Does the next British leader have a plan?

On May22, 2024, British Prime Minister Rishi Sunak called snap elections for July 04, 2024. Polls suggest that the opposition Labour Party—led by the centrist MP Keir Starmer—will sweep to victory, putting an end to 14 years of Conservative leadership. But what are Keir Starmer’s economic policies?

Thus far, Starmer has focused on small-scale policy pledges, such as hiring extra teachers, cutting hospital waiting times, and improving border security—a cautious approach to policymaking that contrasts with the large challenges the country faces.

Sluggish economic growth

One key challenge for Starmer will be improving Britain’s economy. After easily and consistently outperforming the Euro area economy in the years prior to the 2016 Brexit vote, the Britain has underperformed since. This is despite the tailwind of a population which has boomed by around 2.5 million in the intervening years on surging immigration from outside the EU.

Analysts forecast Britain GDP growth to roughly track Euro area GDP growth over our forecast horizon to 2028. Given higher population growth in the UK, this means the Britain’s GDP per capita growth will actually lag behind that of the Euro area. Starmer has pledged to make Britain the G7’s top-performing economy; but analysts see little chance of this happening. That said, the labor market will be one saving grace: The unemployment rate is hovering close to 4% and should remain there in the coming years, which would be below the G7 average.

Strained public finances

Government finances are likely to present Starmer with further difficulties. Weak growth, together with rising spending pressure from an aging population and the Covid-19 pandemic, has translated into a large budget deficit and stubbornly high public debt in recent years. And public debt is set to stay above 100% of GDP over our forecast horizon.

This will likely tie Starmer’s hands and prevent lavish new spending commitments—particularly given the still-fresh memory of the ill-fated attempt by former PM Liz Truss to play fast and loose with fiscal discipline, which resulted in a sharp spike in market interest rates.

Damaged cross-Channel trade ties

Finally, Starmer will have to grapple with the Britain-EU relations. The Britain-EU trade deal has led to a raft of non-tariff barriers on both goods and services trade with Europe which have hampered both British exports and investment into the country.

While Sunak has succeeded in making ties with Brussels more cordial following persistent political frictions under the premiership of Boris Johnson, the trade deal remains threadbare. A Labour government would likely look to work more closely with the bloc in certain economic sectors, but has pledged not to region the EU, the Single Market, or the customs union, which will continue to hamper exports and investment ahead.

Insight from Analysts

 “Much will depend on the size of Labour’s potential majority: a comfortable majority would make some of the party’s policies, such as overhauling the labour market, realistic and actionable.

However, few of the Labour members of parliament (MPs) that will end up in government as junior ministers have experience in government. Labour will face significant challenges, given that many of the major issues facing the next administration will require large amounts of money to fix (including the National Health Service). Its period in office is therefore likely to be challenging.”

Economic situation

 “The Britain economy has underperformed the US and the Eurozone since the start of the pandemic. The slump in 2020 was deeper and the subsequent recovery levelled off in 2022 even more so than in the Eurozone in the wake of the surge in energy and food prices. The strong Q1 GDP data partly correct an unexpectedly weak finish to 2023. The sharp 2.3% drop in imports, which boosted the net trade component in Q1, was probably a one-off. However, the data also suggest that the UK economy may have started to make up some of the lost ground.

 

 

 

Iranian oil industry achievements under Raisi

In a talk show on national TV, Iranian Oil Minister Javad Oji, explained how much was the late president, Ebrahim Raisi serious about developing oil industry projects.

Oji said that since the victory of the Islamic Revolution in 1979, the country had witnessed desirable achievements in the oil sector but none of them were comparable with the great steps taken during the ruling of the 13th administration; which took office in August 2021 under the leadership of President Raisi. 

“Before we come together in 13th administration, my knowledge of the late president Ayatollah Raisi was limited to his activities at holy shrine of Imam Reza but it culminated when he was elected as Iranian president and formed the cabinet in which I was appointed as the minister of petroleum,” Oji said.

The minister said, during the tenure of the 13th administration led by Ebrahim Raisi as the president “we witnessed great leaps forward in view of implementation of oil industry projects, developing upstream and downstream projects including developing oil and gas fields, relying on domestic capabilities, rising oil exports and specifically paying attention to social responsibility.”

Raisi insisted on people’s participation in the implementation of oil industry projects, he said adding “in the first months of the 13th administration taking office, we travelled to oil-rich regions, where by looking at flares the president got worried and ordered removing gas flares by collecting the associated gases.”

He continued: we followed the president demand seriously so that at the end of last Iranian calendar year, 1402, March 20, 2024, we succeeded in collecting 11.5 million cubic meters of associated gases per day which is going to rise to 30 million cubic meters a day at the end of current Iranian calendar year on March19, 2025.

He also said energy imbalances, optimizing energy use and joint oil and gas fields development were among the main concerns of the president so that in every meeting we had he was seeking briefing about the progress of the oil industry projects, insisting on rising production and exports, creating jobs as well as oil revenues situation.

According to Oji, the president, in all his working tours, which went beyond 10 visits to oil industry installations, was very willing to talk with experts insisting that the petroleum ministry should do its best to persuade Iranian elites and experts not to leave the country and it was after his emphasize on the issue that we could absorb more than 900 graduates of Petroleum University of Technology.

He further noted that a great part of Iran’s success to raise oil exports was due to his trips to foreign countries, in which he was presenting Iranian capabilities, trying to build confidence in relations with other countries.

The Oil Ministry was the most successful department of the administration in view of attracting foreign investment in Raisi’s administration, he said, adding the president was very insistent that selling materials as a row should be stopped.

“The 13th administration could raise oil exports by 2.5 times despite harsh sanctions.” Oji concluded.

 

Call for ending attacks on ships in Red Sea

The International Maritime Organization (IMO) on Friday demanded an immediate cessation of hostilities against ships and seafarers navigating through the strategic Red Sea and Gulf of Aden. The call comes in response to increasing maritime threats in these crucial waterways.

The IMO's Maritime Safety Committee adopted a resolution in London condemning these acts as "illegal and unjustifiable," highlighting their direct threat to the freedom of navigation and the substantial disruptions they cause to regional and global trade.

This resolution marks the first such formal stance by the IMO member states since the seizure of the MV Galaxy Leader cargo ship by the Yemeni Houthi group in November in the Red Sea.

"Since then, around 50 dangerous and destabilizing maritime attacks have occurred, resulting in the loss of several seafarers' lives, while the 25 crew members of the Galaxy Leader remain hostages," the agency reported, calling for their "immediate and unconditional release."

The resolution criticized the Houthis' actions for endangering lives, impeding vital humanitarian aid deliveries, increasing the cost of such aid, and destabilizing the region. It also emphasized the importance of resolving the crisis through peaceful dialogue and diplomacy.

IMO Secretary-General Arsenio Dominguez appealed to governments and relevant organizations to assist affected seafarers and to intensify efforts to resolve the crisis. He highlighted the Red Sea's significance as one of the world’s busiest maritime routes, especially for oil and fuel shipments.

China and India vying for influence Bangladesh

Bangladesh faces a complex diplomatic challenge as it navigates the competing interests of India and China regarding the Teesta River project. India is concerned about strategic security and maintaining regional influence, while China's involvement offers economic benefits and potential infrastructure development, raising India's geopolitical concerns. Bangladesh faces the challenge of balancing these interests while safeguarding its sovereignty, security, and development priorities.

The Teesta River Comprehensive Management and Restoration Project, estimated to cost US$1 billion, has attracted significant interest from China, which has submitted a proposal for the project. An agreement might be signed during Prime Minister Sheikh Hasina’s upcoming visit to China. In response, India has sent its foreign secretary, Vinay Mohan Kwatra, to Bangladesh, offering Indian funding for the Teesta project to counter China's involvement, putting Dhaka in a difficult position.

Both China and India have been vying for influence in Bangladesh. In the past, Bangladesh canceled the China-backed Sonadia deep-sea port project due to India's discomfort with China's growing presence in a strategically important area.

Now, the Teesta project has become the latest focal point of this geopolitical competition. India's keen interest in the project is driven by geographical and strategic factors, particularly the project's proximity to the "Chicken Neck" corridor, a vital area connecting India’s Northeast with the rest of the country.

Despite the strong relations between Bangladesh and India, the Teesta River water-sharing issue remains unresolved, heightening Dhaka’s impatience. India’s shift from promising a water-sharing treaty to offering to fund the project seems to be a strategic move to counter China's involvement. This approach raises questions about why India prefers to finance the project instead of ensuring Bangladesh's access to water.

The Teesta River project has significant implications for Bangladesh's relations with India and China. Bangladesh has to maintain neutrality in its foreign policy, as the project could force it to choose sides.

Engaging with India could strengthen bilateral relations but might alienate China. Conversely, partnering with China could yield economic benefits but strain relations with India.

Prime Minister Hasina might find it challenging to replace China with India in the project due to India's strict loan terms, slow disbursement, and questionable capacity to execute such a large-scale project.

Moreover, abandoning the project with China after already canceling the Sonadia port project could severely strain Bangladesh’s ties with Beijing, its top trade and defense partner.

Successful implementation of the Teesta River project requires nuanced diplomacy and strategic decision-making by Bangladesh. Dhaka must leverage its diplomatic channels to engage constructively with both India and China to ensure neither feels slighted, aligning the project with Bangladesh’s national interests and priorities.

How long will Biden protect Israeli war criminals?

This week the prosecutor from the International Criminal Court (ICC) announced it was seeking arrest warrants for Israeli prime minister and top Hamas leaders, then came a ruling from the ICC ordering Israel to immediately halt the assault on Rafah.

As usual, Israel responded to this news with defiance, denials, and deceit.

The official statement released by Israel via X/Twitter flatly denied that they are even conducting military operations against civilians in Rafah and lied about keeping the Rafah passage open to allow aid in. Everyone can see the truth of what is happening there. Some will choose to disbelieve their own eyes, and they will have to live with that choice.

Many will not close their eyes to Israel’s atrocities, and also not stop until Palestine is free.

In the forthcoming election of United States, scheduled for November many of the citizens stand unequivocally with the people of Gaza. Their fight is for people, planet, and peace as inextricable from the fight for Palestinian liberation.

Benjamin Netanyahu may have a close, personal friend, Joe Biden, who may not be there after November 2024.

The first thing the new president may do, end the supply of weapons and military aid to Israel that is in violation of international law, including its practice of genocide, ethnic cleansing, and the occupation of Gaza and the West Bank.

The new president may also push the Senate to ratify the Rome Statute recognizing the legal authority of the International Criminal Court. He may also direct all US federal agencies with the proper authority to recognize and execute any valid arrest warrant issued by the ICC over Israel’s war crimes.

If he has the spine, he may not allow the foreign policy of the most powerful and influential nation on earth to be dictated by a despot clinging to the last threads of his power in a genocidal apartheid state.

Cordial Saudi-Iranian ties to continue, say MBS

Iranian interim president, Mohammad Mokhber, received a phone call from Saudi Crown Prince Mohammad bin Salman on Friday afternoon in which he underscored that the cordial relations between Tehran and Riyadh will continue after the passing of President Ebrahim Raisi. 

“The incident was very painful for us. The loss of Raisi hurt all of us, and the loss of the Minister of Foreign Affairs of Iran, who was very friendly with our Minister of Foreign Affairs, was also sorrowful,” the Saudi crown prince was quoted by Iranian media as telling Mokhber. 

Bin Salman stressed that Saudi Arabia will continue the path of developing relations with Iran, a goal that he described as being pursued by President Raisi and Foreign Minister Hossein Amir Abdollahian. 

He announced his country's readiness to expand economic relations with Iran.

Mokhber, for his part, thanked Saudi Arabia for its messages of condolences with Iran over the demise of its president. 

Describing the expansion of relations with neighboring countries as one of the important strategies of the late President Raisi, Mokhber noted, “It was difficult for us to lose a popular and hardworking president like Raisi, but the course of the country will not change and the same spirit of interest and trust between Iran and Saudi Arabia during the martyred president's term will continue.”

He stressed, “The continuation of the neighborhood policy of the 13th government and the development of relations with the countries of the region is the only option before all of us, and companionship and empathy with each other is the guarantee of stability and prosperity in the region.”

In this call, Mokhber invited the Saudi crown prince to pay a visit to Iran. Bin Salman accepted the invitation and extended an invitation for Mokhber to visit Saudi Arabia. 

 

Pakistan Stock Exchange posts lackluster movement

The market experienced volatility during the week ended on May 24, 2024 due to a lack of progress in negotiations between the Pakistan Government (GoP) and the International Monetary Fund (IMF) regarding the staff level agreement. Despite the talks, both the parties denied officially labeling the discussions as negotiations, contributing to uncertainty and fluctuations in the market.

However, Friday saw news of progress on a new EFF program emerged, boosting market confidence and leading to the KSE-100 Index achieving its highest-ever closing. This positive development counteracted previous market volatility, signaling optimism among investors regarding the economic outlook and financial stability. Overall, the benchmark index closed at 75,983 points on Friday, with a gain of 640 points or 0.85%WoW.

Further, SPI weekly inflation remains consistently on downward trend as per recent readings, suggests a slowing down of CPI data for the current month.

Yields in the mid-week PIB auction also declined slightly.

Positivity soared with news of the forthcoming UAE's pledge of a US$10 billion investment.

Negotiations regarding Reko Diq deal between Pakistan and Saudi investors gained ground, added to the optimism.

Additional revenue measures are being proposed by the authorities by adding 18% sales tax on various zero-rated and exempted goods in the upcoming budget.

Overall, average trading volumes were up by 0.7%WoW, clocking in at 558.18 million shares, as compared to 554.51 million shares traded in the earlier week.

On the currency front, PkR remained flat WoW to close at 278.21.

Other major news flows during the week included: 1) IMF unsatisfied with Pakistan’s steps of bringing real estate into tax net, 2) UN projects Pak economy to grow by 2pc in 2024, 3) Pakistan’s current account records surplus of US$491 million in April and 4) Nepra questions 25% proposed hike in ‘PPP’.

Power Generation & Distribution, Leather & Tanneries, Tobacco, Commercial Banks and Technology & Communications were amongst the top performing sectors, while Sugar & Allied Industries, Automobile Parts & Accessories, Transport, Modarbas and Refinery were amongst the worst performers.

Major net selling was recorded by Foreigners with a net sell of US$12.08 million. Banks/DFI absorbed most of the selling with a net buy of US$10.44 million.

Top performing scrips of the week were: SCBPL, KEL, NPL, SRVI and SHFA, while laggards included: THALL, NRL, DAWH, PSEL and SEARL.

Market is anticipated to remain focused on FY25 budget-related news in the near term. Overall, some profit-taking can be expected with the index hovering at its record high.

With foreign buyers consistently purchasing, the rally is expected to continue amidst the market's attractive valuations. Furthermore, the upcoming Monetary Policy Committee, scheduled just after the budget, will also be in the limelight.

Despite real interest rates being significantly positive, new taxation measures could pose a risk to the inflation outlook and possible start of monetary easing.