme heat.
- The head of Iran’s navy said Tehran and Moscow will continue operational cooperation at sea, including general navy and antipiracy drills.
- North Korean leader Kim Jong Un is purging the military and other institutions, according to anonymous sources who spoke to South Korean newspaper Chosun Ilbo.
- Protests erupted in the Mongolian capital of Ulaanbaatar. As many as 25,000 demonstrators marched against political corruption.
- South Ossetia will be an “equal partner” to Russia and Georgia for opening transit routes through its territory, according to South Ossetia’s president, who added that any agreement would have South Ossetia acting as an independent state.