Important developments today:
1. International banks cut lending to troubled Euro Area countries
2. U.S. economy grew by 2.8% in Q4
International banks cut lending to troubled Euro Area countries. Cross-border bank claims on troubled Euro Area economies declined sharply in the third quarter of 2011, according to the Bank for International Settlements (BIS). International banks cut their exposure to Italy by $113 billion, to Spain by $63.6 billion, to Portugal by $16 billion, to Greece by $7.2 billion and to Ireland by $2 billion. However, total international exposure of banks to Euro Area states rose by $624 billion in the third quarter, driven primarily by increased claims on banks in the United Kingdom ($287 billion) and Switzerland ($103 billion). Meanwhile, lending to emerging economies fell by $10 billion, mostly because of declines in Eastern and Central Europe where banking sectors are dominated by subsidiaries of western European lenders.
U.S. economy grew by 2.8% in Q4. Real gross domestic product in the United States increased at an annual rate of 2.8% in the fourth quarter of 2011, according to the "advance" estimate released by the Bureau of Economic Analysis today. This marks an acceleration from the 1.8% increase in the third quarter. Private consumption expenditure increased by 2.0% in the fourth quarter led by a 14.8% increase in spending on durable goods, residential fixed investment growth accelerated to 10.9% from a 1.3% increase in the third quarter, and exports increased by 4.7% (the same rate as the previous quarter). An increase in private inventories added 1.94 percentage points to the fourth-quarter change in real GDP as private businesses increased inventories by $56.0 billion in the fourth quarter, following a decrease of $2.0 billion in the third quarter. These were partly offset by a sharp deceleration in nonresidential fixed investment to 1.7% from 15.7% in the third quarter, declines in federal government and state and local government spending of 7.3% and 2.6% respectively in the fourth quarter, and the acceleration in imports to 4.4% from 1.2% in the third quarter.
Among Emerging Markets
In the Middle East and North Africa, Tunisia's international reserves fell by 20.8% year-on-year (y/y) in December to end the year at $7.53 billion, with the import cover narrowing to less than 4 months, as foreign exchange earnings from tourism, exports, workers' remittances and capital inflows remained depressed.
In Latin America and the Caribbean, Cuba’s tourism sector, a key foreign exchange earner, received a boost as the number of tourists visiting Cuba rose 7.3% (y/y) to 2.7 million visitors in 2011.
In Sub-Saharan Africa, Zambia’s trade surplus narrowed to $25.8 million in December 2011 as exports contracted by 8.8% (y/y) led by a sharp decline in the international price of copper, Zambia’s main export, during the year, while imports accelerated by 18.8% (y/y).