Fiscal Policy

China’s luxury push paves way for sin tax rejig

5 Aug 2024

Beijing unveiled a 20-point plan targeting consumption of things like yachts and cruise ships. It looks underwhelming as spending remains anaemic in the $17 trln economy. Yet local governments have incentive to step up: a potential luxury goods and services tax windfall.

China looks to the little guy for spending boost

31 Jul 2024

Beijing wants to raise wages for low- and middle-income groups to lift consumption. Combined with higher taxes on the wealthy, that's wise. Yet those policies are unlikely to deliver immediate growth. Officials will have to lean on fiscal expansion to hit their GDP target.

UK’s half-empty fiscal glass is slowly filling up

30 Jul 2024

Finance minister Rachel Reeves announced public spending cuts to fill a 22 bln pound hole left by the old government and raise pay for teachers and doctors. She will also need to hike taxes. But a better financial picture in future years tempers her gloomy narrative.

India’s water stress is a growing sovereign risk

29 Jul 2024

Erratic rainfall is one reason the country's economic growth may slow to 7% this year. Too much and too little H2O affects everything, from cities to power plants to farming. Climate change coupled with weak state capacity is making it worse. Yet it's an underappreciated problem.

Donald Trump may dent but not dethrone King Dollar

26 Jul 2024

The US currency’s long-predicted demise has so far failed to materialise. The former president’s possible return to the White House is a reason to reconsider. While the greenback remains unassailable as the de facto global standard, its days of cyclical strength may be numbered.

China’s leaders pitch their tent in a rainstorm

25 Jul 2024

The five-yearly Communist Party meeting known as the Third Plenum is historically tied with economic policy shifts. Slowing growth and rising trade tensions make the timing apt. In this Viewsroom podcast, Breakingviews columnists discuss what the event means for China’s future.

Public investment dearth is Europe’s growth killer

17 Jul 2024

Germany will spend a paltry 0.15% of GDP on new government-backed projects in 2025. Other European countries are tightening their belts for fear of having to raise taxes. But failing to invest enough in the green transition, infrastructure or defence will cripple their economies.

Ozempic may gift US a $3 trln benefit

16 Jul 2024

Tech advances are the unpredictable joker of healthcare spending, sometimes adding to outlays. Recent estimates to the United States' medical bill suggest costs will rise, even with the new obesity drug. But previous technological advances in medicine have been underestimated.

China’s weak economy awaits new remedies

15 Jul 2024

Growth slowed to 4.7% in the second quarter. Real estate woes endure and lacklustre consumption points to a greater reliance on exports. Policymakers can still hit their annual GDP target, but the sobering data ups the stakes for fresh fixes from this week’s Third Plenum.

Global economy finds new ways to keep growing

8 Jul 2024

Despite fears of a slowdown, world GDP is expanding at 3.5% a year, faster than in 2023. As the US engine loses thrust, Europe and emerging markets are picking up. A sluggish China and geopolitical confrontations are risks. But for now, investors can enjoy a Goldilocks moment.

New UK government can claim competence dividend

2 Jul 2024

Eight years of political upheaval and economic uncertainty raised the risk premium for investors. Now the centrist Keir Starmer is set to take over, while France and the US face electoral turmoil. For the first time since the Brexit vote, the country looks a relative safe haven.

China’s Third Plenum will jolt the economy, again

28 Jun 2024

Xi Jinping has a chance to lay out his answer to major issues including weak consumption at July’s five-yearly huddle of top officials. Previous meetings set the tone for the country. This one is much delayed and will determine China’s interest in making itself “investible”.

UK investment crisis calls for taxes and U-turns

25 Jun 2024

Budget strictures could see public expenditure sink from 2.4% of national income now to 1.8% by 2029. Businesses are unlikely to pick up the tab. The winner of Britain’s July 4 election can redress domestic underinvestment by taxing more – and moving the fiscal goalposts.

French cracks show up Italy’s messy fiscal house

19 Jun 2024

Investors fear Paris’s financial laxity. Yet, after wasting $235 bln on tax credits for home improvements, Rome’s finances are also shaky. EU funds will help offset the phasing out of incentives. But with weak growth and nervy markets, cutting debt is both harder and more needed.

French investors face full year of financial funk

13 Jun 2024

If Marine Le Pen’s far-right RN party wins next month’s election and sticks to its pledges, France’s 5% budget deficit will balloon. President Emmanuel Macron could call a new election, but not for 12 months. Amid paralysis or worse, the state’s fiscal position may get messier.

India’s inequality deserves a bigger risk premium

12 Jun 2024

Prime Minister Narendra Modi suffered his biggest electoral blow in one of the nation’s poorest states. By one measure, the gap between haves and have-nots is wider than during British rule. Closing it is tricky. Without change, though, stability will hang by a thread.

Price cuts will lift US vibes only so much

11 Jun 2024

Since 2019, poorer Americans have received bigger pay hikes than their rich counterparts. Higher costs for basics like food and rent also mean inflation hit them harder. Fresh discounts from Target, McDonald’s and Amazon help, but offer limited relief for tight household budgets.

Russian bond rout raises risk of financial crunch

4 Jun 2024

Yields on the country’s debt are at 20-year highs on worries about the budget largesse lavished on the economy. With inflation rising and interest rates at 16%, President Vladimir Putin’s desire to keep funding the conflict in Ukraine could result in lasting fiscal turmoil.

EU’s wobbly budget rules can bolster shaky economy

3 Jun 2024

Eleven countries have breached Brussels’ fiscal levees, with deficits larger than 3% of GDP. But the limits come with loopholes and allow for delays. That’s good news for a bloc desperate for growth to rival the US. For Europe, weaker rules are better than misguided austerity.

India’s leader faces a reckoning with its poor

3 Jun 2024

Exit polls suggest Narendra Modi will secure a third term with a big majority. Raising rural incomes will be high on his to-do list. Consumption is growing at 4%, making the nearly 8% GDP pace look shaky. Fixing that will boost India's reliability as a global trade partner too.