In absolute terms, global debt exceeded $324 trillion in early 2025, up from around $255 trillion in 2019. This massive debt overhang threatens to undercut every economy’s ability to withstand the latest headwinds, including a return to protectionism in the form of higher trade tariffs. Without urgent course correction, the world could be headed toward a widespread debt crisis with lasting economic and social repercussions.

Global debt overhang and its risks

World Bank Chief Economist Indermit Gill notes that debt is a powerful tool for growth and stability, yet it is also “a form of deferred taxation.”

By borrowing instead of immediately raising taxes, governments can finance long-term investments that benefit future generations or support incomes during a downturn when austerity would be counterproductive.

This strategy makes sense as long as economic growth outpaces the cost of borrowing. Eventually, however, the piper must be paid. If a country’s income does not grow faster than its interest payments, taxes, or inflation, it will inevitably have to increase to service the debt.

In other words, today’s debt is simply tomorrow’s taxes by another name. Persistently high debt, without commensurate growth, thus becomes a drag on development, a barrier to economic progress that grows taller with each passing year of heavy borrowing.

That barrier has seldom been higher than it is now. Over the past 15 years, developing countries have become hooked on debt, accumulating liabilities at a record pace of roughly six percentage points of GDP per year. This debt binge was fuelled by years of ultra-low global interest rates and often justified by optimistic growth projections.

History shows that such rapid debt build-ups often end in tears. Indeed, research indicates that about half of large debt booms in emerging and developing economies have been followed by financial crises. In effect, the odds that the recent developing-country debt surge will trigger a crisis somewhere are roughly 50-50.

With global debt levels at all-time highs, the world is precariously balanced on what Gill calls a “debt time bomb.” Each additional shock, whether economic, geopolitical, or climatic, increases the chances of a detonation.

In May 2025, the International Monetary Fund (IMF) stated that the global public debt could increase to 100% of global GDP by the end of the decade if current trends continue.

According to the IMF report, “The rising ratio of public debt to GDP reflects renewed economic pressures as well as the consequences of pandemic-related fiscal support.”

“This trend raises fresh concerns about long-term fiscal sustainability as many countries face rising budget challenges,” the global monetary body remarked.

The report indicated that approximately one-third of countries, representing 80% of global GDP, now have public debt levels exceeding those recorded prior to the COVID-19 pandemic and are increasing at a faster rate. More than two-thirds of the 175 economies examined in the IMF’s study are carrying heavier public debt burdens compared to the period before the pandemic began in 2020.

In March 2025, the United Nations Trade and Development (UNCTAD) noted soaring interest payments were squeezing budgets, forcing governments to choose between repaying creditors and funding essential services.

“Developing countries are sinking deeper into a debt-driven development crisis. Their external debt, money owed to foreign creditors, has quadrupled in two decades to a record $11.4 trillion in 2023, equivalent to 99% of their export earnings. A mix of factors has fuelled this surge, including increased borrowing for development projects, volatile commodity prices, and widening public deficits. The COVID-19 pandemic worsened the situation, as countries borrowed heavily to offset the economic fallout and fund public health measures,” UNCTAD added.

While debt can be a vital tool for economic growth and development, it becomes a problem when repayment costs outpace a country’s capacity to pay. That is now the case for two-thirds of developing countries. Debt distress now looms over more than half of the 68 low-income countries eligible for the IMF’s Poverty Reduction and Growth Trust, more than double the number in 2015.

Rising interest rates

Exacerbating the danger, the latest debt surge has been accompanied by the fastest increase in global interest rates in four decades. After a long era of cheap money, central banks worldwide applied the monetary brakes in 2022 and 2023 to combat inflation.

The result has been a sharp spike in borrowing costs, as interest rates Monjumped multiple percentage points within months, the steepest rise since the early 1980s. For about half of all developing economies, debt servicing costs have essentially doubled in a short span. On average, the interest payments on government debt in developing countries rose from under 9% of government revenues in 2007 to about 20% of revenues by 2024.

Such a surge in debt service burdens would be daunting even in good times. Amid today’s challenges, it verges on the catastrophic. By 2024, many governments were spending one-fifth of their budgets just to pay interest, resources no longer available for public investments or essential services.

Although the world has so far averted a systemic financial meltdown of the kind seen in 2008 and 2009, too many developing countries are now caught in a “doom loop” of debt and underinvestment. To service their loans, governments are cutting back on the very spending that would boost future growth, slashing funding for education, healthcare, and infrastructure.

This self-defeating cycle undermines human development and erodes the productive capacity needed to escape from debt. Alarmingly, this is not a problem confined to a few outliers; it has become a widespread phenomenon.

Almost half of humanity, about 3.3 billion people, now live in countries that spend more on interest payments than on health or education. In low-income countries, especially, scarce fiscal resources that should be used to build schools, clinics, or roads are instead absorbed by creditors. It is a vicious circle: high debt forces spending cuts, which strangulate growth, which in turn makes the debt even harder to bear.

Debt threat to future workforce

Nowhere is this doom loop more troubling than in the world’s poorest nations. Some 78 low-income countries eligible to borrow from the World Bank’s International Development Association (IDA) are teetering on the brink of a debt disaster. These countries are home to roughly one-quarter of the world’s population, and include a large share of the 1.2 billion young people poised to enter the global workforce in the next 10 to 15 years.

The future of the global labour market, and of these nations’ development, depends on whether this youth bulge can be educated, healthy, and productively employed. Yet high debt threatens to derail that potential. Saddled with onerous debt service, many of these countries cannot invest adequately in their burgeoning young populations.

The result could be a lost generation, where millions of youths are deprived of quality schooling, healthcare, and jobs, sowing the seeds for frustration and instability down the line.

Policymakers, unfortunately, have so far responded with complacency or denial. In what Gill describes as “another triumph of hope over experience,” many governments are effectively gambling that a favourable global environment will somehow rescue them from the debt trap. They bank on global growth suddenly accelerating and interest rates falling just enough to defuse the debt bomb. But counting on a lucky break is a perilous strategy.

In reality, most of these countries are already in deep trouble by any objective measure. According to the IMF, about 60% of low-income countries are now either in debt distress or at high risk of debt distress.

Several have already defaulted or are seeking restructuring of their debts in the wake of the pandemic and other shocks. The world cannot afford another decade of drift and denial on this issue, as the costs in foregone development and human suffering would be staggering.

Low growth, high borrowing costs

If anything, the broader global outlook is making debt burdens harder to manage. Escalating geopolitical tensions and current trade wars, marked by increased tariffs and protectionist measures, have further darkened the economic outlook. Business confidence has been undermined by record levels of policy uncertainty in international trade.

At the start of 2025, private economists expected about 2.6% global GDP growth for the year, but as new data and conflicts emerged, the consensus forecast was downgraded to roughly 2.2%. That is nearly one-third below the average growth rate of the 2010s.

The World Bank likewise projects a significant growth slowdown in 2025 compared to prior estimates. Slower growth directly translates into lower revenues for governments and fewer job opportunities, making it even harder for heavily indebted countries to grow their way out of debt.

At the same time, borrowing costs are expected to remain far higher than they were in the last decade. In advanced economies, central banks have indicated that policy interest rates will average around 3.4% in 2025 and 2026, a level more than five times the ultra-low average that prevailed from 2010 to 2019.

In the United States, for example, the Federal Reserve raised its benchmark rate by over five percentage points in 14 months, the most aggressive tightening in over 40 years. Such moves, echoed by other major central banks, have ended the era of near-zero rates.

For developing economies, the consequences are painful, as higher global rates push up the cost of new financing and often strengthen the US dollar, making dollar-denominated debts harder to repay. In an era of scarce public resources, boosting growth and development will require mobilising private investment, yet foreign capital is unlikely to flow into countries perceived as debt-crippled and low-growth.

Prioritising debt reduction

Given these realities, reducing debt levels is an urgent priority, especially for developing economies with chronically high debt-to-GDP ratios. This must start with responsible national policies, as governments should rein in excessive borrowing and improve their fiscal balances where possible to stabilise debt dynamics.

Some may need to make painful but necessary adjustments to curb non-essential spending and boost domestic revenue. However, the challenge is too large for individual countries to solve alone, especially when many are already insolvent or nearly so.

What is needed is a systemic solution. The global financial community must come together to upgrade the apparatus for assessing debt sustainability and handling debt distress. The current international system for sovereign debt restructuring is widely seen as inadequate, being too slow, too fragmented, and too biased toward kicking the can down the road.

All too often, official lenders and institutions opt to extend new “bridge” loans to tide countries over, when in fact many low-income countries require outright debt write-offs to restore solvency. Procrastination through serial lending ultimately serves neither debtor nor creditor if a country’s debt is unsustainable.

Recent trends underscore the scale of the problem. The number of countries facing high debt levels has jumped dramatically, from 22 countries in 2011 to 59 countries in 2022. As of last count, 52 developing countries, nearly 40% of the developing world, are in serious debt trouble, meaning they either are already in default or face severe financial stress.

Yet progress on mechanisms such as the G20 Common Framework for debt treatment has been disappointingly slow, hampered by coordination problems among traditional creditors, newer lenders, and private bondholders.

To prevent a lost decade for development, the world needs a more streamlined and swifter process for restructuring unsustainable debts. This could involve tougher assessments to distinguish liquidity problems from true insolvency, and bolder action to write down debts that cannot reasonably be repaid without strangling a country’s future.

Returning to prudent debt levels

As the saying goes, when you find yourself in a hole, the first step is to stop digging. The world’s borrowing binge must come to an end. The era of extraordinarily low interest rates that once tempted many countries to live beyond their means is over.

Over the last five years, a series of unprecedented crises, both natural and man-made, made heavy borrowing unavoidable in some cases, as governments acted to cushion their people from harm. Now, however, a return to prudence is essential. Policymakers should re-embrace clear fiscal limits and revert to earlier norms of what constitutes excessive sovereign debt.

One sensible guideline is what Gill calls the “40-60 maximum,” roughly 40% of GDP as an upper debt limit for low-income countries, and 60% of GDP for high-income countries. Middle-income economies would fall somewhere in between those benchmarks.

While these ratios are not necessarily strict thresholds, they hark back to long-standing debt targets, for example, the 60% debt-to-GDP limit in the European Union’s fiscal rules, which were associated with greater stability. Adhering to such limits would give countries more fiscal space to handle shocks and invest in development, instead of constantly teetering on the edge of default.

The looming global debt disaster is not inevitable. It is a man-made crisis, and it can be solved with decisive action. Reining in debt and reigniting growth are difficult tasks, but the alternative is far worse. Without corrective measures, persistently high debt will continue to stall economic progress and heighten the risk of financial crises.

By contrast, a combination of debt relief, sound fiscal management, and growth-enhancing reforms can gradually defuse the debt bomb. The world has arrived at a critical juncture. Having deferred the costs of debt for years, governments and international institutions must now confront them.

The next generation’s prosperity depends on choices made today, on the willingness to restore fiscal discipline, revamp the global debt architecture, and unleash the productive potential of open markets and private enterprise.

The window to act is narrowing, but with clarity of purpose and collective resolve, a global debt disaster can be averted. The lesson of recent years is clear. We can no longer afford another decade of denial and delay on sovereign debt. The time to pay the piper, and to chart a sustainable path forward, is now.

The post Averting the global debt crisis appeared first on International Finance.

The former Italian premier offered a sobering message in a 400-page study written for the European Commission: the EU runs the risk of losing its core purpose if substantial investment and coordinated cooperation are not made.

The EU has faced difficulties for a long time. Since the turn of the century, the continent has struggled with slow growth, and since the global financial crisis, it has struggled with poor productivity and slow wages. Up until now, “slowing growth has been seen as an inconvenience but not a calamity,” according to Draghi’s assessment. However, the environment in which the EU functions is drastically shifting.

The EU’s share in global commerce is decreasing as trade slows down. With the Russia-Ukraine war revealing the EU’s dependence on imported gas, geopolitical tensions are high in both Europe and the Middle East. Meanwhile, the continent of Europe is becoming more and more fragmented due to the development of right-wing populist groups and ongoing cost-of-living difficulties. In light of this, sluggish growth can no longer be written off as a minor annoyance.
Europe’s lack of development has turned into a threat to its future in this new world. Furthermore, Europe runs the risk of falling behind as China and the US make investments in cutting-edge technologies and the green economy.

However, it’s not all bad news. A bold plan for turning around the EU’s failing fortunes is also laid out in Draghi’s report, which calls for increased cooperation and significant investment in common European goals. Draghi’s strategy for reviving the European economy includes reducing regulations, encouraging innovation, and releasing the advantages of decarbonisation.

The brave new world

Following the horrors of two world wars, the idea of a more united, cooperative Europe started to gain traction, and the first tentative steps towards a European Union were taken in 1946 when Winston Churchill delivered a historic speech at the University of Zurich, advocating for a “United States of Europe.”

The “Original Six” countries—Belgium, France, Germany, Italy, Luxembourg, and the Netherlands—began pursuing economic integration after experiencing a post-war growth miracle. In 1957, they signed the “Treaty of Rome,” creating the “European Economic Community.”

Over the ensuing decades, cooperation increased, and in 1993, the “Maastricht Treaty” went into effect, thereby establishing the “European Union.” The EU became the world’s largest and most economically integrated trading union with the creation of the single market.

Businesses of all sizes in Europe benefited greatly from the promise of free movement of capital, people, commodities, and services. Originally envisioned as a means of removing trade restrictions, promoting competition, and fortifying European integration, the single market initially benefited the EU economy.
As a result, trade with Europe increased, job possibilities expanded, and member nations’ GDPs increased slightly. To put it briefly, the single market serves the current globe. After around 30 years, that world has essentially vanished.

Europe was the centre of the world economy in the late 1980s, when the single market was beginning to take shape. Communist governments were falling in central and eastern Europe, and the post-war baby boom had produced a youthful and expanding labour force.

In terms of innovation, research, and development, Europe was keeping up with the United States, while China and India combined accounted for less than 5% of the global economy. However, the world currently appears to be totally different.

The EU’s economic share of the world economy has decreased over the past 30 years. The US is advancing rapidly as the world’s economic superpower, while China, India, and other developing Asian economies are now prominent on the international scene.

The EU economy was still just slightly bigger than the US economy in 2008. However, by 2023, the American economy was over 50% bigger than the EU’s, demonstrating the stark differences in economic fortunes on both sides of the Atlantic. To the amazement of economists and forecasters, growth in the US is booming while it is faltering in the EU.

The EU was on the verge of a recession in 2024 due to the long-lasting effects of the COVID-19 outbreak, excessive inflation, and a broad energy crisis, and its present economic prognosis is still muted. The United States, on the other hand, has surprised everyone by coming out of the pandemic stronger than before.

The development of new businesses is at an all-time high, wages are rising, and unemployment is declining. Meanwhile, even though China’s economy is weakening, it is still growing faster than Europe. The continent is just having a hard time keeping up in this brave new world with new economic titans.
Examining oneself

Europe’s economic fortunes have undoubtedly suffered as a result of the changing geopolitical environment. However, the continent must take responsibility for its own problems if it is to genuinely confront its difficulties.

The continent has been heavily reliant on imports for many years, especially in the areas of raw materials and fossil fuels. Draghi has stated that “we rely on a handful of suppliers for critical raw materials, and import over 80% of our digital technology,” making Europe the most dependent major economy.

Such agreements might not always be a reason for concern during a period of peace and prosperity. But the Russia-Ukraine conflict has shown how susceptible Europe is to geopolitical upheavals. Russia was by far the biggest supplier of natural gas to Europe before it invaded Ukraine.

In 2021, Russia supplied the EU with more than 50 million tonnes of coal and more than 100 million tonnes of crude oil annually, accounting for over 45% of Europe’s gas imports. All of that changed when the Russian taps began to shut off in May 2022. Europe was compelled to consider other, more expensive options as it could no longer afford Russian energy.

In this period of increased geopolitical danger, Europe needs to reevaluate its import dependency. The EU can no longer rely on its suppliers to consistently deliver the products it so desperately needs because once-reliable dependencies have turned into weaknesses.

Furthermore, when it comes to imports, Europe has other weaknesses besides Russian gas. Europe has become more and more dependent on the Asian giant for vital resources, especially those rare earth commodities that are essential to facilitating the renewable energy transition, even if the US has been trying to lessen its reliance on Chinese imports since 2018.

In a 2024 speech in Brussels, European Commission President Ursula von der Leyen said, “This is an area where we rely on one single supplier, China, for 98% of our rare earth supply, for 93% of our magnesium, and for 97% of our lithium, just to name a few. As the digital and green transitions accelerate, our demand for these materials will soar.”

By 2050, the demand for lithium is expected to increase 17 times due to the batteries that power our electric cars. Without access to these vital raw materials, Europe will undoubtedly be unable to achieve its clean energy goals; yet, the Russia-Ukraine war has given the continent a painful but timely lesson in over-dependencies.

The European Commission has responded to this difficulty by introducing the “Critical Raw Materials Act,” which establishes standards that domestically obtained, processed, and recycled raw materials must meet. Europe appears to be learning from its recent setbacks, but if it wants to build a safe future in a world that is becoming more uncertain, it will need to step up its diversification efforts.

Can unity save Europe?

The idea that the European nations are stronger as a group than as individuals is one of the tenets of the “European project.” This idea served as the foundation for the single market, which aimed to promote cooperation and dismantle obstacles throughout the continent. Certainly a commendable goal. However, the single market’s reality has been rather different.

In reality, the single market is not really “single,” as many detractors have pointed out. True cross-border trade is hampered by several factors, such as disparities in national taxation and contradictory e-commerce regulations.

The fact that financial services, energy, and transportation all have their own national markets further complicates issues, leading to differences in laws and policies across national boundaries. Foreign businesses that may normally wish to invest and expand in the EU may be put off by this complicated environment.

“Our competitiveness is negatively impacted by the decades-long fragmentation of our single market,” Draghi claims. It pushes high-growth businesses abroad, which limits the number of projects that can be funded and impedes the growth of the capital markets in Europe.

Draghi asserts that additional market consolidation is necessary for more than just the single market. He contends that for the EU to realise its full potential, it must come together around a common goal and vision. He laments that Europe is failing to realise its potential because it does not act as a true community.

He contends that although the EU has enormous collective spending capacity, it does not sufficiently combine its resources to accomplish common goals. Instead of cohesive strategic thinking, we observe fragmentation and divergence throughout Europe in terms of policy.

With so many national interests at stake, uniting EU member states behind shared objectives may prove challenging, but large-scale cooperation could be the only way the EU can keep up with the US and China’s massive economies.

The issue of productivity

While experts have been worried about Europe’s slow growth for years, the region’s falling GDP has mostly gone unnoticed by EU citizens, until now. After the COVID-19 pandemic began, inflation started rising. Then, when Russia invaded Ukraine in 2022, it climbed even faster, creating cost-of-living problems across several European countries.

A drop in real wages made it harder for families to make ends meet, and households started to feel the pinch of rising food and transportation costs. It is a very different story on the other side of the pond.

Americans pay three to four times less for their energy use than their European counterparts, thanks to the US’s abundant oil and gas resources, which have kept energy prices comparatively steady. Americans are benefiting from a thriving economy as earnings are increasing and unemployment is low.

In contrast, 93% of Europeans ranked the rising cost of living as their top concern, surpassing public health, climate change, and even the spread of conflict in Europe, according to a 2023 study conducted by the European Parliament.

According to the survey, nearly half of EU people said their standard of living has decreased since the start of the COVID-19 outbreak, suggesting that families and individual citizens are starting to feel the effects of Europe’s weak economic performance.

Concerns about their financial future are legitimate for Europeans. Real disposable income in the US has doubled since 2000, indicating a rising disparity in living standards between the US and the EU. Since the COVID-19 outbreak, this economic disparity has become more noticeable, and economists have been trying to figure out why.

Draghi asserts that Europe’s consistently low productivity is the primary cause of its subpar performance. By now, the productivity issue in Europe is widely recognised.

Since the 1970s, productivity has been declining throughout the continent, and this decline cannot be attributed to afternoon siestas and leisurely lunches. And from the 1990s, the EU’s prospects for expansion have been consistently impeded by a refusal to invest in developing industries.

According to Draghi’s study, “Europe largely missed out on the digital revolution led by the internet, and the productivity gains it brought: in fact, the tech sector is largely explained by the productivity gap between the EU and the US. The EU is lacking in the cutting-edge technologies that will propel future expansion.”

The upcoming artificial intelligence revolution poses a challenge to the EU, which has already lost out on the substantial productivity benefits that the digital revolution could have delivered. With their expenditures in AI and other cutting-edge technologies, the US and China are already outpacing the EU in this new race.

Similarly, Europe is well-placed to lead the global green energy shift, but unless it boosts its spending on R&D and worker training, it risks falling behind China. The productivity gains promised by these new industries are something Europe can’t afford to miss out on.

Given the demographic shift the continent is going through, this is an especially urgent issue. The population of Europe is ageing quickly, and future generations cannot sustain growth on their own due to a decline in birth rates.

The EU-27’s over-85 population is predicted to more than quadruple by 2050, and the European workforce may lose up to two million workers annually starting in 2040. Achieving productivity growth will be even more crucial in light of these impending difficulties.

An expensive remedy

Draghi does not sugarcoat the challenging economic situation facing Europe in his report. He admits that things are grim, but they are not hopeless. The former head of the Central Bank lays out a bold strategy to revive the European economy in addition to his appraisal of the current problems.

His radical and far-reaching recommendations mostly focus on three areas of action: maximising the advantages of decarbonisation, enhancing security while lowering dependency, and bridging the innovation gap with China and the US.

Draghi further cautions that without substantial investment, these suggestions cannot be realised. According to him, the EU needs to boost expenditure by €800 billion annually if it hopes to improve its economic situation in the long run. This illustrates the magnitude of the difficulties that lie ahead and amounts to about 5% of the bloc’s total GDP.

In contrast, the “Marshall Plan” recovery programme helped much of Europe develop beyond pre-war levels while spending 1%-2% of GDP to rebuild a devastated Europe. But unlike 1948, there is no outside support for Europe today. It will have to figure out how to pay for its own recovery this time.

The cost issue is the exact point at which Draghi’s proposal fails. His suggestions are contemporary, practical, and potentially revolutionary in theory. However, the cost of putting them into practice might just be too great, especially for the more cautious and risk-averse EU member states.

Draghi admits that without assistance from the public sector, the private sector is unlikely to be able to finance the majority of this investment.

Investing in important European public goods, like ground-breaking innovation, will require some joint funding.

However, given the glaringly empty EU coffers, joint debt might be the only means of achieving the kind of investment Draghi is calling for. In more conservative countries like Germany and the Netherlands, where there is little appetite for more joint spending and much less for joint borrowing, this will be difficult to sell.

In fact, German Finance Minister Christian Lindner confirmed that “Germany will not agree to this” in response to these proposals for greater common debt, just three hours after Draghi’s report was made public.

The alarm

A lot of Draghi’s proposals centre on stronger cooperation and deeper integration in key areas like the digital economy, decarbonisation, and defence. In order to achieve common goals, member states may need to cede some of their authority, even while greater coordinated action in some areas would enable Europe to take advantage of its size and combined strengths.

Many EU nations have been extremely hesitant to give up any form of authority up to this point, and they have even been slow to coordinate their policies. However, this has led to the fragmented EU that exists today, which is impeded by needless duplication and excessive regulation.

Draghi’s report might serve as the impetus for the EU to finally address its present fragmented methods of operation. The EU is in a state of near-crisis both geopolitically and economically, and it may never have felt more split on the most important issues pertaining to its future.

However, if leaders can grab the initiative and take a chance on significant reforms, a crisis can also catalyse progress. The cost of fixing Europe’s problems might be high, but the penalty of doing nothing could be much higher.

The post EU warned: Slow agony ahead appeared first on International Finance.

Pandemic Aftermath: A Landscape Transformed

The commercial property market in the UK, particularly the office sector, took a significant hit during the pandemic. Office spaces saw a decline in demand as companies pivoted towards hybrid and remote working models.

The uncertainties triggered by rising inflation and borrowing costs further dampened investment prospects, creating an environment of hesitation and a steep drop in transaction volumes. Office vacancy rates in London soared, with many companies downsizing or deferring relocation plans.

Data from CoStar reveals that vacancy rates in the capital touched 10.1% in Q3 of 2024—the highest in more than two decades. Even more notably, the eastern Docklands area, including the prominent Canary Wharf, saw vacancy rates rise to nearly 17%. The need for alternative utilisation of these spaces is increasingly evident, as developers explore converting empty office buildings into hotels or residential properties.

However, these gloomy metrics do not paint the full picture. With major new developments underway and a substantial shift in investor preference towards high-quality office spaces, there is optimism that the market is on the brink of turning a corner.

Key Properties Testing Market Waters

Several high-profile properties in London are currently on sale, presenting a litmus test for overall market conditions. Nuveen, a global real estate investor, recently put its 21-storey “Can of Ham” building on the market for GBP 322 million, which is a significant markdown from its 2022 valuation of GBP 400 million. The “Can of Ham,” so-called due to its distinctive rounded design—represents a crucial test of market sentiment, given the price revision.

Similarly, Brookfield Asset Management has listed its Citypoint tower for GBP 500 million, a far cry from its GBP 670 million valuation and below the price tag from its 2016 sale. These properties’ valuations underscore a central issue in the post-pandemic market: forced corrections in valuation, where sellers must accept significantly reduced offers. The reduced prices reflect investors’ concerns about tenant occupancy and the potential for future rental growth amid economic uncertainty.

New Developments Cater To Shifting Preferences

Despite the challenges in older office assets, demand for new high-quality office buildings is on the rise. M&G’s new office towers at 40 Leadenhall are reportedly over 80% let, despite their recent listing on the market. This success highlights an underlying trend of “upgrading”—tenants are seeking out premium office spaces to match their evolving workforce needs.

Buildings like 40 Leadenhall are designed with a broad range of modern amenities, including wellness facilities like saunas, yoga rooms, hair salons, fitness suites, and even cinema rooms. The presence of such perks is becoming essential as companies seek to entice employees back to the workplace. As Martin Towns, deputy global head of M&G Real Estate, noted, “We had a conviction that tenants would want to upgrade their space.”

A major trend in the construction of these new properties is the emphasis on green credentials and sustainable features. A report by Turner & Townsend Alinea highlights that construction costs for prime office buildings in London have risen to over GBP 500 per square foot, compared to under GBP 400 per square foot before the pandemic. Half of this cost increase is attributed to the need for better amenities, while the rest is linked to improved sustainability standards—including energy efficiency and minimising carbon footprints.

Office Market Recovery Lags But Shows Promise

According to MSCI, the overall UK commercial property market saw transaction volumes rebound by 26% year-on-year in Q2 of 2024. However, this uptick is nuanced: office deal volumes were still down by 21% over the same period, lagging behind segments like logistics and residential properties.

The market has not seen a single office sale above GBP 100 million in the first half of this year, the first time this has happened since 1999. These numbers indicate that while investor appetite is returning, it remains uneven across different property types.

Nevertheless, overall market projections remain optimistic. Capital Economics forecasts that UK commercial prices will rise by 2% in 2024, a notable contrast to the continuing declines anticipated in the eurozone and the United States.

Moreover, United Kingdom commercial real estate is expected to outperform other Western markets over the next four years. These predictions are grounded in expectations of easing inflation, stabilising interest rates, and improving financing conditions—all of which would help support demand for property investments.

Investors Eye The UK As Opportunities Arise

One of the driving forces behind the market’s anticipated recovery is renewed interest from both domestic and international investors. Following years of subdued investment, there is an emerging belief that the UK presents attractive opportunities at a relative discount, especially compared to other European capitals such as Paris or Frankfurt.

James Seppala, head of real estate for Europe at Blackstone, mentioned that the market’s “mood music” had changed, with more investors returning after years on the sidelines. Fiona Voon, head of real estate capital markets UK at BNP Paribas, similarly noted that investors are being drawn to the UK due to the stability of its political environment, which is seen as an advantage compared to other regions. This interest is particularly evident from Middle Eastern, Asian, and Australian investors who are keen to make their mark while valuations are favourable.

Domestic investors like Schroders are also stepping up, with plans to deploy hundreds of millions of pounds into the UK commercial property market this year and the next. The firm’s global head of real estate, Nick Montgomery, emphasised that “from the position we’re in, it’s more of an opportunity than a risk,” highlighting the shifting investor perception of the UK’s office market.

Future Directions And Challenges

While the signs of revival are promising, the road ahead for the UK commercial property market remains challenging. The transformation of office usage is still underway, as remote and hybrid work arrangements appear to have lasting impacts. Many outdated and underutilised properties will likely need to be converted for alternative uses, such as residential housing, to avoid lingering vacancies.

Additionally, while new premium properties like 40 Leadenhall attract tenants, many older buildings outside core locations face bleak prospects. According to MSCI data, London’s overall office vacancy rate remains above 10%, reflecting a bifurcation between the demand for high-quality and lower-quality office spaces.

Financing constraints also present a significant hurdle. The cost of borrowing remains a challenge for many potential buyers, and higher refinancing costs may force some landlords to sell properties at discounted prices. However, the recent easing of inflation and expected stabilisation of interest rates may make financing slightly more attractive over the next year, which could provide a boost to deal volumes.

An Opportunity-Laden Recovery

The UK’s commercial property market is on the cusp of a potential recovery, but this journey will likely be complex and varied across property types and locations. Prime office buildings in central London, which offer upgraded amenities and sustainability features, are expected to lead the charge in this recovery. Meanwhile, older office properties that do not meet the evolving demands of tenants risk being left behind unless they are repurposed.

The market’s recovery is contingent on a combination of factors, including the stabilisation of financing conditions, effective management of surplus office space, and investor confidence in the broader economic environment. For now, international and domestic investors are increasingly optimistic, seeing value in the opportunities presented by a market that has experienced forced price corrections.

Their activity will be pivotal in shaping the trajectory of the UK commercial property market over the next few years, potentially marking the beginning of a broader revival for commercial real estate in the post-pandemic world.

The post IF Insights: UK commercial property market shows signs of post-pandemic revival appeared first on International Finance.

In the first half of the year, Dubai Airports reported that 44.9 million passengers travelled through Dubai International Airport (DXB), which is the world’s busiest airport for international travel. The airport experienced strong demand from important markets like China and India.

Over a million passengers travelled an increase of 80% from the previous year and 90% of 2019 levels. China was severely affected by restrictions during the COVID-19 pandemic.

“We have a very optimistic outlook for the remainder of the year, and we are on track to break records with 91.8 million annual guests forecasted for 2024,” CEO Paul Griffiths said in a statement.

Griffiths projected 91 million passengers for the year in May 2024, exceeding the airport’s previous record of 89.11 million set in 2018. A record 17.15 million foreign overnight visitors visited Dubai in 2023, making it a major hub for trade and tourism in the Middle East.

The city has seen a huge influx of foreign visitors due to its generous income tax policies, extensive infrastructure spending, and welcoming immigration policies.

The new passenger terminal at Al Maktoum International Airport, which is estimated to cost 128 billion dirhams (USD 35 billion), was approved in April by Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai.

The Sheikh stated at the time that Al Maktoum International Airport will be five times larger than DXB and have the capacity to handle 260 million passengers, making it the largest airport in the world.

He also mentioned that all operations at Dubai Airport would be moved to Al Maktoum in the upcoming years. DXB has connections to 269 locations in 106 different nations.

According to Dubai Airports, the top three countries by number of passengers were, in order, India, Saudi Arabia, Britain, and Pakistan.

Meanwhile, the airport will roll out new developments in the coming months including colour-coded car parks for easier navigation.

“As part of Dubai Airports’ continuous efforts to enhance the guest experience, with a focus on operational excellence and seamless travel experiences, new developments will be rolled out in the coming months. These include colour-coded car parks for easier navigation,” the DXB authority said in a statement.

According to Dubai International’s website, parking charges at Terminal 1 range from Dh15 per hour to Dh125 a day at Terminal 2 and from Dh5 to Dh125 at Terminal 1 and Terminal 3. Each additional day’s cost is Dh100 for parking.

The post Dubai Airport sees record year for passengers after 8% rise in H1 2024 appeared first on International Finance.

With the low value of the lira playing a part, wealth per adult increased by 157% in local currency terms in Türkiye, but it also increased by 63% in dollar terms.

According to the report, growth in both Qatar and Russia during the same period was approximately 20% in local currency terms.

Since the start of UBS’s research in 2008, Turkey has experienced the greatest growth in average wealth per adult in local currency terms, with growth of 1708% to 2023. At the presentation of UBS Global Wealth Management’s annual Global Wealth Report, economist Samuel Adams noted that during the epidemic, family wealth in Qatar, like other Gulf governments with a currency tethered to the dollar, saw one of the biggest declines.

The economy and household wealth have both shown signs of revival over the past few years, which includes 2023. This indicates that Qatar’s wealth growth rate has been very robust lately, surpassing that of Saudi Arabia, which saw wealth stagnant last year while not seeing the same contraction in 2020. Similarly, the UAE witnessed some wealth rise the previous year but not as dramatically as Qatar.

According to Adams, Qatar’s growth story is one of a nation returning to its historical pattern rather than a dramatic break from the rest of the area.

In Five Years, Where Will Millionaires Reside?

The number of United States dollar millionaires is predicted to rise at the quickest rate in Taiwan from 2023 to 2028, rising by 47% to 1.158 million. Turkey is predicted to expand at the fastest rate, rising by 43% to 87,000.

During that time, there will be 461,000 more millionaires in Russia, a 21% rise. There is expected to be a 15% growth in the UAE, reaching 232,000, and a 14% growth in Qatar, reaching 30,000. There will be a decline in the Netherlands and the UK, of 4% to 1.179 million and 17% to 2.542 million, respectively.

Russia’s local currency wealth is increasing. After the rouble fluctuated more wildly, reaching lows in March 2022 after the invasion of Ukraine, Russia’s wealth declined in US dollars during 2023.

Despite the difficulties the nation has suffered as a result of Western sanctions, wealth per adult increased in local currency terms, a development that UBS attributed to the fact that conflict economies do not often cause household wealth to decline.

According to chief economist Paul Donovan, structural shifts and the unexpected windfalls brought about by innovation have made wealth an increasingly salient political issue.

He claimed that after declining between 2021 and 2022, global wealth began to rise again in 2023. 2022 saw a decline in global wealth on three separate occasions since the report’s inception fifteen years prior.

The growth of economic nationalism, he lamented, “as well as global financial flows, the mobility of wealth throughout the world is also going to become more of a political preoccupation.”

Money rose at a global average rate of 4.2% even after accounting for the impact of currency rates and the strength of the dollar, which contributed to the wealth recovery in 2023.

The regions that experienced the fastest growth were Asia Pacific (4.4%), the Americas (3.6%), and Europe, Middle East, and Africa (EMEA), at 4.8%.

Adams stated that whereas 2022 brought about economic turmoil, increased interest rates, and a decline in economic activity, 2023 has witnessed a steady return to normalcy.

Are Wealthy Moving From UK To UAE?

The EMEA’s wealth growth doubled the pre-pandemic average in 2023, with Western Europe contributing 84% of the region’s total wealth.

According to Donovan, there are currently more millionaires in the United Kingdom than there are in the country for the size of its economy. This will change as wealth redistribution takes place.

According to him, restrictions on international money flows will cause a change that will outweigh the natural increase in the number of millionaires, and the abnormally high number in the United Kingdom will be balanced.

Although there are no reasons for the rich to leave a nation, there are push and pull factors at play in the United Kingdom, with changes to non-domiciled tax having little impact and demographic shifts brought on by sanctions against Russia.

“The non-indigenous rich population will always be searching for low tax policies, and that is not a result of UK policy, but rather a result of other countries’ pull factors, whether they be in Singapore, Dubai, or somewhere else,” Donovan stated.

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According to data gathered by wealth advice firm M/HQ and reported by the news agency, Abu Dhabi’s financial hub now has over 5,000 SPVs, up from just 46 in 2016.

According to an analysis of the hundreds of corporate filings made in the United Arab Emirates, ADGM has recorded “dozens” of HNWIs establishing SPVs in Abu Dhabi in 2023 alone. These affluent investors include Russia’s steel mogul Vladimir Lisin, India’s Adani family, Ray Dalio, the billionaire hedge fund manager, and the richest person in the cryptocurrency space, Chagpeng “CZ” Zhao.

Nassef Sawiris, the billionaire Egyptian, also announced in December 2023 that he would relocate his family office to ADGM.

A parent company’s creation of business entities, subsidiaries, or holding companies is known as an SPV. To separate financial risk, they are set up with their balance sheet.

Former corporate consultant for the Abu Dhabi free zone, Bhaskar Dasgupta, claims that the number of SPVs in Abu Dhabi is “increasing sharply.”

“High-net-worth individuals are relocating here from the BVI, Cayman Islands, Mauritius, and Singapore at an increasing rate,” he stated further.

Abu Dhabi may see an increase in wealth inflow because of the Gaza crisis. The managing partner of M7HQ, Yann Mrazek, reports that he just received a request from a Palestinian businessman who intends to establish an SPV to safeguard assets. Mrazek is headquartered in Dubai.

Numerous studies indicate that after the COVID-19 pandemic, HNWIs have been drawn to the UAE.

The UAE, Australia, Singapore, the United States, and Switzerland were the top five destinations for net inflows of high-net-worth individuals (HNWIs) in 2023, according to a survey conducted by Henley & Partners.

One of the largest numbers of millionaires ever recorded is anticipated to relocate to the UAE this year—roughly 4,500. The UAE had historically had net inflows of about 1,000 HNWIs annually before to the epidemic.

This year, India is expected to account for most migrant millionaires, with significant contributions also coming from the United Kingdom, Russia, Lebanon, Pakistan, Turkey, Egypt, South Africa, Nigeria, Hong Kong, and China. stated Henley & Partners.

One of the main factors luring HNWIs to the UAE is its reputation as a haven. The UAE’s highly diversified economy, low tax rates, first-rate healthcare system, great real estate, upscale dining and shopping, and top-notch international schools all attract HNWIs.

The post Abu Dhabi emerges as new haven for billionaires seeking to protect assets appeared first on International Finance.

A new SAS-sponsored study by Economist Impact predicts three potential futures for banking, examining the risks and opportunities ahead. Depending on the sequence of events that take place between now and 2035, any of the scenarios are conceivable. The objective of the study is to shed light on how banks might change their purpose and business strategies to benefit consumers, shareholders, communities, and the environment. The study makes it evident that the banks are at a turning point in dealing with issues like climate change, economic dispersion, and chronic economic and social injustices.

Yuxin Lin, Senior Manager of Policy and Insights at Economist Impact said, “The sector’s rapid evolution amidst prevailing uncertainty begs a fundamental question: What is the purpose of banks?”

How banking leaders answer this question – and the business decisions they make as a result – will redefine the entire industry.

Alex Kwiatkowski, Director of Global Financial Services at SAS said, “Banks have the power to elevate not just our global economy but all of humankind. By embracing technology and innovation with intention, banks can pave a more purpose-driven path, where higher purpose and profitability go hand-in-hand. And if they don’t embrace this fully, a golden opportunity to make a genuine difference will be squandered, potentially with very serious consequences.”

Scenario 1: Can transformed banks regain public trust?
Banks have had issues with their reputations ever since the 2008 financial crisis. According to the 2022 Edelman Trust Barometer, financial services presently inspire confidence in just over half (54%) of the general public, making them one of the least trustworthy industries. Flashing forward to 2035, Scenario 1 envisions a world where banks wield digital transformation to rehabilitate their image. Banks have backed consumer-focused regulation and improved safeguards against cybercrime and data privacy. More open banking and collaborations that spark profitable new offers are fueled by increased transparency and consumer protections, which boost public confidence. Every aspect of clients’ financial lives are seamlessly integrated via digital platforms in personalized, adaptable ways.

Stu Bradley, Senior Vice President of Fraud and Security Intelligence at SAS said, “Consumer trust, built over many years, can be lost in an instant. As digitization accelerates, it is critical that banks create hyper-personalized engagement as they address rising risks. In balancing customer experience and risk, an enterprise decisions approach – where fraud, risk and engagement decisions integrate holistically across the customer journey – can cut costs and streamline banks’ IT infrastructures, while boosting revenue and customer retention.”

Scenario 2: Might banks catalyze cross-industry climate action and power the green transition?
It will take unprecedented levels of global cooperation and teamwork to address the climate crisis. The United Nations claims that states’ present pledges to cut greenhouse gas emissions are far insufficient to keep global warming to 1.5°C over pre-industrial levels. Action that is swift and firm is necessary to prevent the worst effects of climate change. Scenario 2 foresees that in 2035, the world community will be committed to addressing climate change, and decolonization will be a top priority for infrastructure, transportation, and energy. Cities have been redesigned to be more resilient to the effects of the climate. Green technologies and affordable renewable energy sources are becoming the norm.

Troy Haines, Senior Vice President and Head of Risk Research and Quantitative Solutions at SAS said, “Climate leadership in the banking sector will drive greater cross-industry progress toward net-zero emissions by 2050 – and it starts now with better analytics, modelling and management of climate risk. In enhancing their ability to model climate risk scenarios and understand potential impacts to their balance sheets and capital, banks can help propel the green transition and advance worldwide climate resilience”.

Scenario 3: How will banks fare in a geopolitical fragmented world?
Economic and market uncertainty continues even as the world seeks to put the worst of COVID-19 in the rearview mirror. The pandemic’s aftermath has exacerbated rivalries among the world’s economic superpowers while overtaxing developing nations, whose citizens bear disproportionate burdens. Against this backdrop, it isn’t hard to imagine Scenario 3, which depicts a geopolitically contentious world stage in 2035, colored by divergent interests and a retreat of multilateralism among the world’s economic giants. The World Trade Organization has been displaced by bilateral and regional accords. The emergence of digital currencies and rivals’ alternative payment methods has shattered the global financial system.

Theodora Lau, Founder of Unconventional Ventures says, “Deglobalisation, accelerated by recent global events, will likely widen the staggering societal inequalities that plague us today. Indisputably, banking and money are at the heart of it all. Each of us has a role to play in championing a more inclusive and sustainable future with our actions of today”.

How fintech challenges banks
The use of personal finance applications has increased recently. The app game is being played by everyone in the banking industry; app providers range from banks that offer their own services to lone developers that make stand-alone saving, budgeting, or money management apps. It is anticipated that the use of personal finance applications will be at its peak in the coming future. These app providers offer current accounts that can only be handled from a phone or tablet, and staff members give customer support via a live chat service. The option to temporarily block your card from your app in the event of loss or theft is one of the major improvements offered by challenger banks with app-based business models. Instead of phoning customer support for replacements, clients can order a replacement with a few taps on the screen. The services offered by conventional banks might be improved with such straightforward changes. By allowing consumers to just take photos of their checks rather than bringing them into the branch, some traditional banks already assist their clients in this way.

Conventional banks are catching up
There are indications that major banks are adapting to the future of banking by becoming more digitally friendly. For instance, Hello bank! by BNP Paribas Fortis which operates in France, Belgium, and Germany was the first bank to exclusively handle accounts through an app. In keeping with a shifting consumer landscape, Hello Bank! offers assistance and support to its clients via a variety of social media platforms, including an online forum.

Additionally, a lot of these services make international banking simpler than before. The number of apps that assist users in managing their finances on a daily basis has increased in other places. Yolt, for instance, enables users to integrate all of their accounts and monitor them in a single app while also getting advice on their weekly or monthly budget. Standalone savings apps are becoming increasingly common, too. This includes applications that add the difference between the amount a user spends on each transaction and the nearest unit to their savings account. If customers are unable to afford to set aside hundreds of pounds or euros each month, such straightforward developments can give them a new, simple option to save money.

Open banking
Increased awareness of how banks communicate with (and inform) their customers is one of the long-term repercussions of the 2008 financial crisis. The European Union’s Payment Services Directive went into effect in 2018. The order upholds restrictions on how users can access their financial data. This is open banking, which gives banks a plethora of new ways to interact with customers and gives consumers a greater understanding of their money. Open banking basically implies that companies that offer online accounts (such as credit and savings cards) must allow their clients to securely exchange data (such as expenditure) with outside companies (such as budgeting applications), if the client so chooses.

Consumer education regarding the advantages of open banking still needs to be done in great detail. Furthermore, banks must appropriately embrace the various ways in which they might exploit these innovations. This suggests that the coming years could be significant for the banking industry’s future because several governments are now approving operating more open banking.

The post Banking in 2035: What lies ahead? appeared first on International Finance.

Recession unlikely

According to Kampon Adireksombat, first senior vice-president of Siam Commercial Bank’s Chief Investment Office (SCB CIO), it is very doubtful that the Chinese economy would enter into a global market recession in 2023.

“The Chinese economy already bottomed out in the second half of 2022 because of their zero-COVID policy. The reopening rules, combined with easing monetary, fiscal and regulatory measures, will likely result in an economic rebound, especially in the first half of 2023. Rising COVID cases after the reopening could force some business activities to halt, but we believe it could be on a temporary basis,” Kampon Adireksombat told the Bangkok Post.

SCB CIO anticipates that China will further relax its monetary policy by lowering the minimum reserve ratio demanded by commercial banks. The People’s Bank of China is also expected to put policies into place that support particular companies, particularly vulnerable ones.

According to Kampon, China’s recent reopening for international travel and softening of monetary policies are important positive factors for both its domestic economy and other nations with substantial exposure to trade, investment, and tourism.

“In 2023, we believe China reopening for domestic and international travel is the most important easing measure that will likely benefit the Thai economy,” he said.

The tourism sector in Thailand and allied industries will benefit from the return of Chinese visitors. According to Kampon, the recovery in the tourism sector should also assist domestic demand because it is a labour-intensive industry. As a result of China’s recent reopening news, Kasikorn Research upped its projection for Thai GDP growth for 2023 from 3.2% to 3.7%, noting that this will be good for Thailand’s export and tourism industries.

“We believe China’s plans to expand businesses abroad will be the second priority for the government and firms, as they may want to stimulate domestic investment to shore up their own economy first,” Kampon said.

Currency concern

According to Sanan Angubolkul, chairman of the Thai Chamber of Commerce, the expected slow development in China won’t likely have a detrimental impact on Thailand’s performance in international trade. He said that China’s initiatives to relax strict zero-COVID regulations will hasten the country’s economic recovery, with the growth of 5% likely starting in the second quarter of 2023.

“Our greatest concern is the frenetic volatility of the foreign exchange rate, especially for the baht, which is strengthening more than other regional currencies. Thai entrepreneurs have to prudently plan and manage foreign exchange risks to curb the impact on their businesses and trade,” Sanan said.

He anticipated that due to the weakening economy of Thailand’s major trading partners, exports will decline in the first two quarters of 2023. According to Sanan, the third and fourth quarters should see an improvement in exports. Also, the Joint Standing Committee on Commerce, Industry and Banking estimates that Thai exports would eke out growth of 1-2%.

Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office (TPSO), stated that despite expectations for slow growth in China’s economy due to zero-COVID policies and a struggling real estate market, the office is still optimistic about the country’s export prospects.

According to a recent analysis by TPSO, the Chinese reopening is anticipated to help Thai exports to China, particularly those of fruit, food, beverages, and clothing. He added that shipments of medical and healthcare products had potential futures. Data from the Commerce Ministry show that in the first eleven months of the year 2022, Thailand’s exports to China decreased by 6.5%, with fruit, plastic pellets, computers and computer components, chemicals, and rubber being the main exports.

Moderate impact

According to J.P. Morgan’s research team, COVID infections in China will peak in January 2023, but the country’s economic recovery won’t begin until the second quarter.

“Even though COVID-19 infections in China rose rapidly after the country reopened faster than expected, we expect the impact to be transitory. In fact, these early infections that will likely peak in January are expected to bring forward the timing of China’s economic recovery to the second quarter,” J.P. Morgan’s research team told the Bangkok Post in a statement.

The team predicts that the recovery will increase consumer demand for tech products like smartphones, which will strengthen trade flows between China and Thailand for tech-related components. According to Vinayaka Venkatesh, senior market analyst for Asia-Pacific at tech market research firm IDC, a rise in infections in China and the possibility of an economic slowdown are expected to curb the supply of tech products, as the majority of countries in the region rely on China. He claimed that increasing loan rates and rising consumer product prices have hurt the Thai economy, which has reduced demand for computer products.

“We expect a slowdown in demand as local and global macroeconomic conditions hurt consumer sentiment and buying power. It doesn’t help that supply of lower-cost smartphones has shrunk significantly,” Venkatesh said.

No concerns over spending

According to Sisdivachr Cheewarattanaporn, head of the Association of Thai Travel Agents, the first quarter would see significant expenditure by Chinese tourists to Thailand, with little influence from the anticipated economic slowdown. As wealthy visitors who have waited three years to travel overseas, Sisdivachr said he believes the Chinese still have trust in visiting Thailand and they may even spend more during the first quarter than they did before the pandemic. Independent travellers, working persons under 40 years old, and the wealthy will make up the bulk of the travel market in China’s early phases of openness, he predicted.

Operators should prepare by offering excellent services, such as attractions, tour guides, bus operators, and boat charters, to draw Chinese tourists.

“This time is different than the global financial crisis in 2008-2009, when there were not many Chinese tourists,” Cheewarattanaporn said.

The Tourism and Sports Ministry reported that only 815,708 visitors from China arrived in 2009. In the second quarter of 2023, Sisdivachr predicted that the Chinese government will let tour groups resume travel. In order to prepare for the restoration of tour group services in the future, he said, Chinese travel agents are currently inspecting attractions and other services in Thailand.

According to Sisdivachr, when Beijing finally drops the necessity for the RT-PCR- COVID test, the Chinese market might expand significantly, while airfares would gradually go down. He predicted that tour operators will make even more money from Chinese vacation packages than they had in the years before COVID.

The Tourism Authority of Thailand’s governor, Yuthasak Supasorn, claimed that the Thai tourism sector has some advantages that should keep demand high even if it is predicted that one-third of the global economy will experience a recession. For instance, he noted that high energy costs in Europe would lead some travellers to look for extended-stay locations outside of Europe. According to Yuthasak, the tourist sector needs to refocus on nations that are anticipated to be less impacted by the economic slowdown in order to minimize these risks.

Tougher competition

As economies continue to contract, the Federation of Thai Industries (FTI) is concerned about competitiveness in the international market. A recession in the global economy has reduced the demand for goods and services in many nations. According to Kriengkrai Thiennukul, chairman of the FTI, supply now outpaces demand on the international market. He stated that if China increases its exports, competition will heat up and other countries’ concerns over slow global commerce will grow.

Kriengkrai said, “After reopening, China will return to competing with other countries. Exporting countries, including Thailand, will face risk because we believe China will increase manufacturing for exports to make up for losses from when the country was closed.”

According to Kriengkrai, when China implemented tight zero-COVID regulations, it provided a chance for other countries to boost manufacturing and export goods. He said this circumstance will change as China ramps up attempts to revive its economy because a slowdown in China’s economy could have an impact on the global economic recovery.

The IMF’s forecast that the Chinese economy may expand at or below the average rate of world growth for the first time in 40 years is cause for concern. The growth prediction for the Chinese economy from J.P. Morgan experts has increased from 4.7 to 5.4% for 2023, Kriengkrai said.

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One of the most crucial institutes of human civilization found itself in troubled waters as it got hit from multiple angles. Both personal and institutional banking activities came to a near standstill as everyone experienced a financial crunch. The term used by S&P to describe the effect was ‘Screeching Halt’, which spoke volumes for the state of things. However, it was not the pandemic alone that affected banks. The pre-COVID banking sector was already under pressure in two main areas: competition from large and small fintech and tech fin firms, and low-interest rates.

The situation was only exasperated by the crisis, providing a stark reminder that it was time for banks to up their game.

Issues that plagued the banking sector due to COVID-19 pandemic

Banks saw a drastic reduction in investment levels while also experiencing market volatility. Activities like M&A/SPAC also saw a drop, further affecting income streams. And finally, the underutilization of brick-and-mortar bank facilities added to costs without substantial revenue to justify the spending. The aim of the banking sector in the post-COVID world was not so much about surviving – that was well within its capability, but more about how quickly it would get back on its feet.

Fortifying for the post-COVID era

There are a few areas that the sector can focus on to be better equipped for the post-COVID era. The first is digitalization. This is where fintech got it right, right from the start. If banks can digitalize and automate as many processes as possible, it could be a leap forward in getting back on track. Digitalization does not only streamline operations and makes them faster, but it also helps to lower the error rate to even zero. Automating processes helps free up resources that would otherwise be tied up doing mundane tasks. Reallocating these resources can have a considerable positive impact on the everyday running of the banking sector.

Personalized experience for customers

While going digital and moving processes online, it is also important to maintain a personalized experience for customers. Improved telephonic and video communications for customer interactions could be exactly what both banks and customers need to retain good relationships and provide reassurances in the sector’s ability to build momentum in the ‘new normal’.

In a world where many non-banking financial companies (NBFCs) already have a head start in online payments and processing of financial transactions, banks do not have to start from scratch. Collaborative ventures or even mergers and acquisitions of small yet well-equipped NBFCs could speed the process along.

Interests on loans have been the major source of revenue for banks over the decades. However, the COVID-19 crisis rocked this model to the core. Loss of jobs, and businesses collapsing made it impossible for a vast number of borrowers to pay back their loan amounts. As the number of non-performing loans (NPLs) increased, banks found themselves incurring greater losses with a diminishing capacity to absorb these losses over time. This situation is unlikely to change at a rate that would help banks recover quickly.

Focusing on alternate sources of income

One way that the banking sector could start recovering from this outcome is to focus on other sources of income. A fee-based model for revenues should be the next step to protect and stabilize the business. Developing new products and improving existing products would help to enhance fee-based revenue-generating streams. Whether we are looking at digital products like e-wallets and e-credit cards or more traditional products like lockers, Guarantees, and pay orders, increasing their attractiveness and accessibility for the customers is a move in the right direction.

COVID-19 was a shock to the system of transactional banking, which has led to a change in the business model. This new model combines and integrates technology into the survival strategy. There has no doubt been progress, and things have been looking up to an extent. However, while it is now behind us, COVID has left us with a rocky road ahead, fraught with significant recessionary and geopolitical factors that continue to influence the banking industry.

In this light, the future needs to be navigated with caution, but also with imagination and innovation playing a significant role. An attitude of openness to collaboration with various players is necessary in order to thrive and should be looked at with a fresh perspective. Typical low activities like consolidation and joint ventures are essential if banks are to emerge stronger in a post-COVID world.

The post Revival of banking sector after COVID era appeared first on International Finance.

According to aviation consultancy OAG, the hub, which has consistently outperformed its international competitors, including London Heathrow, logged 4.2 million seats in February 2023.

Although Dubai International Airport has the highest monthly capacity in the world, the latest figures are down by 9% from the previous month.

With 3.3 million seats and a 7% drop from the prior month, London Heathrow, a solid rival to Dubai International Airport, placed second overall. The third-place went to Istanbul Airport, Paris Charles de Gaulle and Singapore’s Changi.

The most recent monthly rankings from OAG are based on February’s scheduled airline capacity.

The consulting company also compared the most recent data to the same month in 2019, before the global pandemic COVID-19 began.

Dubai International Airport recently reported carrying over 66 million passengers overall in 2022, an increase of 127% from 2021. The airport anticipates a rise in traffic, with 78 million passengers passing through in total by 2023.

According to the International Air Transport Association (IATA), relaxing COVID-19 regulations helped the aviation sector grow in 2017. Compared to 2021, international traffic increased by 152.7% in 2022, surpassing pre-COVID levels by 62.2%.

The average waiting time at Dubai International Airport departure passport control was less than five minutes for over 96% of passengers in 2022, the airport’s operator announced recently.

For arrivals, the average waiting time at passport control queues was less than 13 minutes for over 95% of flyers.

These figures are usually based on average queuing times (weighted by the total number of passengers processed) captured by Dubai Airports’ real-time monitoring system.

Dubai International Airport also mentioned how its ‘Smart Gates’ were speeding customers through the immigration process.

The airport rolled out the feature in 2021, thus enabling flyers to travel without using their identification papers.

Utilising a mix of facial and iris recognition, passengers can check in for their flights and complete immigration formalities sans identification documents. Their faces serve as ‘passports.’

The aviation hub’s baggage handling system processed a total of 62.2 million bags in 2022.

“With a success rate of 99.8%, this translates into 2.2 mishandled bags per 1,000 passengers, an impressive performance for the world’s busiest international hub. In terms of baggage delivery on arrival, 92% of all baggage was delivered within 45 minutes to our customers. The baggage volume in 2022 represents 86.2% of the 2019 baggage volume at DXB,” Dubai International Airport stated.

The baggage delivery performance measures the time from the moment the aircraft comes to a halt on the bay to the time the bags are delivered to the reclaim carousel.

According to OAG, capacity decreased in February 2023 compared to January at every significant airport that made it into its top 10 rankings.

The three aviation hubs that have seen the most significant drops in traffic are Istanbul, Doha, and Bangkok, each of which saw a 10% drop in passengers.

However, some Asian airports have experienced increased passenger volume, with Changi in Singapore, Incheon in Korea, and Suvarnabhumi in Bangkok making OAG’s top 10.

Changi advanced from position 11 to position 4, Incheon advanced from position 45 to position 7, and Suvarnabhumi advanced from position 46 to place 10.

London Heathrow remains the top hub in the European market, followed by Istanbul with 3.2 million seats.

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