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Egyptians Steadfast as Inflation Hits 30 Percent

Egyptians are bearing down under their worst inflation in a decade, cutting spending as much as possible as prices surge on basic food items, transportation, housing, and even some essential medicines.

Inflation reached almost 30 percent in January, up 5 percent over the previous month, driven by the floatation of the Egyptian pound and slashing of fuel subsidies enacted by President Abdel-Fattah el-Sissi in November.

The move was part of a reform package to secure an IMF bailout loan of $12 billion desperately needed to shore up investor confidence and overhaul the economy. Immediately after the floatation, the pound lost over half its value, making a wide range of Egypt’s many imported goods double in price.

Quietly tightening belts

In the months since, Egyptians have been left with a grim search for ways to tighten their belts and make ends meet, hoping eventually the promised benefits of reform like growth and job creation come.

There’s little public outlet to voice discontent, with opposition and dissent in general crushed, and alternatives to el-Sissi’s rule unfathomable for most. Many fear saying anything negative about the country in public.

“People are buying half of what they did before, because it’s gotten very expensive,” said Hassan, a butcher who only gave his first name for fear of creating too much attention.

Food and drinks have seen some of the largest increases, costing nearly 40 percent more since the floatation, figures from the statistics agency show. Some meat prices have leaped nearly 50 percent.

“They’re buying less than before. Instead of buying five or six items they’ll buy two, for example,” said a grocery clerk, Ismael, who gave only his first name for similar reasons. “No one knows what the prices will be next. But hopefully tomorrow things will get better.”

Little alternative to reforms

The economy has yet to recover from the 2011 Arab Spring uprising that overthrew longtime autocrat Hosni Mubarak. Investment and tourism, a pillar of the economy, were both gutted by political turmoil and terror attacks.

Keeping the pound’s value high artificially was draining foreign reserves at a time of waning largess from Saudi Arabia and Gulf Arab allies, who propped up el-Sissi’s Egypt with tens of billions of dollars after he led the military’s ouster of his Islamist predecessor, Mohammed Morsi, in 2013. Paying for subsidies also sucked up much of the budget.

Reforms were long avoided by Egypt’s leaders for fear of a popular backlash like the 1977 bread riots that forced the reversal of food subsidy cuts.

There have been some positive signs since the shock reforms were enacted. Investors have flocked to buy Egyptian bonds, and foreign reserves are rising. The pound has regained some strength, trading around 16 per dollar as opposed to nearly 20 in late December. People have changed buying habits, purchasing local goods, instead of imports, rendered more expensive by both the exchange rate and newly imposed high import tariffs.

Economists, the government and the IMF predict inflation will ease later this year.

In the meantime, people are using public transport more, moving children to less expensive private schools, avoiding meat, using electricity more thriftily and supplementing some purchases with food handouts from the army. 

Poor hit hardest 

But among the poor, daily needs are being hit hard. Nearly a third of Egypt’s population of 92 million people lives under the U.N. poverty line of $1.9 a day.

“For people who are more working class or poor, there’s less room for belt-tightening at this point since such a large percentage of their salary was already devoted toward purchasing food,” said Timothy Kaldas, a non-resident fellow with the Tahrir Institute for Middle East policy.

Some drugs have gotten harder to find in pharmacies. Manufacturers have slowed or stopped production on some medicines because higher prices of components make them less profitable or unprofitable, since prices are fixed by the state. Accusations of drug hoarding abound amid expectations the government will have to bump up the prices.

The government appears to be betting it can keep a lid on any discontent long enough for hoped-for growth to kick in. 

President keeps tight grip

In speeches, el-Sissi has commended Egyptians for enduring what he called difficult measures, while telling them further cutbacks are inevitable.

His government, meanwhile, has kept an iron grip. A crackdown over the past two years has crushed both the Islamist movement and secular pro-democracy activists, with thousands arrested, leaving almost no organized opposition. Unauthorized gatherings are banned.

Pro-el-Sissi media consistently demonize dissidents and discourage any complaining, urging a patriotic front.

Calls for protests following the initial price hikes in November fizzled and, for the moment, there appears to be little attempt at more.

Kaldas said that in the view of the population, they had two uprisings that ousted two governments and quality of life has only deteriorated.

“The likelihood that they would see that as a solution going forward anytime soon is, I think, pretty slim,” he said.

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Will US Workers Have Right Skills for Jobs of the Future?

President Donald Trump told the heads of more than 20 of the largest U.S. manufacturers Thursday that he planned to bring millions of factory jobs back to the United States.

Trump said the United States had lost one-third of its manufacturing jobs since the North American Free Trade Agreement was signed, and that 70,000 American factories had closed since China joined the World Trade Organization.  

Experts say trade and company efforts to take advantage of cheaper labor overseas contributed to the decline of U.S. manufacturing employment, but many economists say the rising tide of automation played a major role in the loss of high-wage factory jobs.

To boost the economy and employment, Trump has said he will change tax policy, cut regulations and spend more money rebuilding roads and other infrastructure, though many details have not yet been announced.

“Everything’s going to be based on bringing our jobs back, the good jobs, the real jobs,” he said Thursday.  

The chief executive officers of General Electric, Lockheed Martin, Dow Chemical and other firms gathered at the White House, where they discussed regulations on minerals extracted in conflict zones, export regulations for military hardware, business taxes and problems finding technically skilled workers for manufacturing jobs.

Focus on creativity

MIT research scientist Andrew McAfee told VOA the U.S. education system was doing a great job of turning out the kinds of workers “we needed 50 years ago.” He said schools and employers should put more emphasis on “encouraging creativity” and helping students not just learn to solve problems, but to “figure out what problem we should go chase down next.” 

He said technology is “lousy at that.”


A study by the Deloitte consulting firm says that the U.S. economy will create 3.5 million manufacturing jobs over the next decade, but that more than half of them may go unfilled because companies cannot find people with the right skills. The problem grows from the retirement of millions of baby boomers and the creation of hundreds of thousands of new jobs.  

The key to closing this gap is training and retraining for workers, Senator Chris Coons said in a recent Capitol Hill speech.  But the Delaware Democrat said the United States had cut its investment in retraining by half over the past 30 years and now spends just one-sixth the amount that other advanced industrial nations put into upgrading workforce skills. He said that hurts economic growth and employment over time.  

Republican Senator Thom Tillis of North Carolina told the same gathering the problem was the “mismatch” between workers’ current skills and “the needs of the industry.”

Other nations’ systems

Both lawmakers said Americans should study the system used by Germany, Austria and other nations for apprenticeships, technical training, and updating and upgrading workforce skills. In Germany, companies, schools, unions and government officials work together to figure out what skills are needed for jobs today and in the future, what gaps exist in workers’ knowledge, and how to organize appropriate classes and training.

The head of science, technology, engineering and math education at a North Carolina community college said many of his students were already involved in programs that blend academic skills with on-the-job training in a system that borrows ideas from the German model. Chris Paynter said many different kinds of companies are involved, so the program offers a blend of core skills and training customized for the needs of the particular firm that employs the apprentice.  

While there has been a lot of concern about manufacturing jobs, Harvard University’s James Heskett said the automation and trade that cut jobs from factories could also hurt employment in the far-larger services sector. In a recent blog post, the emeritus professor from Harvard’s business school said there might be an even larger job crisis ahead.

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Mnuchin Says Goal Is to Pass US Tax Reform by August

Treasury Secretary Steven Mnuchin said Thursday the administration is committed to getting major tax reform legislation through Congress by August. He predicted that President Donald Trump’s economic proposals will be able to boost growth significantly to annual rates above 3 percent.

Mnuchin said that tax reform is the administration’s top economic priority and the goal is to have a measure approved by the time Congress takes its August recess.

“We are committed to pass tax reform,” Mnuchin said in an interview on CNBC. “It’s going to be focused on middle income tax cuts, simplification and making [the U.S.] business tax competitive with the rest of the world, which has been a big problem.”

He said implementation of Trump’s economic program including tax cuts and deregulation would make growth in a range of 3 percent to 3.5 percent “very achievable.”

During the campaign, candidate Trump had set a goal of achieving growth, as measured by the gross domestic product, of 4 percent or better. The country has struggled through the weakest recovery in the post-World War II period in terms of growth, with GDP averaging annual gains of just above 2 percent in the seven years since the recession ended in mid-2009.

“We have underperformed where we need to be,” Mnuchin said. “We believe we can be competitive and get back to sustainable growth of 3 percent or more.”

The GDP grew by just 1.6 percent last year, and many forecasters are predicting growth this year at an only slightly better pace of 2 percent to 2.5 percent. Mnuchin said it would take time for Trump’s economic program to translate to faster growth. But he said positive effects would be realized by next year.

Mnuchin’s prediction of an August passage of a tax plan could prove optimistic given that House and Senate Republicans seem sharply divided over key elements of the program. GOP lawmakers in the Senate have expressed opposition to a House proposal to replace the current 35 percent tax on corporate profits with a border adjustment tax.

Under the House proposal, American companies that produce and sell their products in the United States would pay a new 20 percent tax on the profits from those sales. But if the company exports its products, the profits from those exports would not be taxed by the United states. However, foreign companies that import goods into the United States would have to pay the 20 percent tax.

Mnuchin did not commit to supporting the border adjustment tax but said the administration was “looking closely” at the issues raised by this type of tax. He said he has discussed those issues with two supporters of the approach, House Speaker Paul Ryan and House Ways and Means Committee Chairman Kevin Brady, R-Texas.

“We think there are some very interesting aspects of it. We think there are some concerns about it,” Mnuchin said.

He said one thing the administration wants is a combined plan that would draw support from lawmakers in both the House and Senate.

“We’re working behind the scenes very carefully. We’re running a lot of numbers and we’re taking into account a lot of issues,” he said. He said the administration hoped to have a proposal ready to unveil in “the near future, and we’re committed to get this passed by August.”

In a separate interview with the Fox Business Network, Mnuchin said the administration was focused on an “aggressive timeline” to enact tax reform, calling it critical to stimulating economic growth.

“There’s trillions of dollars offshore that will come back, and this will create jobs [and] this will create investment and we need to make sure our U.S. businesses are competitive,” Mnuchin said.

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Investing in Disaster Resilience Now ‘Mission Critical’ for Business

In the aftermath of Hurricane Katrina in 2005, Gillis, Ellis & Baker, a New Orleans-based insurance company, relocated from the battered, flooded city to nearby Baton Rouge so it could carry on serving its 4,000 clients, who all had at least one claim following the storm.

Had it not been able to keep operating after the disaster, “we would have been out of business today”, said the firm’s president, Anderson Baker.

“We would not have been able to live up to our promise to get our customers’ claims initiated,” he told the Thomson Reuters Foundation.

The company had decided to ramp up its disaster plan just weeks before the deadly hurricane hit, and was able to make use of a generator-powered trailer with office equipment and satellite phones provided by U.S. firm Agility Recovery.

“We don’t see it as a choice,” said Baker. “It’s part of being in business. For us, it’s mission critical.”

Whether a devastating hurricane like Katrina – the costliest storm in U.S. history, which left 1,800 dead — or more commonplace events such as a rat infestation, natural hazards can disrupt business operations and harm profitability.

In 2016, over 10,000 people died as a result of natural and man-made disasters globally, while financial losses amounted to at least $158 billion, according to insurance giant Swiss Re.

Increasingly, companies are realizing how important disaster recovery can be for their survival, and are finding ways to keep their staff and assets safer from threats. Gillis, Ellis & Baker is now investing in remote and cloud-based systems as part of a strategy to protect its operations in case of future disasters.

“We’ve got to be there or those clients—  have no reason to stay with us any further if we’re not there to answer the phones and do what they need us to do,” said Baker.

Stock-piling critical materials, backing up computer data, identifying alternative suppliers and re-locating activities are among the measures businesses can take to prepare and build resilience to disasters, experts say.

Recovery services

And as climate change brings more extreme weather around the globe, there is growing demand from the private sector for backup services in case a disaster strikes.

“It’s asset protection, employee protection — so there’s a responsibility for companies to have to do this,” said Hyune Hand, chief executive officer of Agility Recovery. “The biggest gap we have is when customers say ‘we’ll deal with that if it comes’.”

Agility Recovery, which provides mobile units, computers and generators to disaster-affected clients, is gearing up to increase the number of ready-to-use offices it can offer its customers in emergencies.

When Superstorm Sandy ploughed into the U.S. northeast in 2012, leaving over 120 people dead and knocking out power and telecommunications, Agility Recovery brought in equipment to help its clients, ranging from large financial institutions to local convenience stores.

But businesses need not wait for a crisis to hit before putting in place measures to reduce losses.

When it comes to building resilience to climate change, companies should consider the potential impact on their physical assets, as well as rising costs, from energy prices to raw materials, said Geoff Lane, a partner in the sustainability team at professional services firm PwC.

“Another key aspect is ‘brand resilience’ as consumers, employees and investors are increasingly looking at companies’ overall positioning and response to climate change when making financial or life choices,” he said.

‘Triple Dividend’

But many businesses — and governments — are still too used to under-spending on prevention, taking a short-term approach that ultimately costs them more, experts say.

“We are actually far outspending on recovery and response, the post-event funding … than on prevention and ex-ante anticipative management, and this is really a problem,” said Swenja Surminski, a senior fellow at the London-based Grantham Research Institute on Climate Change and the Environment.

“We’re locking ourselves into a less resilient future if we don’t address risk right now,” she told a recent webinar for the International Center for Climate Governance.

A new book co-authored by Surminski, “Realizing the Triple Dividend of Resilience,” argues that boosting resilience can save lives and avoid losses; unlock economic potential; and generate additional value known as “co-benefits.”

These “co-benefits” could be investing in life boats for floods that can also be used by communities for fishing and trade, or leasing shelters that double up as meeting spaces.

Ripple effects

Adam Rose, research professor at the University of Southern California Sol Price School of Public Policy, agrees that emphasizing the benefits could be one way to incentivize businesses to invest in resilience.

Doing so could help them avoid a drop in profits due to loss of customers and market share, and lessen disruptions to the local economy or society they operate in, he said.

“People are realizing that disaster losses to an individual business have spill-over effects,” he said.

For example, the GDP losses from Hurricane Katrina far exceeded the cost of property damage, while business interruption caused by the September 11, 2001 attacks in New York was valued at around four times higher than the physical damage to the World Trade Center, Rose noted.

So far, larger companies have generally been quicker to take action, while many medium and small-sized firms still need to get up to speed and adopt best practices, he added.

“Businesses are getting more involved in sharing information [and] learning more about all features of the broad definition of resilience,” he said.

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Moody’s Sticks to Initial Assessment of Trump, US Economy

Before Donald Trump won the November election, many analysts were sharply critical of his economic proposals. Some predicted big declines in financial markets, hiring slowdowns and a heightened risk of recession.

But just a little more than a month since Trump became the 45th U.S. president, U.S. stocks have enjoyed the longest winning streak in decades, hiring continues to beat expectations and consumer confidence is soaring.

Were naysayers wrong?

VOA spoke with an early critic of Trump’s economic plans, Moody’s Analytics chief economist Mark Zandi, to ask him if the experts got it wrong.

Zandi’s answer was a crisp “No.”

 “If Mr. Trump got precisely what he wanted, the policy proposals that he had put forward, what would happen to economy? And the answer is, the economy would go into a deep recession.”

Zandi told VOA he stands by his initial assessment before Trump became president, saying that from a policy perspective, he has yet to deliver on his campaign promises.

“What he wanted was 11 million undocumented workers to leave the country. What he wanted was a 45 percent tariff on China, 35 percent on Mexico. What he wanted was tax cuts and government spending increases that would increase the budget deficit by $10 trillion over 10 years. So if that is what he got, that would lead to a recession. That hasn’t changed.”

Others see good signs

But others say the record run-up in stock prices reflects renewed investor optimism under Trump, much of it driven by expectations of corporate tax cuts and fewer regulations. PNC senior analyst Gus Faucher says it’s about higher profits in the short term.

“So they (investors) are expecting stronger U.S. economic growth under President Trump, both real growth — that is after inflation — but also perhaps higher inflation, and that’s going to boost profits as well,” he said. “And then also it looks like we’ll get corporate income tax cuts, so that means more profits to distribute to the shareholders so that’s good news for stock prices.”

Faucher says investors will be disappointed if Trump fails to introduce concrete proposals to boost growth, such as corporate income tax cuts or a major infrastructure jobs program, but he says, in general, the economic outlook is much better than it was just a few months ago.

Enthusiasm wanes

But enthusiasm surrounding Trump’s economic agenda may be waning.

Goldman Sachs says investor confidence may have reached its peak. And Kevin Kelly at Recon Capital Partners says markets may be close to reaching a tipping point.

“Now, it’s focusing on, OK, are we going to get deregulation or are we going to get taxes? Are things going to be weighing for a while? Is it going to be a second half of the year story? I think that’s what’s kind of seeping into the market right now.”

Some economists say Trump’s protectionist, anti-trade positions pose another risk to the larger global economy. 

Trump has turned his back on the 12-nation Trans-Pacific Partnership, and he wants to renegotiate the 1994 North American Free Trade Agreement (NAFTA) with Canada and Mexico. Critics of NAFTA say the North American trade deal destroyed millions of high-paying manufacturing jobs in the United States.

But Zandi of Moody’s says, “The United States is at the center of the global economy. It’s taken hundreds of millions of people out of poverty and brought them into the middle class. Think about Brazil, think about Eastern Europe, think about China and Asia. Consumers have also benefited enormously from cheaper goods. If we pull back on globalization, the world suffers and we will also suffer.”

Congress likely to back policies

Despite reports of disarray in the early days of the Trump administration, Zandi believes a Republican majority in both houses of Congress is likely to approve most of Trump’s policy proposals. 

But some economists wonder, given the Republican party’s brand of fiscal conservatism, if lawmakers approve Trumps proposed tax cuts, how is the administration going to pay for a major infrastructure jobs program, or new border agents, and of course, that giant border wall between the U.S. and Mexico?

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Moody’s Economist Sticks to His Prediction: Trump Bad for Economy

Before Donald Trump won the election, many analysts were sharply critical of his economic proposals. However, in Trump’s first month in office, U.S. stocks have hit a series of record highs and consumer confidence improved. Did analysts get it wrong? Economist Mark Zandi, an early critic of Trump’s economic plans, said it’s still too soon to tell. Mil Arcega reports.

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US Fed: Rate Hike May Come ‘Fairly Soon’

An interest rate hike may come “fairly soon” according to notes from the most recent meeting of top officials of the U.S. central bank.

The assessment by Federal Reserve leaders assumes that data on the job market and inflation continues strengthening at its current pace or faster.

Some Fed officials expressed concern that unemployment might fall so low that it would spark inflation as employers are forced to offer higher wages to attract workers in a tight labor market.

Officials raise interest rates to cool the economy to keep prices from soaring. They worry that an inflationary spike could hurt economic growth.

The Fed is supposed to work toward stable prices and full employment. The most recent unemployment rate is 4.8 percent, which many economists say is pretty much full employment for the large and complex U.S. economy.

The Fed information was published Wednesday after the customary delay of several weeks. The next scheduled meeting of the Fed leadership is in mid-March.

Earlier on Wednesday, a separate report said U.S. home resales surged to a nearly 10-year high in January.

The National Association of Realtors says existing home sales jumped 3.3 percent to an annual rate of 5.69 million homes.

The report says sales are being hampered by the smaller-than-usual number of homes available for sale. The real estate industry group also says sales were up 3.8 percent from the same period a year ago.

Sales growth was stronger than many experts predicted, perhaps because they thought rising prices and interest rates might cool the market a bit.

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US Treasury Chief Tells IMF He Expects ‘Frank and Candid’ Forex Analysis

U.S. Treasury Secretary Steven Mnuchin told International Monetary Fund Managing Director Christine Lagarde on Tuesday that he expects the IMF to

provide “frank and candid” analysis of exchange rate policies, a Treasury spokesperson said.

In a phone call with Lagarde, the spokesperson said, Mnuchin also “noted the importance that the administration places on boosting economic growth and jobs in the United States, and looked forward to robust IMF economic policy advice on its member countries and tackling global imbalances.”

The conversation on U.S. priorities occurred as officials from the Group of 20 major economies express concern about how the United States will approach multilateral institutions and delicately crafted G-20 language on foreign exchange cooperation, trade and other economic policies.

As President Donald Trump pursues an “America First” agenda aimed at reversing chronic trade deficits with China, Mexico, Germany and other major trading partners, some are concerned his administration could back away from pledges to maintain an open global trading system.

“I believe the Trump administration will try to leverage the IMF and the G-20 to help achieve its external objectives and escalate pressure on China and Germany,” said Domenico Lombardi, a former IMF board official who is now with the Center for International Governance Innovation, a Canadian think tank.

Targeting currency manipulation

Throughout his election campaign, Trump accused China of manipulating its yuan currency to gain an export advantage over the United States. And Trump trade adviser Peter Navarro in late January said Germany was using a “grossly undervalued” euro to do the same. Both countries have large bilateral trade surpluses with the United States.

But IMF officials no longer view the yuan as undervalued, especially since China’s central bank has spent hundreds of billions of dollars to prop up the yuan over the past year to counter capital outflows.

The euro’s value against the dollar is widely viewed as a function of still-weak fundamentals in key eurozone economies and the European Central Bank’s use of negative interest rates at a time when the U.S. Federal Reserve is raising rates.

A ‘constructive discussion’

Mnuchin, who was sworn in as Treasury secretary just a week ago, has yet to lay out his priorities. Before his Senate confirmation, he pledged to work through the IMF, the G-7 and G-20 to address currency manipulation as an unfair trade practice.

But he added in written remarks to senators: “The IMF and other multilateral institutions do not appear to have prevented nations from manipulating the value of their own currencies.”

In the call with Lagarde, the Treasury spokesperson said Mnuchin “underscored his expectation that the IMF provide frank and candid analysis of the exchange rate policies of IMF member countries.”

IMF spokesman Gerry Rice said that Lagarde “had a constructive discussion with Secretary Mnuchin on a wide range of issues of interest to our membership. We look forward to continuing our close and productive engagement with the U.S. authorities.”

US is largest IMF shareholder

The United States is by far the IMF’s largest shareholder, with about 17 percent of its board voting power, enough for an effective veto over many major decisions.

It is unclear how Mnuchin might wield U.S. influence over the IMF on issues such as whether it should commit resources to Europe’s bailout of Greece.

In his written remarks to senators, Mnuchin said the Trump administration will “ensure that U.S. resources placed in international institutions such as the IMF and multilateral development banks are used to promote policies consistent with the objectives of the United States to the greatest extent


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Small Business Owners in Arizona Look to Trump for Relief

The owners of a local printing company in Arizona are looking to President Donald Trump to cut taxes and improve the business climate. Mike O’Sullivan spoke with the owners, who backed Trump, and their son, who did not, about what they expect from the president.

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Supermarket Uses Lasers to Brand Fruits and Vegetables

A Swedish supermarket chain is offering shoppers some fruits and vegetables that are branded with their country of origin and code number, instead of being wrapped in plastic with that information. VOA’s Faith Lapidus reports.