Moody’s predict over 3% GDP growth of G20 countries and warns of geopolitical risks

In its latest report, Moody’s Investors Services forecast the G20 economic growth at over 3% for the current and the next year. In addition, it also warns of geopolitical risks, US protectionism and spill overs from monetary tightening and China’s deleveraging measures.

The ratings agency clarified that strong data in the first two quarters of the year prompted it to raise 2017 growth forecasts for China to 6.8 % from 6.6%; for South Korea to 2.8% from 2.5%; and for Japan to 1.5% from 1.1%.

In tandem, the agency expects acceleration in the Euro zone through the year based on strong sentiment indicators and has hence revised its forecasts to upwards for economies like Germany, France, and Italy.

However, the agency cut its forecast for the United States to 2.2% in 2017 and 2.3% in 2018, citing its weak first half performance and expectations of more modest fiscal incentive than earlier assumed.

According to the Reuters, the report stated, “The balance of risks is more favourable than it was at the beginning of the year. However, we note event risks related to conflicts in the Korean Peninsula, the South China Sea, and the Middle East. The test firing of missiles by North Korea, intensification of aggressive rhetoric on both sides, and a hard-line stance from the Trump administration have raised the risk of a conflict in the Korean Peninsula.”

While labelling the wide-ranging measures of the Donald Trump administration to address bilateral trade issues as unfair trade practices, which could hurt the superpower’s growth, Moody’s warned China of its growing debt and lowered China’s ratings by one notch to A1 in May, saying the financial strength of the economy would erode in approaching years.

While forecasting for India, the agency slightly lowered the rate to 7.1% because of the government’s demonetization policy last year which led to several months of acute shortages for manufacturing and construction firms in particular; although it said it expects the impact to ease in coming months.

Sources: Reuters, The Hindu Business Line

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US President Trump to meet Putin

POTUS Donald Trump is scheduled to meet Russian President Vladimir Putin for the first time on the sidelines of the G20 meet, Hamburg, Germany as reported by BBC.

Both the leaders have been open to repair ties which had been earlier damaged by the Syrian war as well as the Crimean crisis. However, due to anti-Russian sentiment in the USA is at an all-time high due to the controversial involvement of Russia in the US Presidential elections which helped Trump to win. Also, there have been rumours that Trump has given highly classified information during the visit of Russian foreign minister Sergey Lavrov to the White House. Moscow has been in support of North Korea launching its ICBM (Inter Continental Ballistic Missiles) which has been heavily criticised by Washington. All this may lead to Trump holding a tough stance against Russia as reported by the Guardian.

Though the meeting would last for only an hour, there is a high chance that something new might come out of it. As far as Syria is concerned, both are determined to drive out ISIS but the US wants to install Kurdish-led Syrian Defense Forces government, while Russia wants Bashar-Al Assad to restore his rule as reported by the BBC.

In the recent days, Trump visited Poland and talked about the evils of communism which has been inflicted on the people of Warsaw. This certainly means that the personal equation between the two leaders is not very good as for now.
From body language to every word which both the leaders say during the meet will be dissected by the media from around the world.

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Dragon snarls, India refuses to budge

China is constructing road near the disputed area of Doka La which is claimed by India, China, and Bhutan as well. The Royal Bhutanese Army opposed the construction of the road at Doka La; India, in turn, intervened its army and halted the Chinese march ahead. The reason why this standoff is different from the past standoff between the two armies is due to the strategic location of Doka La. If China is able to make its road, it would be closer to the “chicken’s neck”, i.e. the narrow 50 km long Siliguri corridor which is the solo route connecting India with its North-East region.  If a war breaks out in future, it would give China the upper hand in cutting out the north-east region from the rest of India.
The tension does not seem to subside after 18 days of standoff between both the armies, China has repeatedly asked India to retreat their troops and the Chinese media has also been very critical and mentioned that “India should have learned lessons from the 1962 war”.  The Chinese have also stopped the Indian pilgrims to Kailash Mansarovar through Nathu La pass in Sikkim. Indian Defence Minister sharply replied to the Chinese media statement by mentioning that “If they are trying to remind us, the situation in 1962 was different and India of 2017 is different”.
Sikkim is one of the few regions where the Indian army has the upper hand in case of a conflict. India also has a brigade stationed inside “Ha Valley” in Bhutan, which would lead to the Chinese Army being trapped in a “funnel” in case a war breaks out. However, the construction of this road would seriously alter the status-quo. Indian Army would be stretched thin across the 4057-kilometer long land border if the Chinese army increases its ante near the area of Doka La.
Also at the strategic level, it comes at a time when India refused to join the Chinese initiative of developing a modern Silk Route i.e. OBOR (One Belt One Road) and Indian Prime Minister Modi during his visit to Washington. If Indian troops retreat, it would be a global embarrassment for India, as it has always taken the stance against the Chinese expansionism in the South China Sea and is unable to face China across its own borders.
Indian Army General Bipin Rawat has also visited the region, in order to assess the situation. Additional troops have been deployed by both the sides in case a war theater pops up.
Indian Prime Minister Narendra Modi is set to meet Chinese President Xi Jinping on the sidelines of G 20 summit in Germany, and this standoff would surely be a part of their discussion. Interestingly, the Malabar exercise between India, USA, and Japan is going on with all the three navies incorporating their biggest ships in the war games in the Indian Ocean. Tension needs to be doused down soon, however; in the near future, it looks unlikely with the Indian army refusing to move.

Twist of Tale: Modi’s calculated risks in Vietnam?

It is a known fact that Prime Minister Narendra Modi has a strong penchant for flashy headlines; especially those that mark him first at setting some trend or record. The visit to Vietnam enroute the G20 Summit, is one such case, as on September 2, Modi became the first Indian Prime Minister to visit the country after 15 long years of detachment.

But the story is much more that what meets the eye. Why such sudden interest in Vietnam? And, that too, ahead of a G20 meet being held in Hangzhou, China. The China’s spreading military clout could be one reason, as according to experts. And this is the reason why this move by Modi, has been read as India’s ‘bold move’ toward handling the China dispute, following the verdict by Permanent Court of Arbitration (PCA) on South China Sea (SCS) on July 12,2016 at Hague.

Based on a complaint filed by Philippines against China, this verdict rebuked the latter’s ‘historical’ claims on SCS,  owing to which it is carrying out the construction of artificial islands. China’s arbitrary actions in the waters is pushing towards ecological destruction,which directly or indirectly affects all South Asian countries including Vietnam.  Vietnam’s major interests linked to harvesting energy and fishery resources from its Exclusive Economic Zone, has been paralysed by China dominance over the waters. This has led to violent conflicts damaging life and property in the past. June 2015 witnessed two such attacks that left Vietnamese fisherman injured and their boats destroyed near Pracel Islands. At this juncture, Modi’s visit comes out as an extension of help to Vietnam in controlling China’s clout.

Further, just after the PCA Award was announced, India had taken a stand to emphasise the significance of maritime security, freedom to navigate, and the critical need to respect the provisions of the United Nations Convention on Law of the Sea (UNCLOS). As opposed to India’s supportive stance, China adopted an aggressive attitude dismantling PCA’s authority on this issue. India’s interest in support of PCA lies in the fact that more than 50 per cent of its foreign trade processes through these waters. And, this meet provides the scope for India to strike a deal with Vietnam for gas and oil in areas within the territories of Exclusive Economic Zone.

Cementing India and Vietnam bilateral ties and upgrading it from “strategic partnership” to “comprehensive strategic partnership”, Modi signed 12 agreements. From shipping, defence,medicine, health, to education, space and technology, the meet is expected to yield richer results in the future for both the countries.

But, just after a week, the plot has altered as Vietnamese Prime Minister Nguyen Xuan Phuc has turned to China for friendly ties. Seemingly dissolving the hostility over the waters, Phuc has gone to China for a six-day visit, following which a string of agreements between Phuc and his Chinese counterpart Li Keqiang has already commenced. The current strategy of balance employed by Vietnam is however not very uncommon, as many countries in the South asian region have resorted to it to defend themselves from China’s growing influence. While neighbours like India could help Vietnam strengthen its defence and prepare against Chinese threat; diplomatic relations with China could ensure a safe zone for the time being. At this point, the question arises as to what effect could this have on India and how it could turn the complication of cross country ties to it’s ultimate benefit.