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First Move with Julia Chatterley
ECB Launches New Tool Help Ease Bond Market Pressures; IEA Responds to Threat Russia may Withdraw Energy Supplies; Tesla Earnings Fall on Hit from China COVID Surge; ABD Slashes Growth Forecast for China Amid COVID Lockdowns; Heat Wave Affecting More than 900 Million People in China; Regulators Urge Airlines not to Over-Book Flights. Aired 9-10a ET
Aired July 21, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
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JULIA CHATTERLEY, CNN HOST, FIRST MOVE: On a busy Thursday on top including breaking news from the European Central Bank policymakers raising interest
rates by an aggressive half a percentage point their first hike in more than a decade with hints of more aggressive action to come to tame
inflation.
The ECB is dropped made harder to buy political turmoil and one of its largest nations Italy. Prime Minister Mario Draghi resigning today after
his coalition government collapsed, sending the country's sovereign bond yields soaring.
Also in Europe, Russian gas flowing once again through the Nord Stream pipeline, it would be it is a fraction of full capacity the International
Energy Agency warning of a worsening energy crisis for the continent as winter approaches.
We'll be joined in just a moment's time by the Executive Director of the IEA, Fatih Birol. For now, energy investors and users I think breathing a
sigh of relief natural gas easing, by as you can see that more than two and half percent bigger losses for Brent and U.S. crude almost 4 percent in the
case of WTI.
Selling pressure building in the Crypto currency space as well, Tesla announcing it's sold at some 75 percent of its Bitcoin holdings for
liquidity purposes down 2.8 percent.
As you can see the Bitcoin sale coming amid a challenging quarter for the EV make a better than expected profits. But margin pressure too was a
result of challenges over supply chains and production in COVID hit China.
Tesla shares higher however in pre-market trade and a mixed overall for global stocks U.S. futures looking stronger. Italy, as I've mentioned the
underperformer in Europe down by around half a percent but off those intraday lows and over in Asia, modest gains for the Nikkei, as the Bank of
Japan keeps its interest rates at rock bottom levels, plenty to get to this Thursday.
Let's begin with the action Europe and it's a lift off finally, for European Central Bank interest rates. Now that announcement of a half a
percent rate hike comes within the past hour and the ECB also launching a pretty well telegraphed new program to ease stress in sovereign bond
markets.
Clare Sebastian joins me now. The timing couldn't have been better or worse of course, for a final collapse of the Italian government. Talk us through
what the European Central Bank said today.
And of course, deciding to go that full half a percentage point to which sends a strong message.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, this was a really big move Julia from the European Central Bank ending sort of two errors in one fell swoop,
one that they haven't raised rates at all since 2011. Meanwhile, the Fed has actually raised rates 12 times in that period and also because they've
actually been at negative interest rates since 2014.
So this half a percent rate hike brings them back to zero that the ECB finally joining the rate rise party that we're seeing around the world as
inflation really forces the hand of central banks.
But there were two things that allowed them to do this bigger than expected rate rise. One, they said, because of the inflation situation, it's at 8.6
percent in the Euro zone, that's the highest ever since records began when the Euro was launched.
And second, because they did manage to pull together this anti- fragmentation tool, this mechanism that we're still waiting for final details on, which is designed to sort of allow the ECB to regulate
borrowing costs across the Euro zone to stop them rising too fast, in some places, and not so much in other places to allow the monetary policy
decisions that they make to sort of be the same in all different countries.
They've got that in place. Now it's been approved, that means that the risks of raising rates are a little bit moderated. So two key things there,
but clearly, you know, a major move, the ECB needed to show that it was being proactive in the face of these inflation rates to restore credibility
and take a look at the Euro against the dollar today.
We have seen some rises thereafter, it almost hit parity, just a few days ago. So that shows a slight increase in confidence there, although still
obviously Julia at historic lows. I think the question for many out there is this actually going to be a tightening cycle? Or is this just going to
be a little bit of a blip? And then perhaps an economic downturn gets in the way?
CHATTERLEY: Yes, and that's going to be the key. And for those that were criticizing, perhaps this idea that it's easing in the bond market trying
to contain those bond yields.
They got the half a percentage point to your point about the catch up, perhaps on some of the inflationary pressures. Clare Sebastian, thank you.
Now one less thing for the European Central Bank to worry about, at least in the short term gas is flowing again, from Russia to Europe via Germany.
It follows a maintenance shutdown on the Nord Stream 1 pipeline and days of uncertainty about whether supplies would resume a tool. Fred Pleitgen joins
us now from Berlin. So the good news is gas is flowing once more but it is severely reduced rates around what 40 percent capacity.
[09:05:00]
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, around -- yes, you're absolute right around 40 percent at the beginning as the German said that might only be actually 30 percent. But now it seems to be at
around 40 percent capacity, that oil that gas is flowing into Nord Stream 2 and then obviously flowing here into Germany and into the rest of Europe.
Now, the Germans are saying that simply isn't enough, they say that they would need the pipeline to run at a much larger capacity. And they believe
that Russia is doing this for political reasons.
It was really interesting, Julia, because of course, I would say that there was a lot of concern here in this country, that there could be a full
shutdown of Russian gas completely for a long period of time.
And the German economics minister, he actually just finished a press conference a couple of minutes ago, where he accused Russia of doing all
this for political reasons. He said that Russia was not a reliable partner.
And he also admitted that Germany had made itself as the largest economy here in Europe and a huge industrial economy, of course, way too dependent
on Russian energy.
Now, the Germans have said, despite the fact that gas is still flowing, they are so concerned about the situation that they've just put in place a
whole flurry of new measures to try and conserve gas for those winter months, where obviously, they are going to need it.
They want the capacity of their storage facilities to be at around 95 percent come November 1, that's an extremely difficult task. And that
means, especially with the gas flowing at only about 40 percent in Nord Stream 1 that means they're going to have to conserve a lot of energy.
They're trying to get people to conserve a lot of energy, trying to get the industry to conserve a lot of energy. But they're also mobilizing a lot of
their coal reserves as well to try and get energy from other sources.
So they don't need to use gas to make electricity, for instance, they need to use as little as possible to actually get heat, as well, of course, come
the months in fall. So the Germans really, you could almost describe it as panic and some echelons here of the German government and political parties
extremely concerned about the situation and also about the fact that this pipeline now is running again, but only running at around 40 percent.
Of course, the Russians say that a turbine that was being serviced in Canada was missing. And that's why the pipeline is running at that lower
capacity. The Germans say they absolutely don't buy that.
But the reality is they have to deal with this new situation where energy is very hard to come by. For a country, of course, as you very well know,
that just needs a huge amount of energy to keep that industrial heart beating here in this country. CHATTERLEY: Absolutely. I think some would
argue that panic is a good thing in order to force better preparation and ongoing preparation, Fred, great to have you with us, thank you, Fred
Pleitgen there.
Now the International Energy Agency describes the Russian situation is perilous quote and warns Europe it must prepare for a long, hard winter. In
response, it's drawn up a five point action plan, which includes letting big industry auction off their excess gas supplies, incentivizing less
consumption, minimizing gas use in the power sector, which means relying more on coal and oil and nuclear power in the shorter term, improving
coordination to between gas and electricity operators across Europe and reducing household demand.
And then harmonizing emergency planning that includes energy rationing, if needed. Fatih Birol is the IEA's Executive Director and he joins us now,
Dr. Birol Fatih, fantastic to have you on the show.
The short term uncertainty over this pipeline now appears to be over. But the risk that this is weaponized to use the term in Europe once again
surely remains very high.
FATIH BIROL, EXECUTIVE DIRECTOR, INTERNATIONAL ENERGY AGENCY: Definitely so, I think the good news that some gas from Russia started to flow. But I
think it is too early to be a happy about this. The current gas flows from Russia to Europe, compared to the normal years, the historical average is
only about one third of what Europe received from Russia.
This is one reason why we shouldn't be so happy. And the second is it can be cut anytime. We have experienced this in the last few weeks last few
months, that the Russia may well use this as leverage for reaching it is political goals.
CHATTERLEY: And you're saying to Europe, they need to expect that they need to expect and be better prepared for a full cut off.
BIROL: Definitely so, definitely so. I mean, if we assume in Europe the Russian current gas flow continues as it is until a winter throughout the
winter. Plus, all the LNG Europe is getting from the United States and - which is a record high continues to be these levels plus the maximum amount
of gas we are getting to Europe from Norway, Azerbaijan, Algeria.
[09:10:00]
BIROL: If they continue again at this maximum capacity even if there is no single accident or fire or this ended around - Europe still needs to reduce
its gas consumption about 20 percent compared to today, in order to have a safe and a normal winter months for the citizens for this economy.
So we should give a site hoping that somewhere, sometime, huge amount of additional guests will come to Europe, which is not the case, there's not
enough gas around the world.
So what we have to do in Europe is to reduce gas consumption to be prepared for winter.
CHATTERLEY: Wow. So you're saying that even without any other accidents, there needs to be 20 percent reduction in consumption to avoid shortages,
energy shortages, and rationing this winter?
BIROL: Exactly, rationing.
CHATTERLEY: It's sort of impossible.
BIROL: Yes, the earlier we start, the better it is. Because when we come to the winter months, the measures we may need to take may well be more
drastic than what we have suggested. The better is we start now and more importantly, in a coordinated way within Europe.
So it shouldn't be those days, if we don't take the measures. Now it shouldn't be a white vest. It should be a coordinated, cool headed
preparation. And we should have an emergency plan across Europe, across all countries.
You are talking about Germany, definitely Germany is one of the most vulnerable countries, but certainly Germany, it is Italy. And most
importantly, several Eastern European countries that are relying heavily, much more heavily than Germany, Italy, on Russian gas, we have to also
think about those countries as well.
CHATTERLEY: I mean you're taking more action at a time when Europe suffering an extreme heat wave and demand for electricity use for air
conditioning is accelerating off the charts. Is any country doing enough?
Germany's just announced a whole new raft of measures that they're going to take. But what you're saying is it requires input from governments from the
business from the industry, the industrial sector, and also consumers to check their behavior is any European nation doing enough at this stage?
BIROL: I would not be telling you the truth, if I would say that any country is fully prepared now. There are different actions; different
measures take in different countries. But in my view, it should be at the European level, European Union level, that we prepare and coordinate our
response to Russian policies, Russian gas policies.
And in my view, this winter, European is going to go through a historical test whether or not Europe as a union can show solidarity and European as a
whole support each other. And not only the big countries, but also small countries are well prepared for this rather long and hard winter.
CHATTERLEY: You're basically saying without saying that you fair there are going to have to be energy cut down cuts, because there are going to be
shortages. And the danger is there's infighting within Europe.
BIROL: Exactly. So it is the worst thing from a political point of view that the European countries are competing with check with each other in
order to get the available gas. It is better to prepare now and have an emergency plan a across Europe so that the measures that we have to take in
winter are not hurting the economy and not hurting the political solidarity of the European countries.
This is what the Russians and the others would like to see. So therefore, again, Europe is going to go through a historical test in terms of its
union.
CHATTERLEY: Yes, don't let the politics perhaps play into Russians hands at this moment. You've also and we can talk about the broader energy complex
said that energy supplies should also be released.
President Biden was just in the Middle East, he spoke to the Crown Prince in Saudi Arabia. How confident are you that that relationship will
ultimately end up in perhaps more supplies from Saudi Arabia if not other OPEC nations perhaps where capacity exists?
BIROL: Saudi Arabia in the - when we look at the previous similar crisis, like that Saudi Arabia has been a responsible player provided comfort to
the markets. And I very much hopes that the Saudi Arabia and other Middle East countries once again, provide support bring in new volumes, oil to the
market.
And at the same time, ensure if the world needs more oil they will be on the side of countries who wanted stability in the world, who want to avoid
a recession, economic recession around the world, which is bad news for not only for the consumers, but producers at the end of the day.
[09:15:00]
BIROL: So again, oil markets are also going through a very critical time. But here, we have enough oil in the Middle East, soon, coming from United
States, from Brazil, and Canada and from other countries.
But they will come to the market towards the end of the year; they will hit the market towards the end of the year. And let's do not forget that the
International Energy Agency member countries provided substantial amount of oil from it to stocks.
And they are also slowly but surely hitting the market to provide a comfort zone for the consumers around the world.
CHATTERLEY: It's coming is the message more supply is coming. But it could be a wild coming. And that's the problem. Give us the worst case scenario;
can you in terms of your forecasts for energy prices?
If we end up in a situation where there are shortages, where there's infighting, how high might energy prices go, because I think that's the
most concrete warning to consumers and to governments that you can provide to say, take action today.
BIROL: I mean the key word in my view is the red alert, red alert for the global economy. It is not only for the countries we talk about the European
countries, but more importantly, developing countries.
It is the countries in the Asia in Africa and Latin America, they are going to suffer from high energy prices, and not when the prices will be high,
but their currency is also weak. And they will go through big difficulties in terms of economy. Therefore it is the red alert, in my view, where we
are now in terms of energy markets.
CHATTERLEY: Yes, prepare now or try and avoid a worst recession or recession later.
BIROL: Exactly. If we don't move now, if we don't have international solidarity here, vis-a-vis, in my view, the largest energy crisis the world
has ever witnessed in terms of its depth.
And in terms of this complexity, then we are going to see a recession, which is again, bad news for almost all countries around the world, but
mostly for the developing nations.
CHATTERLEY: Red alert, sir, we're on it. We've got it. I'm wearing an appropriate color for you today as well to emphasize the message. Great to
have you on the show with us sir, and we'll chat again soon.
Fatih Birol, Executive Director of the Energy, International Energy Agency there, thank you. OK, let's move on. Draghi drama is in Italy, the nation
looking for a new prime minister after his second resignation in just under a week.
Barbie Nadeau is in Rome for us. It's always complicated in Italian politics. The question is the country now headed for fresh elections? And
what might that bring? Indeed a period of uncertainty, whatever way it happens?
BARBIE NADEAU, CNN CONTRIBUTOR: Well, yes, we are. We are in a period of uncertainty here after bloodshed last night with this confidence vote. When
three of the main parties were very instrumental in this coalition, the coalition that Mario Draghi was leading, decided not to vote that's very
different than voting against him.
They instead abstained from the vote, which sends a different message that sends one to their constituents. Now these parties two of them are on the
center right coalition, center right side, one by a Silvio Berlusconi, headed by Silvio Berlusconi, who of course everyone following Italian
politics there as well.
And the other way Matteo Salvini, they're polling very high right now.
They want new elections before May 2023, which is when this mandate for the 2018 election ends. They're banking on the fact that we will go into new
elections in this country because then they could come to power.
The other party, the Five Star Movement, the anti-establishment group that won so heavily in 2018 has imploded, they've disintegrated within
themselves. And so they need to regroup.
And those are the parties that caused Mario Draghi, even though he won a confidence vote last night to take a good look at the ability he has to
govern going forward and said, nope, I'm not going to have I'm not going to try it.
I'm not going to do it anymore. I'm handing it back to you. He gave his resignation and Sergio Mattarella, the President this time, accepted it. So
there seems no other way to go forward than to go into new elections or talking about dates in early October. And then we're going to see what
happens but this is a terrible time for this country is in an economic down spin.
We're still looking at recovery from the COVID pandemic. There's war next door all of these factors don't bode well for an election for a campaign,
let's say because there's a lot of different players here with a lot of different interest, Julia.
CHATTERLEY: Absolutely and whatever your views on Mario Draghi, this is the worst time to be without a government as the European Central Bank's
raising interest rates stagflation, a war in Ukraine to your point.
[09:20:00]
CHATTERLEY: It's actually not what the country needs irrespective of anything else. Bobby, great to have you with us, thank you. OK, still ahead
on "First Move, Tesla slams on the brakes when it comes to its crypto commitment.
It's something you want in China either, but it's working on it. Plus, as airlines are taught to do a better job of looking after passengers, Anna
Stewart sees firsthand how hard it is to even get all on plane. Will she make it from London to Ibiza? All the tough jobs before the end of the
show, we'll find out.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to an eye watering penalty the Chinese government finding ride hailing giant Didi around $1.2 billion for violating data
security laws.
The company has been under investigation by China's cyberspace regulator for the past year. Even since its blockbuster share listing in the United
States, Didi later decided to delist from the New York Stock Exchange.
The company says it sincerely accepts the regulator's ruling. Meanwhile, Tesla hitting the brakes the company's second quarter sales and profit
dropped from the previous quarter as COVID lockdowns continued in China.
It's the first time since the pandemic that Tesla did not set a new profit record. The company also sold the majority of its Bitcoin holdings. Paul La
Monica joins us now.
Wow. That was a tough ride for Tesla in that introduction. I want to start by talking about the sideshow to the sideshow, which is exactly how Elon
Musk called it. I couldn't agree with him more, which was the crypto sale for liquidity purposes.
PAUL R. LA MONICA, CNN REPORTER: Yes, I thought you were going to go to Twitter there for a second Julia, which is a real sideshow.
CHATTERLEY: Tempting.
MONICA: But yes, Tesla's selling a majority of its crypto holdings in the quarter. And you know, Musk said that a lot of that had to do with the fact
that because of the problems in China because of the COVID lock downs there, they really needed to maximize their cash position.
So he seemed to suggest that they weren't necessarily getting bearish on crypto per se and they still hold whatever they have in Dogecoin for
example. But it is notable that you know Tesla has been one of the bigger proponents of having Crypto currency on the balance sheet along with micro
strategy and Michael Saylor.
[09:25:00]
MONICA: But they had to, for liquidity reasons, sell that crypto and get good old fashioned cash, which apparently is still king.
CHATTERLEY: Yes, cash rather than the crypto version. No irony there. But to your point as well, and this was he said this was not about crypto, this
was simply about to your point, the liquidity position, fine.
So we've mentioned the sideshow. We've mentioned the sideshow to the sideshow to the sideshow, which is Twitter. Let's talk about the core
business. And what was going on there.
Because this is the first full quarter, I believe, since they raised prices by around 10 percent. So to get the sense of their pricing power in this
market, what did you make from of the results?
MONICA: Yes, I think that on the one hand, it is concerning that you saw this big deceleration on a sequential quarter over quarter basis compared
to the first quarter.
And since Tesla is a momentum, stock, a growth company, people are going to look at the numbers through that lens. But I think as Tesla matures, it's
also important to note that compared to a year ago, these numbers were pretty good, while the earnings were better than expected, but it was still
solid revenue and profit growth compared to the second quarter of 2021.
And I think that's Julia what Investors are probably focusing on, we said at least at last check, right before the market opened, it looked like
Tesla was going to open higher.
So if Tesla shares do wind up in green, once the opening bell hits in a few minutes, I think that's a reflection that maybe Investors are more
encouraged than disheartened by these numbers.
CHATTERLEY: Yes and they've got a whole host of challenges that everyone's facing the input costs, labor, and economic downturn, all the challenges
that everybody else is facing.
Cash burn with the ramp up that we're seeing in Texas and Berlin, I was looking at Dan Ives, who's a regular on the show, and he was talking about
a 40,000 car a week run rate.
So we're talking, producing 2 million cars a year. And this is at a time when we're seeing evermore in competition in this space, as they said on
the call demand here is not a problem. It's pretty mighty.
MONICA: Yes, demand is clearly strong. But Julia, you're definitely correct to point out that Tesla doesn't have this market to itself by any stretch
of the imagination.
GM and Ford are both aggressively ramping up their electric vehicle production. We're seeing more EV focus from European car makers as well. So
this is going to be a market that Tesla may have had that first mover advantage to use our show name in that comment.
But I'm not so sure that over the long term, people that love their Model S and Model X and model three, they're going to find that there are other
options out there.
If they want to switch to another electric vehicle or for people who haven't adopted electric cars yet, they will notice that there are probably
cheaper options available from the giant car makers in Detroit and Europe and possibly even Japan as well.
CHATTERLEY: One of my very favorite First Movers. Paul La Monica, thank you for that and you're hired by the way for the advertising there. Thank you.
Coming up, the war in Ukraine, higher rates in China's COVID lockdowns are putting pressure on economic growth across Asia. The latest forecasts,
next.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to "First Move". A landmark day for global markets as the European Central Bank raises interest rates for the first time since
2011 the ECB hiking by a greater than expected to half a percentage point.
The European Central Bank Chair Christine Lagarde saying the Central Bank had to become more aggressive because of growing pricing pressures. She
also noted the added security of the TPI Program intended to keep bond yields across the Eurozone in check.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, ECB PRESIDENT: The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization
path than signaled at its previous meeting. This decision is based on our updated assessment of inflation risks, and the reinforced support provided
by the TPI for the effective transmission of monetary policy.
(END VIDEO CLIP)
CHATTERLEY: Pricing concerns outweighing growth concerns at this moment. European stocks lower across the board a bit of a softer open for U.S.
stocks as you can see there too Lagarde acknowledging the threat to the European recession in her press conference though on a more positive note.
She said supply bottlenecks that have fueled inflation do appear to be easing a little.
Now the Asian Development Bank cutting its growth outlook for Asia from 5.2 percent to 4.6 percent for 2022 I have to break it down though for East
Asia, the forecast has come down to 3.8 percent as China's COVID lock downs continue.
The estimate for South Asia is also downgraded to 6.5 percent amidst the economic crisis in Sri Lanka. But as you can see, the outlook is raised for
central and southeast Asia, as well as the Pacific region.
Joining us now for more context is Albert Park. He's Chief Economist at the Asian Development Bank. Sir, great to have you on the show! So we've got
the overview of Asia there, but I want to break it down and in East Asia does attract attention simply because your growth forecasts I believe, for
China this year 4 percent, far lower than China's mandated growth level, which is 5.5 percent just give us a sense of what your assumptions are
coming into that level.
ALBERT PARK, CHIEF ECONOMIST, ASIAN DEVELOPMENT BANK: Well, the big issue in China has been the very strict zero COVID policy, which has really led
households to lose confidence. We saw a reduction in real household spending by 4.5 percent in the second quarter, and a reduction in retail
sales of over 8 percent. And that's really been driving the downward adjustment in growth rates.
And of course, where China goes, so goes as the region there's a lot of linkages through supply chains from China to other regions. Some of the
city lock downs in Shanghai and elsewhere have led to some supply bottlenecks which have caused issues in other countries in Asia as well.
CHATTERLEY: Are you factoring in any amount of stimulus into that forecast? And are you also making an assumption that to your point, a lot of what's
driving this is the sporadic lock downs that we've seen to adhere to zero COVID policy in China? Are you assuming those continue for the rest of the
year? Or adjust in some way because that's material to the forecast.
PARK: Right. We are assuming there's going to be some recovery and we're also expecting the Chinese government to engage in some stimulus.
[09:35:00]
PARK: But we recognize other risks. For instance, the property sector has really struggled. And it's also related some of the competence issue,
issues we talked about before. So despite, you know, China's pretty good record of hitting its own growth projections or forecasts was realistic
that they'll be able to do so this year.
CHATTERLEY: Oh, saying they do. I should calibrate that slightly. What about the banking sector, in particular, because we've also been reporting
on some concerns for some savers who've not had access to their savings in in some of the rural banks in certain regions.
I don't want to overplay this, but how concerned are you after of years of reports about the risks in the in the Chinese banking sector in the shadow
banking sector? How concerned are you at this moment?
PARK: Well, there's some concern, because a lot of the banking liabilities are related to housing sector. And we saw the events in some of the rural
banks. But what happened in that case is the Chinese government did step in and say we're going to shield depositors from this burden, and we're going
to protect them.
And the Chinese banking system and the government itself has still a lot of ways in which it can really stand up and recapitalize banks or support them
to avoid a situation where it would lead us to some serious contagion or some kind of a crisis in the banking sector.
CHATTERLEY: I mean, it's sort of tied to this in a way too. And it's something that you've pointed out on social media is unemployment, as the
economy slows, and the latest statistic for China, specifically for youth unemployment is more than 19 percent.
And you said, look, if you if you look across Asia, and the Pacific youth is almost five times more likely to be unemployed than adults. I've
mentioned the Chinese stat just for that country alone.
Tied to all the sporadic issues that we're talking about, and the risk of a further slowdown, Albert, how concerned are you by unemployment and youth
unemployment?
PARK: Well, youth unemployment is not an issue only in China; it's actually an issue in many countries in the region. And it's really related back to
the pandemic, when, you know, a lot of the countries in the region struggled with the virus initially, and recovery has been somewhat modest
last year, with some recovery, and some gaining of pace this year.
But the result has been many youth have been dislocated from the labor market for some time. And we view that as a concern in the medium term. We
know that when youth are disengaged from the labor market for a long time, we have a scarring effect; it becomes much more difficult for them to get
back in to - into career tracks, which are going to make them successful over the long run.
CHATTERLEY: Are you seeing policies to try and help with that?
PARK: Well, I think what you see him in many Asian countries is a desire to deal with these headwinds, the challenges of inflation with elevated
commodity prices, but at the same time - not moved to quickly with raising interest rates because they want to support economic recovery.
And I think in their minds exactly issues such as youth unemployment. There has been also an effort, of course, to target vulnerable groups by many
governments. But after several years of the pandemic, it's becoming harder and harder to finance that. So we are seeing elevated debt levels in many
countries.
And so it really means that countries need to be very precise in how they target their subjects and tried to balance these competing concerns of
macroeconomic management.
CHATTERLEY: I mean you can substitute most countries around the world for all the challenges that you just pointed out there and the lack of a fiscal
room to try and take action. It's part of what's contributed to the challenges in South Korea sorry Sri Lanka. And it's an - it's exacerbated
now by political crisis there too.
We've spoken to the Central Bank Governor this week, and I know it's incredibly difficult to get any sort of gauge on the economic damage that's
taking place. But what are your forecasts for Sri Lanka this year be it growth or inflation?
PARK: Well, our forecast admittedly with a lot of uncertainty is that the Sri Lankan economy will contract by 7.6 percent this year and by more than
3 percent next year as well. Sri Lanka, though, you know, was running chronic fiscal desk deficits over 10 percent the last couple of years, and
it was very vulnerable to the shocks that the world has seen, which is tipped it over into crisis.
Most economies in Asia, though, have been relatively well managed. And so even though you're right, the governments are facing the same challenges as
countries all over the world. In Asia, you know, growth of 4.6 percent, although lower than our previous projection is still a pretty healthy
recovery, given all of the headwinds and reflects that sounding macroeconomic management.
There's one that has occurred which has allowed these countries to continue to recover and also reflects doing a pretty good job and much of Asia in
managing the Omicron virus this year.
[09:40:00]
PARK: The virus has not led to heavy lockdown in most countries, the kind of COVID. The restrictiveness index that we looked at has really declined
steadily this year, which means economic activity has been back to normal and the region has done a pretty good job with the virus, and that has
supported growth momentum, despite all the headwinds.
CHATTERLEY: And that's domestic demand driven to your point as the economy recovers, and people get back to life. I mean, to the point where we're
seeing forecasts in Southeast Asia, Central Asia and the Pacific actually rose, which is incredibly welcome news.
PARK: Right, I think it is driven by this rising domestic demand. You see it, especially in India, or, you know, they've had some unexpected
inflation pressures, which has led the Central Bank to tick up rates slightly. But we still see a rise in consumer confidence as life gets back
to normal. And, and that is going to carry, you know, growth to 7.2 percent this year.
CHATTERLEY: Very quickly how concerned are you by the Federal Reserve, the European Central Bank raising rates, the fact that we're seeing the U.S.
Dollar strengthened, for example, relative to most other currencies around the world?
It also sucks capital from some of these, these regions, which obviously is vital at this point in time. We've talked about the financing challenges
post COVID, how much of a concern is that?
PARK: We're very concerned about it. I mean, you're right; it creates a lot of financial pressure on the region. It gives Central Banks more of a
reason to want to raise interest rates in response to reduce outflows and to reduce pressure for the currencies to depreciate, although, again,
that's balanced against the desire to recover, but it reduces the room for maneuver for sustaining recovery in Asia.
So it's definitely a concern. And, of course, if growth really slow significantly, especially if the measures in the West make the economies
grow much slower, that creates lower demand also for export goods from Asia. And with elevated interest rates and lower growth rates, it becomes
even harder to service debt burdens. And that could create you know, financial tipping points for some countries, if they're not careful.
CHATTERLEY: Yes, but we're not talking about that right now. It's good to be talking about at least some parts of the world raising growth forecasts.
Albert great to get your wisdom on the show today! Thank you so much for joining us! There Albert Park Chief Economist at the Asian Development
Bank, sir thank you!
OK, Still ahead on "First Move", overheated and overwhelmed how certain temperatures in China are putting further strain on COVID workers next?
(COMMERCIAL BREAK)
[09:45:00]
CHATTERLEY: Welcome back to "First Move". With a look at the stories making headlines around the world; parts of Europe still struggling to contain
wildfires even as searing heat waves move eastward. In Spain the military has been building firewalls and using water to prevent flames from
spreading further.
In other regions firefighters have extinguished some major fires but officials are urging caution as more strong winds and high temperatures are
expected. An intense heat wave is also sweeping over China and it's affecting more than 900 million people.
Almost every province in the Northeast has issued high temperature warnings with some weather stations logging record numbers, in at least four cities
temperatures have gone as high as 44 degrees Celsius that's 111 degrees Fahrenheit.
Unusually warm weather in Northern Greenland has triggered rapid melting and scientists on the island ice sheet are alarmed. CNN's Rene Marsh
reports.
(BEGIN VIDEOTAPE)
RENE MARSH, CNN CORRESPONDENT (voice over): Off the Coast of Northwest Greenland the water is perfectly still, but peddling on icebergs indicate a
transformation is underway. That's the sound of rapid melting triggered by a few days of unusually warm temperatures. During CNN's first three days in
Northern Greenland, the temperature topped out nearly 10 degrees higher than normal.
MARSH (on camera): It's days like today warm enough to wear short sleeves near 60 degrees in Greenland. It's a high melt day when it's this unusually
warm. And it's also deeply concerning for scientists.
KUTALMIS SAYLAM, RESEARCH SCIENTIST, UNIVERSITY OF TEXAS-AUSTIN: It definitely worries me. We are at 67 latitude here on top of the world in
North Pole. And we could just yesterday especially not today, but yesterday we could wander around in our T-shirts. That was not really expected.
ASLAK GRINSTED, CLIMATE SCIENTIST, NIELS BOHR INSTITUTE: It's basically at the melting point today as you can see - make snow balls.
MARSH (voice over): At a research site in Northeast Greenland near melt conditions at an elevation of nearly 9000 feet made what's usually a frozen
landing strip inoperable.
GRINSTED: They have a problem when it's this soft as the surfaces now.
MARSH (voice over): Climate Scientists Aslak Grinsted tweeting mini heatwave negative 1.6 degrees Celsius in the middle of the Greenland ice
sheet. Our planned planes are postponed because our ski way is not that good when it is this warm.
Unable to fly out the scientists past the time playing volleyball in shorts atop the ice sheet pre global warming Grinsted says temperatures near 32
degrees Fahrenheit at this altitude were unheard of.
The National Snow and Ice Data Center tells CNN from July 15th through 17th alone, a melt surge in Northern Greenland caused ice sheet runoff of about
6 billion tons of water per day. That's about the volume of 2.4 million Olympic sized pools. Put in another way enough water to flood the entire
state of West Virginia with one foot of water in three days.
SAYLAM: The amount of melt from the ice was to us - was very surprising because it was very warm day. You could even hear the ice was just melting
in front of our eyes.
MARSH (voice over): Research scientists tell CNN this extent of melt in North Greenland this past week is quite unusual and will contribute to
global sea level rise, which impacts coastal communities half a world away. Rene Marsh, CNN Greenland.
(END VIDEOTAPE)
CHATTERLEY: And in the United States, the January 6 Committee convenes Thursday night in Washington for a Primetime hearing. The focus is expected
to be the 187 minutes that elapsed while the right happened at the Capitol and when then President Donald Trump did or failed to do. Stay with CNN for
the Committee's public hearings on Thursday our special coverage starts at 7 pm in Washington 7 am Friday in Hong Kong.
OK, coming up after the break, a stressful sight, Anna Stewart stuck at the baggage carousel we're inflicting the travel experience on her so that you
can avoid it her London to - nice challenge, next.
(COMMERCIAL BREAK)
[09:50:00]
CHATTERLEY: Welcome back to "First Move". As holding makers continue to face delays and disruption regulators in the United Kingdom are warning
airlines they have to put passengers first. A joint letter from the Competition and Markets Authority and the Civil Aviation Authority says
airlines need to stick to the rules including making sure they aren't selling more seats than they can supply that they give customers plenty of
notice of cancellations, and that they're meeting their legal obligations when it comes to rerouting passengers.
To see how difficult air travel can be right now, Anna Stewart has managed to travel from London to Ibiza. I love it Anna, when someone says you have
to go on an outside broadcast, you're like, don't worry, I know exactly where you can send me send me to Ibiza.
But there is a serious angle here and we should talk about it. Warning needs to be given because you've talked to people who have literally been
stuck at the airport and it's children included.
ANNA STEWART, CNN CORRESPONDENT: It's been absolutely terrible to be honest. I was shocked by even our own experience in terms of queues that
I've never seen a queue like that at Heathrow and I travel a lot.
The security queue was so long that despite arriving at the airport with three hours to go before our departure, we actually had to get removed from
the queue which was so long, it was a man with a sign saying the queue starts here.
We had to get removed from the queue and fast track otherwise we'd miss our flight which was only one hour delayed. Other people Julia as you say have
had even worse experiences much worse than that they have bounced between different airports now for days, flight after flight delayed or canceled.
And actually just to gate long from the flight we took to Ibiza, there was a flight going to Frankfurt due to take off last night was still not in the
air by the time we were there. So it was already 14 hours delayed and counting and almost everyone I spoke to there waiting at that gate had
slept the night on the airport floor, including a couple.
I'll give you their story. Their journey started even earlier than that flight to Frankfurt has actually started their journey in Ireland take a
listen.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: My flight started in Dublin two days ago and my first flight got canceled. And then I started my flight yesterday to London, the
second one and now this one got canceled also and now I'm here and I hope today I will leave the country.
STEWART (on camera): How are you feeling right now?
UNIDENTIFIED FEMALE: Annoyed.
UNIDENTIFIED MALE: Hungry, tired.
STEWART (on camera): Where did you sleep last night?
UNIDENTIFIED MALE: Floor.
STEWART (on camera): Do you ever traveling again?
UNIDENTIFIED MALE: Not to the UK.
(END VIDEO CLIP)
STEWART: I mean I smile but they've had a truly dreadful 24, 48 hours. There was also a lady I spoke to who had small children. She said that she
and her children slept on the floor all night she says her children were cold and that they had no food because she says everything was shut.
And she said that was because she doesn't have a credit card. And so airlines do have a duty and I'm very pleased to see the morning from
regulators.
They're very stretched. It's really hard for them but they have a duty to provide food drink transportation hotel if they're too stretch to do that
they give people vouchers or they tell people to go and buy what they can know what they need as long as it's reasonable and it will get compensated
later on. But for not everyone that doesn't always work and also there are so many planes that have been canceled.
[09:55:00]
STEWART: There are so many people trying to cram themselves into airport hotels or hotels nearby, they are full and prices are skyrocketing so lots
of people just nervous to go and book an airport hotel. They don't know whether they'll get their money back so plenty of people spending the night
on the floor of Heathrow Airport last night.
CHATTERLEY: I know when it comes down to staffing and an inability to hire staff but the pressure backs up on them too, because then they have
disgruntled customers and people that are frustrated and I'm sure they're under a lot of pressure too.
Tell you what though. This proves how good a negotiator you are. Because I did a similar story once a broadcast and I got sent to Benidorm. Now, I'm -
I have nothing against Benidorm, but people don't often go to Benidorm to sleep and I remember that I had two very miserable nights where I started
listening to music all night.
Please tell me you're going to stay for the weekend. Now that you've gone toward the effort of getting there you get to spend the weekend tonight at
Heathrow.
STEWART: I would love that. I have 24 hours in Ibiza much of it will be here stuck to this camera but I think after many, many cues and probably
maybe one two hours a glimpse of a beach would be quite nice. But yes, it was a brazen pitch. We're pleased to be here Julia.
CHATTERLEY: You didn't even get to enjoy it. I think we should know that you're working very hard on being told that you use yourself we've got to
go as always. OK, that's it for the show. "Connect the World" with Becky Anderson is next.
(COMMERCIAL BREAK)
[10:00:00]
END
