The I.M.F. warns of a lopsided economic recovery but retains its 6 percent global growth forecast.

The I.M.F. warns of a lopsided economic recovery but retains its 6 percent global growth forecast.

The I.M.F. warns of a lopsided economic recovery but retains its 6 percent global growth forecast.

Daily Business Briefing

July 27, 2021, 9:14 a.m. ET

July 27, 2021, 9:14 a.m. ET

India was downgraded because of a severe second wave of the virus slowing the economic recovery.
Credit…Saumya Khandelwal for The New York Times

The International Monetary Fund warned on Tuesday that the gap between rich and poor countries was widening amid the pandemic, with low vaccination rates in emerging economies leading to a lopsided global recovery.

The I.M.F. maintained its 2021 global growth forecast of 6 percent in its latest World Economic Outlook report, largely as a result of advanced economies, including the United States, expecting slightly faster growth than the global body previously forecast. Economic growth in developing countries is expected to be more sluggish, and the global body said that the spread of more contagious variants of the virus poses a threat to the recovery. It called on nations to work together to accelerate protect their citizens.

“Multilateral action is needed to ensure rapid, worldwide access to vaccines, diagnostics and therapeutics,” Gita Gopinath, the I.M.F.’s chief economist, wrote in the report. “This would save countless lives, prevent new variants from emerging, and add trillions of dollars to global economic growth.”

The I.M.F. projected that the U.S. economy will expand 7 percent in 2021. The euro area was projected to expand 4.6 percent and Japan was expected to expand 2.8 percent. Rapid expansion was expected for China, at 8.1 percent, and India, 9.5 percent, but both of their outlooks have been downgraded since April. The outlook in China was lowered because of a scaling back of public investment, while India was downgraded because of a severe second wave of the virus slowing the recovery.

The global expansion in 2022 was projected to be stronger than previously forecast, with growth of 4.9 percent. That, too, will be led by advanced economies, the I.M.F. predicted.

More than a year after the coronavirus emerged, economic fortunes are closely tied to how successfully governments have been at providing fiscal support and acquiring and deploying vaccines. The I.M.F. said that about 40 percent of the population in advanced economies has been fully vaccinated, while that figure is just 11 percent or less in emerging markets and low-income developing economies. Varying levels of financial support from governments is also amplifying the divergence in economic fortunes.

Concerns about price increases have grabbed headlines in the United States and elsewhere, but the I.M.F. said that it continued to believe that the recent bout of inflation was “transitory.” The organization noted that jobless rates remain below their prepandemic levels and that long-term inflation expectations remain “well anchored.” Ms. Gopinath said that predicting the path of inflation is subject to much uncertainty because of the unique nature of the economic shock that the world has faced.

“More persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation,” Ms. Gopinath said.

As the Federal Reserve prepares to meet on Tuesday and Wednesday, she advised central banks to be nimble in setting monetary policy and urged them not to raise interest rates too soon.

“Central banks should avoid prematurely tightening policies when faced with transitory inflation pressures but should be prepared to move quickly if inflation expectations show signs of de-anchoring,” Ms. Gopinath added.

Mutations of the virus remain the most daunting challenge facing the global economy. The I.M.F. projected that highly infectious variants, if they emerge, could derail the recovery and wipe out $4.5 trillion in gross domestic product by 2025.

Government officials are imposing vaccine mandates to encourage the private sector to do the same.
Credit…Kena Betancur/Agence France-Presse — Getty Images

With coronavirus case counts rising, officials are imposing vaccine mandates on government workers in hopes that the private sector will follow suit. “We’re leading by example,” Mayor Bill de Blasio of New York said Monday, in announcing the city is mandating vaccines or testing for all municipal employees. “A lot of times, private sector employers say that’s what they need.”

Some major New York employers, notably Morgan Stanley, have already moved toward mandating vaccination for workers returning to its offices in the city. Many others haven’t taken that step, even after the mayor’s urging.

  • Facebook, which has 4,000 employees at its New York office, said Monday that it would continue to encourage, rather than require, coronavirus vaccines for workers. “We understand that some people may not or cannot get the Covid-19 vaccine for a variety of reasons, so the vaccine is not required to work from a Facebook office, though we encourage employees to get the vaccine to protect themselves and the communities we live in,” said Jamila Reeves, a Facebook spokeswoman.

  • Goldman Sachs declined to comment. The New York Times reported in June that the bank, which has roughly 10,000 New York employees, was requiring its bankers to log their vaccination status before being allowed in the office. It has been requiring regular testing for unvaccinated employees.

  • JPMorgan Chase, which employs about 20,100 people in New York, declined to comment. The bank has so far only strongly encouraged vaccinations, but its chief executive, Jamie Dimon, warned employees in a memo last month the bank “may mandate that all employees receive a Covid-19 vaccination consistent with legal requirements and medical or religious accommodations.”

  • Citigroup, which has 7,000 New York-area employees, is requiring unvaccinated employees to use an at-home rapid test three times a week and to wear masks in the office. Those who show proof of vaccination can bypass those requirements.

  • Pfizer, which employs roughly 2,700 employees and contractors in its Manhattan headquarters, does not generally require vaccinations as condition to enter its offices. “There may be certain circumstances in the future in which we impose a vaccination requirement in the interest of colleague health and wellness,” said Faith Salamon, a Pfizer spokeswoman.

The Tencent booth at an internet conference in Beijing earlier this month. Tencent’s WeChat service dominates Chinese social media.
Credit…Tingshu Wang/Reuters

The Chinese internet giant Tencent said Tuesday that it had temporarily suspended new user registrations for its hugely popular WeChat app, raising fears of new regulatory pressures even as it insisted the outage was the result of a technical upgrade.

Tencent said in a statement that the shutdown, which affected only new users and groups registering for the app, would be over by early August and was part of a fix to its security technology.

The timing of the suspension left investors uneasy, with concerns mounting that a regulatory rampage aimed at the technology sector could heavily affect Tencent, China’s largest internet company. By far the company’s most important product, WeChat dominates Chinese social media, allowing users to do everything from share photos and chat to pay for coffee and pay bills.

Tencent’s shares closed down almost 9 percent in trading in Hong Kong. Overall, it was a rough day in Chinese stock markets, with the Hang Seng Index in Hong Kong dropping 4.2 percent and the Shanghai Composite down 2.5 percent, amid concerns over Beijing’s regulatory crackdown.

Thus far, Tencent has managed to steer clear of the worst of a nine-month spree of government scrutiny on China’s high-flying tech sector that has led to multibillion-dollar fines, suspensions of app services and tumbling share prices for its rivals and as well as companies it has invested in. Over the past month alone, Chinese officials have mandated security reviews for internet firms seeking to list their shares abroad and barred tutoring companies, many of which operate online, from making a profit.

Tencent’s worst scrape with Beijing has come through a company it has invested in, the ride-sharing business Didi. Earlier this month, regulators opened an investigation into the company, eventually ordering its apps off mobile stores until the investigation concluded. The company’s shares are now down more than 40 percent from when they listed at the end of last month.

In its statement Tuesday, Tencent sought to play down the suspension, but acknowledged the hand of the government, saying that the security upgrade was “to align with all relevant laws and regulations.”

On Saturday, China’s market regulator separately took action against Tencent, invoking the country’s antimonopoly law. It issued the company a small fine, roughly $75,000, but also forced it to abandon exclusive deals it had with record companies for its music business, arguing that an acquisition had given it excessive market share in the sector. Shares in Tencent Music, which trades in the United States, fell 3 percent on Monday and were down another 4 percent in premarket trading Tuesday.

A trailblazer in chat apps, gaming and social media, Tencent’s soft-spoken founder, Pony Ma, has a track record of keeping the company out of the spotlight and away from government scrutiny.

Yet the company itself is renowned in Chinese tech circles for its aggressive competitive strategies, using its huge social media platforms first built more than a decade ago to overwhelm nascent rivals. Recently, it has taken stakes in a constellation of internet newcomers and then linked its services to them in an effort to compete with Alibaba, a rival e-commerce giant. It’s not clear whether the paltry fine over its music holdings and the quiet security rework are indications it will get off light or the worst is yet to come.

Alibaba shows how bad things could get. In April, Chinese officials fined the company $2.8 billion for monopolistic behavior. Last year, regulators suspended the blockbuster listing of Alibaba’s sister company, Ant Group, days before its initial public offering, likely cutting more than $100 billion from its market share.

Henry M. Paulson Jr., the former Treasury secretary and executive chairman of the private equity fund TPG Rise Climate.
Credit…Luke Sharrett for The New York Times

When Bono helped recruit Henry M. Paulson Jr., the former Treasury secretary and Goldman Sachs chief, to join TPG’s impact investing initiative, part of the pitch from the musician-activist-investor was that a private equity fund focused on fighting climate change could be big. He was right.

The TPG Rise Climate fund announced on Tuesday that it has raised $5.4 billion, which would make it the largest climate-focused fund in the world. The fund, which counts a TPG co-founder, Jim Coulter, as its managing partner, would rank as the 25th-largest private equity fund out of more than 1,200 raised this year, according to PitchBook. It has a cap of $7 billion, so it could get bigger by the time it closes in the fourth quarter of the year.

Unusually, Rise Climate’s investors aren’t simply the big pension funds. Investors include Apple, General Motors, Nike, FedEx, Honeywell and roughly three dozen other large corporations, which collectively are contributing about $1 billion. Corporations rarely invest in private equity funds, so their participation underscores the demand by both investors and companies to find climate solutions.

The companies that invested in the fund are likely to have access to many of the businesses that TPG invests in, helping them grow, and potentially validating them. TPG said Rise Climate would be focused on companies that can “enable carbon aversion in a measurable way.”

Earlier this year, Mr. Paulson told DealBook that for a fund focused on sustainability to sustain itself, it had to produce returns that were competitive with other private equity investments. “The market will not scale for concessionary or subsidized returns,” he said. He will have to prove the returns, but so far scale does not seem to be a challenge.

A Mirai at a hydrogen fuel pump in Torrance, Calif. The lack of refueling infrastructure, along with the cars’ high prices, has held them back.
Credit…Philip Cheung for The New York Times

Even as other automakers embraced electric cars, Toyota bet its future on the development of hydrogen fuel cells — a costlier technology that has fallen far behind electric batteries — with greater use of hybrids in the near term. That means a rapid shift from gasoline to electric on the roads could be devastating for the company’s market share and bottom line.

In recent months, Toyota has quietly become the auto industry’s strongest voice opposing an all-out transition to electric vehicles — which proponents say is critical to fighting climate change, Hiroko Tabuchi reports in The New York Times.

Last month, Chris Reynolds, a senior executive who oversees government affairs for the company, traveled to Washington for private meetings with congressional staff members and outlined Toyota’s opposition to an aggressive transition to all-electric cars. He argued that gas-electric hybrids like the Prius and hydrogen-powered cars should play a bigger role, according to four people familiar with the talks.

The recent push in Washington follows Toyota’s worldwide efforts — in markets including the United States, Britain, the European Union and Australia — to oppose stricter car emissions standards or fight electric vehicle mandates.

Households including 60 million children received advanced child tax credit payments in July to help them emerge from the pandemic.
Credit…Christopher Smith for The New York Times

The Biden administration sent out letters to families alerting them about payments this month that are part of an expanded child tax credit that aims to support Americans as they ride out the pandemic. Instead of claiming the benefit during tax season, eligible families are receiving half of the credit, up to $300 for each child, in monthly installments that began in July and will run through December.

The payments are welcome relief for many households — families including 60 million children received $15 billion in July — but there is a fair bit of confusion about what they may mean when it comes time to file tax returns next year. Tara Siegel Bernard reports for The New York Times on some of the top reasons taxpayers may want to take a closer look at the potential tax implications or consider opting out of the advance payments.

“Accepting the credit now can be a lifeline for many, but it’s important that taxpayers know how this will affect them during next year’s tax filing season,” said Cari Weston, an accountant and director for tax practice and ethics at the American Institute for Certified Public Accountants, a trade group.

  • Tesla on Monday reported a big increase in profit for the three months ending in June because it sold more than twice as many cars in the period as it did a year earlier. The company said it made $1.1 billion, or $1 a share, in the second quarter, up from $104 million in the same period a year earlier. It reported revenue of $12 billion, up from $6 billion. Tesla sold 185,000 cars in the first quarter of 2021. A significant portion of Tesla’s profit comes from selling regulatory credits to other automakers that need them to meet emissions standards. In the second quarter, it took in $354 million from the sale of credits.

  • Lordstown Motors, a struggling electric pickup truck company, said Monday that it had reached a deal with an investment firm to raise $400 million over three years. The investment firm, Yorkville Advisors, has agreed to buy up to $400 million of Lordstown’s shares, which would provide badly needed cash to a company that this summer said it could go out of business without raising more money. Lordstown’s stock price has tumbled from a peak of almost $31 in February and is now trading at less than $10. The stock was down 2.5 percent at the close of trading on Monday.


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