Russia leads the world in nuclear energy, Ukraine rushes to buy gas, US-China tensions

Positive signals for global growth, Russian nuclear energy corporation continues to maintain its leading position, Ukraine imports record high gas, China accuses the US of not complying with many WTO regulations... are the outstanding world economic news of the past week.

Russia's Leningrad II nuclear power project. (Source: Rosatom)

World economy

The global economy is doing better now.

On January 9, the World Bank (WB) released its latest Global Economic Prospects report. Accordingly, the world economy is forecast to grow by 2.4% in 2024. According to WB, 2024 could end a series of 5 years of global economic growth at the lowest rate in the past 30 years - a sad number.

The World Bank report said the global economy is in better shape than it was a year ago, with the risk of a recession easing – largely thanks to the strength of the US economy. However, rising geopolitical tensions could pose new threats in the short term.

Meanwhile, the medium-term outlook for many developing economies has turned grim. Growth in most major economies has slowed, global trade has stagnated, and financial conditions are the tightest in decades.

Global trade growth in 2024 is expected to be just 50% of the pre-pandemic decade average. Borrowing costs for developing economies, especially those with poor credit ratings, are likely to remain high as global interest rates remain anchored at four-decade highs (after adjusting for inflation).

Global growth is forecast to slow for the third consecutive year – from 2.6% in 2023 to 2.4% in 2024, nearly 0.75 percentage points lower than the average growth rate in the 2010s. Developing economies are estimated to grow by just 3.9%, 1 percentage point lower than the average of the previous decade.

US economy

*For the first time in two decades, the United States has overtaken China as South Korea's top export market . South Korea's exports to the United States surpassed those to China in December 20223, a sign of a changing relationship amid global tensions over economic security and technology supply chains.

South Korea sold $11.3 billion worth of goods to the United States in December 2023, compared with $10.9 billion to China, according to the U.S. Commerce Department. The change in position was driven by a 5.1% increase in South Korea’s total exports from a year earlier, the third monthly increase after a year of declines. The change in position partly reflects China’s economic challenges, which prompted policymakers to roll out a series of stimulus measures last year.

*According to the survey results released by the National Federation of Independent Business (NFIB) on January 9, the confidence of small businesses in the US in December 2023 increased from 90.6 in November 2023 to 91.9 in December 2023. This is the first increase since July 2023, but is still lower than the 50-year average of 98 for the 24th consecutive month.

Additionally, hiring costs and inflation concerns continue to dampen business owners' optimism.

Chinese Economy

* According to insidetrade.com on January 9, China believes that the US does not comply with many regulations of the World Trade Organization (WTO).

The Chinese government said on January 8 that US export controls on semiconductors and sanctions on Chinese telecommunications companies violate some WTO principles.

Chinese Foreign Ministry spokesman Mao Ning said at a press conference the same day that the US is strengthening controls on chip exports to China for national security reasons. According to the Chinese Foreign Ministry spokesman, the US controls violate the WTO's most-favored-nation principle as stated in Article I of the General Agreement on Tariffs and Trade.

* China's exports are likely to grow at a faster pace (from the previous month) for a second straight month in December 2023, a Reuters poll showed, in a sign that global trade is starting to recover thanks to a boom in the electronics industry and expectations of lower borrowing costs in 2024.

Shipments from the world's second-largest economy are expected to have risen 1.7% in December from a year earlier, after ending a seven-month decline and seeing a 0.5% increase in November, according to the median forecast of 32 economists polled by Reuters.

European Economy

*Belarusian Energy Minister Viktor Karankevich said on January 10 that his country and Russia have prepared an agreement on the formation of a unified electricity market, and the parties are developing the rules for the operation of this market.

Mr. Karankevich noted that the unified electricity market creates additional opportunities to strengthen the relationship between the two countries' energy systems and develop grid infrastructure.

* On January 6, speaking on Russia-24 TV channel about the performance of the Russian nuclear industry in 2023 and plans for the following year, General Director of the Russian Nuclear Energy Corporation Rosatom, Mr. Alexey Likhachev, said that despite external pressure, Rosatom continues to maintain its global leading position, setting a new record in 2023.

According to him, 2023 is a comprehensive and generally positive year. “We continue to maintain our global leadership, we have again set records: in total revenue, in foreign revenue, in new products,” said the head of Rosatom.

*The Ukrainian gas transmission system operator LLC recently released data showing that in 2023, Ukraine imported 4.3 billion cubic meters of natural gas from the European Union (EU) and Moldova.

According to LLC, the figure is more than double Ukraine's imports in 2022 , and most of the gas is stored in the country's underground storage facilities.

Most of Ukraine's gas imports come from Slovakia, with more than 1.8 billion cubic meters, or 42% of total imports. Meanwhile, Hungary supplies 1.3 billion cubic meters (31%), Poland supplies 602 million cubic meters (14%) and Romania via Moldova supplies 550 million cubic meters (13%).

According to LLC's report, in 2023, Ukraine also imported more than 550 million cubic meters of gas via the Trans-Balkan corridor, mainly for storage.

* Germany's construction budget will fall in 2024. This is the first time since the financial crisis that construction spending has fallen, also a new negative sign for the real estate industry, which is going through its worst crisis in decades.

Many companies have declared bankruptcy. Chancellor Olaf Scholz's target of building 400,000 new homes a year is unlikely to be achieved.

Construction spending will fall 3.5% in 2024 to 546 billion euros ($597.38 billion) before recovering slightly with a forecast increase of 0.5% in 2025, according to a study published on January 10 by the DIW economic institute.

* Speaking at a press conference after a meeting with French Minister of Energy Transition Agnes Pannier-Runacher on January 9, Czech Minister of Industry and Trade Jozef Sikela said that the two countries will cooperate to finance joint nuclear energy projects and promote suitable conditions for the development of nuclear energy in the EU.

During the meeting, the two sides focused on discussing the energy transition in Europe and the role of nuclear energy in decarbonizing the energy sector as well as energy security.

Japanese and Korean Economy

* Real wages of Japanese people fell 3% in November 2023 compared to the same period last year, falling for 20 consecutive months as wage growth failed to keep up with price increases, government data showed.

Wages are expected to rise following the upcoming annual "shunto" wage negotiations between business unions and employers in Japan, while Prime Minister Fumio Kishida is urging companies to raise wages to levels far above inflation.

However, a Labor Ministry official said it was difficult to predict at this point whether such increases could keep up with price increases.

* The announcement of the Japanese Ministry of Agriculture, Forestry and Fisheries on January 9 showed that the value of the country's seafood exports in November 2023 decreased by 18.8% compared to the same period last year, equivalent to 30.6 billion Yen (about 210 million USD).

Not only did seafood products decrease, but ornamental carp (koi) exports also dropped sharply, especially to the Chinese market. By country/region, the export value to the Chinese market decreased by 6.5 billion Yen (86.8%).

* The Bank of Korea (BoK) kept its base rate unchanged at 3.5 percent at its meeting on January 11 due to concerns that Korea's economic recovery remains weak and risks remain looming.

This is the eighth consecutive time the BoK has maintained its stance following rate freezes in February, April, May, July, August, October and November 2023. The rate freeze comes after the BoK implemented seven consecutive rate hikes from April 2022 to January 2023.

The decision to keep interest rates unchanged came as the South Korean economy showed signs of recovery in exports but consumer spending remained sluggish amid easing inflationary pressures.

* South Korean businesses will be able to make payments in South Korean won to their trading partners in the Association of Southeast Asian Nations (ASEAN) as early as the second half of 2024, financial sources said on January 9.

The new payment method aims to cut the large transaction fees charged when converting won to other currencies, usually the US dollar, or vice versa, while also limiting risks associated with fluctuating exchange rates. The plan was mentioned in the 2024 economic policy guidelines announced by the Ministry of Economy and Finance (MOEF) and other relevant ministries in South Korea last week.

MOEF is working to improve currency exchange regulations in the first half of 2024 to implement the plan.

ASEAN Economy and Emerging Economies

* The Malaysian Prime Minister said that energy transition and digital transformation are urgent and important for the country and require the participation of all people.

Speaking at a meeting of the Ministry of Finance on January 9, Prime Minister Anwar asked the Ministry of Finance to coordinate with the Government-linked investment companies (GLICs) and Government-linked companies (GLCs) to make strategic investments in line with the New Industrial Master Plan and the National Energy Transition Roadmap. He also called on GLICs and GLCs to reduce overseas investments and increase domestic investments.

* On January 9, during a plenary cabinet meeting at the State Palace, Indonesian President Joko Widodo called on ministries and agencies to be vigilant against the impacts of climate change that could cause difficulties for agricultural production in the early season.

Climate change could disrupt planned planting and harvesting seasons, so issues related to safety conditions and strategic food reserves must be taken into account more carefully, he stressed.

* The Thai Commerce Ministry is aiming to sign three free trade agreements (FTAs) this year, including two new agreements with Sri Lanka and the European Free Trade Association (EFTA), and an agreement to upgrade the existing ASEAN-Australia-New Zealand FTA.

Announcing the plan, Director General Chotima Iemsawasdikul said that the Department of Trade Negotiations under the Thai Ministry of Commerce has accelerated negotiations to align with the government's policy led by Prime Minister Srettha Thavisin, which aims to create more opportunities and increase competitiveness for Thai businesses.

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