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Ruto Narrowly Wins Kenya’s Presidential Election

Source: BBC

Deputy President William Ruto won Kenya’s presidential election on Aug 9, 2022, after a close race between him and rival candidate Raila Odinga. After a week of tallying votes, Kenya’s electoral commission ruled that Ruto had won with 50.5% of the vote vs. former Prime Minister Odinga’s 48.8%. Ruto served as deputy president for nearly 10 years under President Uhuru Kenyatta.

The official announcement was delayed as Odinga’s campaign alleged that Ruto’s campaign had tampered with the ballot count, and four of the seven members of the electoral commission refused to endorse the result. Kenya has a history of disputed elections, with sometimes violent results — after the 2007 election, around 1,200 people were killed and 600,000 displaced.

After the contested 2007 elections, the International Criminal Court charged Ruto with crimes against humanity. The case was closed after he was elected Kenyatta’s vice president in 2016. However, he subsequently fell out with the president and positioned himself in the election as an outsider fighting the political dynasties of Odinga and Kenyatta.

Climate Change Causes Deadly Flooding in Pakistan

Source: The Economist

A deadly monsoon season in Pakistan has led to the country’s worst flooding in a decade, as climate change causes increasingly extreme weather around the world. 

By the end of August, Pakistan had received three times its annual average rainfall. Summer monsoon rains caused the worst flooding in areas around the Indus River, with some provinces receiving up to five or six times their 30-year average rainfall. More than 33 million people have been impacted by the flooding, and at least 1,100 people have died. 

Pakistan is responsible for less than 1% of the world’s greenhouse gas emissions, but it is the eighth-most vulnerable country to climate change. Some officials estimate that the recovery will cost $10 billion. The costs of flooding also affect the rest of the world: Flooding in 2021 destroyed more than 12 million acres of crops, contributing to the global surge in food prices. Worldwide, flooding has caused over 250,000 deaths and led to economic damage exceeding $1 trillion since 1980.

Risk of Stagflation Rises Around the World

 

The risk of stagflation is rising around the world as inflation rates hit record highs and economic growth slows, reports the World Bank. Stagflation, a period of high inflation, low economic growth, and high unemployment, is a rare occurrence, last seen during the 1970s OPEC oil embargoes. But the combination of the Ukraine crisis and the pandemic has pushed prices high, while hampering growth and limiting consumer spending.This is the “largest commodity shock we’ve experienced since the 1970s,” said Indermit Gill, the World Bank’s vice president for equitable growth, finance and institutions, in an interview with the Financial Times.

The forecast for global economic growth is down to 3.3%, while inflation is up to 6.2%. Asian forecasts have been revised down due to supply chain disruptions, China’s zero-COVID policy, and Russia’s invasion of Ukraine. 

Latin American forecasts have similarly been revised, due to surging inflation. Europe and the U.K.’s energy prices and sanctions on Russian energy imports may trigger an economic crisis. High energy and food prices are also impacting Africa and the Middle East.

But the U.S. faces the highest risk of inflation, according to some experts, as the economy contracts and inflation and interest rates rise.

European Energy Systems Are Scrambling to Adapt

Reductions and temporary halts in Russian natural gas exports have exposed the vulnerability of European energy systems, pushing gas prices to record highs and amplifying recession and high inflation concerns.

The situation is worsened by drought conditions that have caused reductions in hydroelectric and nuclear power generation across Europe and led Norway to announce possible cuts to its hydroelectricity exports. The consequences on European energy systems are already evident: Germany will limit heating in public buildings to 19 degrees Celsius and has announced rationing plans unless usage is reduced by 20%

European gas storage facilities are on track to meet their refill targets, but this may not be enough to prepare for winter. The EU is planning to reform its energy markets and has agreed to cut gas use by 15% through March 2023 while increasing imports from the United States. With its REPowerEU plan, the European Commission will also reduce Russian gas imports by two-thirds by the end of 2022. Meanwhile, Germany and other EU countries are scrambling to find additional suppliers while investing in energy efficiency and renewables. The U.K. has announced similar plans to phase out Russian imports and to expand its wind and nuclear capacity.

Recession Fears Drive Volatility in German Bonds

The eurozone bond market is experiencing volatility at levels last seen during the 2011 eurozone debt crisis and 2008 financial crisis, as uncertainty about rising interest rates and recession fears continue to grow.

Germany — the benchmark for the euro — has seen swings in its 10-year bund (German federal bond) of at least a 0.1 percentage point range on 79 days in 2022, reports the Financial Times. The spread between German and Italian 10-year-yields was at its highest level this month, near 2.3 percentage points.

Liquidity in bond markets has been impacted by a looming recession and the European Central Bank’s continued interest rate hikes. The ECB has signaled that it will raise interest rates another half percentage point at its meeting on September 8 in an attempt to curb inflation. Inflation in Germany is forecast to rise above 10% for the first time in 70 years, and eurozone inflation reached a record high of 8.9% in July. 

Adding to investors’ worries is the ECB’s slowdown on its bond-buying programs, including the end of its 1.7 trillion euro ($1.7) Pandemic Emergency Purchase Programme and the expected third-quarter end of its €3.3 trillion ($1.3) Asset Purchase Programme

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