Inside Hamas's Sprawling Financial Empire

Michelle

Political

Palestinian-Israeli conflict

Summary:

Why Israel is powerless to dismantle the group's finances.

Inside Hamas's Sprawling Financial Empire_1

Viewed from one of Istanbul's glitziest restaurants, the Bosphorus looks sublime. The venue is a favoured haunt of mandarins, businessmen, minor celebrities—and Hamas's financiers. A man on whom America has imposed sanctions for funding the Islamist group describes his various board seats. “It's ridiculous,” he says, of America's accusation, but eventually admits, “now, if you're asking what our employees do with their own money, why would I know?”

Hamas has three sources of power: its physical force inside Gaza, the reach of its ideas and its income. Since Hamas's attacks on October 7th, Israel has killed more than 12,000 Palestinians in Gaza in seeking to wreck the first. But Israel's declared goal of destroying Hamas for good requires its financial base to be dismantled, too. Very little of this sits in Gaza at all. Instead, it is overseas in friendly countries. Furnished with money-launderers, mining companies and much else, Hamas's financial empire is reckoned to bring in more than $1bn a year. Having been painstakingly crafted to avoid Western sanctions, it may be out of reach for Israel and its allies.

Hamas's income pays for everything from schoolteachers' salaries to missiles. Around $360m each year comes from import taxes on goods brought into Gaza from the West Bank or Egypt. This is the easiest source of cash for Israel to strangle. After withdrawing from the strip in 2005, it strictly limited the movement of goods and people across the border. Now it stops even most basic necessities from getting in.

A much larger income stream, though, comes from abroad. Israeli officials reckon this amounts to around $750m per year, making it the main source of funding for Hamas's current stockpile of arms and fuel. Some comes from friendly governments, the biggest of which is Iran. America reckons that the ayatollahs provide $100m to Palestinian Islamist groups, mainly in military aid. The task for Hamas's financiers is to move this money around without falling prey to America's sanctions. In the past month alone, American officials have imposed three rounds of restrictions on people and companies for funding Hamas.

Dodging American sanctions requires some ingenuity. Millions of dollars flow to Hamas through crypto markets. “You'd be surprised how much of the market's activity comes back to [Hamas],” says Firuze Segzin, an economist at Bilkent University. America's treasury department says Hamas has smuggled more than $20m through Redin, a currency exchange crammed among tourist shops deep in Istanbul's run-down Fatih neighbourhood.

But the lion's share of Hamas's money—at least $500m a year, say Israeli officials—comes from its investments, some of which are firms registered in countries across the Middle East. These are run by professionals from Hamas's investment office and employ its members. American officials say the firms donate to charities which in turn funnel funds to Hamas; Turkish officials say profits are sometimes taken directly. Untangling these revenue streams is tricky for Western regulators. One such firm built the Afra Mall, Sudan's first shopping mall, while another mines near Khartoum, its capital. A third built skyscrapers in Sharjah, in the United Arab Emirates (uae). Many of these companies boast of their business deals, but deny affiliation with Hamas.

Can any revenue streams remaining to Hamas be choked off? That depends on the countries through which they flow. Since 1989, when Israel arrested a handful of Hamas's top brass in Gaza and the West Bank, its bankers have lived abroad. Over time, though, geopolitical shifts have forced them to keep moving. Hamas abandoned its first financial hub, Amman, after Jordan's ties to America grew too close.

Today, while Hamas's politicians favour Doha, the capital of Qatar, and its companies range from Algeria and Sudan to the uae, its financiers live in Istanbul. Zaher Jabarin, accused by Israel of running Hamas's finances (which he denies), is based there, as are several other individuals under sanctions by America for funding the organisation. Eager to gain regional influence by supporting the Palestinian cause, Recep Tayyip Erdogan, Turkey's president, offers shelter. Israel says that the Turkish government hands out passports (which it denies) and lets Hamas keep an office in the country.

Meanwhile, Turkey's banking system helps Hamas dodge American sanctions by conducting complex transactions across the world. A booming, lightly regulated crypto market helps. Many of Turkey's biggest banks, including Kuveyt Turk, have been accused by Israel and America of knowingly storing Hamas's cash. Some murmur that Mr Erdogan quietly approves. In 2021 the Financial Action Task Force, a g7 watchdog, placed Turkey on its “grey list” of countries doing too little to freeze terrorists' assets.

No one benefits more than Hamas's businessmen. The Turkish government's tacit approval “opens doors and makes things smooth in business”, says one of the group's finance employees. Trend gyo, an Istanbul-listed firm that has been placed under sanctions by America for funnelling funds to Hamas, won an official contract to build Istanbul Commerce University. Construction companies, which feature heavily in Hamas's portfolio, can quietly swallow huge lumps of cash, and regularly receive large loans. All this allows Turkish officials to say that they are not directly lining Hamas's pockets.

So far, Hamas seems financially bulletproof. Israel has inflicted little harm on either its income or savings; Turkey's banks have been unco-operative. America's numerous sanctions are less effective if their targets can keep cash outside its banking system. And Hamas hides its companies well. “Every time you think you've got a big fish, it changes its name,” despairs one ex-Treasury official.

In fact, the risk is that Hamas's finances will improve. As Israel steps up its attacks on Gaza, Western governments may blanch at the humanitarian horror. Countries with pro-Palestinian populations may make it even easier for Hamas to earn money. For months, rumours have circulated that some civil servants in Mr Erdogan's economic ministry are co-ordinating with Hamas's finance office.

For Israel, Hamas growing richer despite the war would be a disaster. With its wealth and financial roots intact, it—or a similar organisation—may well flourish after the destruction. Gazans, meanwhile, have been plunged into tragedy so that Israel can destroy a group whose money and power are safely ensconced elsewhere. Compare their plight to the picture in Istanbul: eating lobster and gazing at the Bosphorus.

Source: Economist

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Glendon

Economic

Why should investors consider inflation-linked bonds (known as linkers) when inflation pressures globally appear to be receding. Below, we discuss three reasons why it's an opportune time to consider incorporating inflation-linked bonds, also known as linkers, into your portfolio.

An uncertain inflation outlook.

Linkers are structured to outperform conventional government bonds, also known as nominal bonds, during periods when the actual inflation rate (typically measured by the Consumer Price Index or CPI) surpasses the expected inflation rate for that same period. The distinguishing factor of linkers is that their principal, and subsequently, their coupon, is adjusted in accordance with the inflation rate. Therefore, even during periods such as now, when inflation pressures appear to have reached their peak, but the future trajectory of inflation remains uncertain, an allocation to linkers could still be seen as a sensible choice.

Although central banks have nearly concluded their cycle of rate hikes, the risks associated with inflation remain high. The Covid-19 crisis caused a multitude of disruptions, pushing greater uncertainty around the path of inflation in its wake. Now that the supply chain issues, which contributed to higher prices during the pandemic, have normalised, the straightforward progress to lower inflation might be in our rearview mirror. However, with service inflation proving stickier for many economies around the world, there are challenges that still lie ahead.

In the US, efforts to reduce inflation seem to have plateaued, and according to some metrics, have even regressed. The Median CPI is one such measure that has seen a significant surge in month-on-month price gains. As this measure excludes outliers (i.e., the smallest and largest price changes), it can provide one of the more reliable indicators of the underlying inflation trend.

If Inflation Is Peaking, Why Hold Inflation-Linked Bonds?_1

CHART1: US inflation ticking up – Median CPI

The total return angle.

From a total return perspective, it is important to understand that linkers are particularly sensitive to movements in real yields (a bond's yield after being adjusted for inflation). Their unique cashflow structure means that they are of a longer duration and so are more sensitive to changes in interest rates compared to nominal bonds with a similar maturity.

A common misconception is that linkers are inflation matching investments. This interest rate sensitivity was particularly evident during 2022 when central banks aggressively raised interest rates in a bid to tame rampant inflation pressures. Although global inflation-linked bonds outperformed nominal bonds (i.e., conventional government bonds), they still delivered double-digit negative returns.

However, looking ahead, the real yield element should be less impactful and potentially positive for linkers' total returns as central banks stop raising interest rates. Moreover, the ongoing struggle to control inflation may create an optimal environment for global inflation-linked bonds.

Let's examine three potential inflation outcomes and assess how global linkers would fare in each:

Soft Landing - Also known as a 'Goldilocks' scenario, this is when inflation is peaking, but the economy remains resilient. Under these circumstances (our current base case), we would anticipate linkers generating positive total returns (assuming central banks pause rate hikes) but underperforming nominal bonds as inflation expectations moderate.

No Landing - Recent deterioration in US inflation dynamics has increased the likelihood of a ‘No Landing' - scenario. In this case, we would expect both nominal bonds and linkers to yield negative returns (based on a narrative of persistently high rates), but linkers would likely outperform due to persistent inflation.

Hard Landing - The prospect of a Hard Landing has been gradually rising as higher interest rates take effect, risking a future recession. In this scenario, we would expect central banks to cut interest rates, leading to positive total returns (the highest among the three scenarios) for both nominal bonds and linkers. However, a deflationary environment would likely result in linkers underperforming.

If Inflation Is Peaking, Why Hold Inflation-Linked Bonds?_2

CHART 2: How can inflation linked bonds perform from here?

Current valuations are making linkers an even more compelling option.

Real yields are looking attractive. For the first time since 2009, US 10-year real yields have surpassed the 2% mark. In fact, real yields are positive across the entire US curve for the first time in a decade. While this is not true for all linkers markets globally, it's worth remembering that around half of the global market is made up of the US. So, for a European investor (where real yields are comparatively lower), an investment in a global linker strategy would provide an uplift to their inflation-adjusted expected return.

US real yields as shown in the chart below, are something the US Federal Reserve (Fed) is watching closely, using them as an implicit target to assess the restrictiveness of current monetary policy settings. Recent indications suggest that the Fed is nearing the end of its rate hike cycle. This would imply that real yields are approaching their peak (yields of course are inverse to price).

If Inflation Is Peaking, Why Hold Inflation-Linked Bonds?_3

CHART 3: US Real Yields over 2% across the curve for the first time since 2009

Diversification

When the outlook is uncertain, it makes sense to spread your risk. It's possible to do this through a mix of conventional government bonds and linkers. However, these diversification benefits can be vastly increased by going global.

Adopting a global approach offers the opportunity to gain from broader diversification across distinct inflation-linked bond markets. Currently, we're witnessing a divergence between a robust US economy and a more subdued outlook for the rest of the world. Given that individual economies are at different stages of the economic cycle and display unique, ever-evolving inflation profiles, it's worth exploring the use of global inflation-linked bonds to maximise returns and manage risks. The chart below illustrates the potential for enhanced returns through an active strategy across global inflation-linked bond markets.

If Inflation Is Peaking, Why Hold Inflation-Linked Bonds?_4

Chart 4. Performance of global linkers

In conclusion, forecasting inflation and determining the type of environment we're in is invariably challenging. Given the possibility that the post-pandemic era may lead to shorter economic cycles and inflation might remain structurally higher, allocating to global inflation-linked bonds could be the most appropriate strategy, especially when valuations are looking so attractive.

Source: Schroders

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FastBull Featured

Daily News

[Quick Facts]

1. Villeroy: ECB rates will remain unchanged for the next few quarters.

2. U.S. Treasury Secretary Yellen: Considerable progress made in reducing inflation.

3. Tax cuts may become the core of British fiscal policy.

4. Fed's Barkin: "Job's not done" on bringing inflation down.

[News Details]

Villeroy: ECB rates will remain unchanged for the next few quarters

The European Central Bank's (ECB) interest rates have reached a plateau where they will likely remain for the next few quarters, said Francois Villeroy de Galhau, ECB Governing Council member and the Bank of France Governor, in a speech on Monday, Nov. 20, dismissing rate cut talk as premature.

The conflict in Gaza and Israel as well as oil market swings were unlikely to derail the fall in inflation, though occasional ups and downs could be expected in the next few months, he said.

The ECB aims to steer euro zone inflation towards its 2% target by 2025, though Villeroy insisted the number was an average and he was not fixated on hitting 2.0% precisely.

In recent months, euro zone inflation has fallen quickly in recent months as the economy has slowed. A "soft landing" seems more likely.

In the future, the ECB might need to bring back some form of forward guidance about its interest rate plans, so long as that does not limit its room for manoeuvre too much. "Central banks should be predictable, but not pre-committed," he said.

U.S. Treasury Secretary Yellen: Considerable progress made in reducing inflation

After the Federal Reserve aggressively raised interest rates to cool price pressures, the CPI fell back from its peak to 3.2% in October, said U.S. Treasury Secretary Janet Yellen in an interview on Monday. We have made "considerable progress" in bringing inflation down while maintaining a strong economy and a robust labor market.

Tax cuts may become the core of British fiscal policy

British Prime Minister Rishi Sunak made a speech on Monday about the UK's economic development plan, pointing out that the UK's future long-term economic development will focus on five goals: cutting tax, reducing debts, sustainable energy, backing British business, and delivering world-class education.

As the British Prime Minister's speech coincided with the government's upcoming release of the Autumn Budget on Nov. 22, the market expects tax cuts to become the focus of attention in this year's British Autumn Budget.

Paul Johnson, director of the Institute for Fiscal Studies, warned that "there is no room" for substantial tax cuts. The public finances are "in a mess" due to debt interest payments, so that the government does not have much room for manoeuvre.

Fed's Barkin: "Job's not done" on bringing inflation down

U.S. economic data show that the economy is expanding, while price growth is slowing, but the progress is not enough for the Federal Reserve to declare victory on inflation, said U.S. Richmond Fed President Tom Barkin on Monday.

I think inflation is stubborn, which gives us a reason to keep it higher for longer, said Barkin. Getting inflation convincingly back to target - that's my goal, he added. We can get to the target in several different ways, but I remain unconvinced that price-setters in the current economy are back to where they were three or four years ago.

This is not a good time to provide forward guidance, and the Fed will respond to the data.

[Focus of the Day]

UTC+8 21:30 Canada CPI MoM (Oct)

UTC+8 18:15 Boe Governor Bailey Speaks

UTC+8 01:00 Next Day: European Central Bank Executive Board member Schnabel Speaks

UTC+8 01:30 Next Day: European Central Bank Governing Council Member Centeno Speaks

UTC+8 03:00 Next Day: FOMC Meeting Minutes

Risk Warnings and Disclaimers

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Michelle

Economic

Sam Altman seemed secure as one of AI's leading lights

Its chief executive, who has the ear of world leaders, toppled as senior colleagues turn on him - only for the rest of the company to demand they themselves should be fired.

No, that's not my pitch for a Netflix drama, that's basically been the past few days at OpenAI.

Tech journalists, enthusiasts and investors have been binge-watching it all unfold - though opinions differ as to whether it was a high-stakes thriller or a farce.

How it started...

The battle at the top of OpenAI, the creator of the AI chatbot ChatGPT, began very suddenly on Friday, when the board of directors announced that it was firing the co-founder and chief executive, Sam Altman.

In a blog post the board accused Mr Altman of not being "consistently candid in his communications", and said as a result they had "lost confidence" in his leadership.

There are only six people on that board - and two of them were Sam Altman and his co-founder Greg Brockman who quit after Mr Altman was dismissed.

OpenAI co-founder Greg Brockman has also left the firm

So four people who knew Mr Altman and the business well reached a breaking point of such seriousness that they sprung into action immediately, blindsiding the entire tech community including, reportedly, their own investors.

Elon Musk - also an original co-founder at OpenAI - wrote on X, formerly Twitter, that he was "very worried".

Ilya Sutskever, the firm's chief scientist, was a member of that board and "would not take such drastic action unless he felt it was absolutely necessary", he wrote.

Mr Sutskever has now expressed his own regret - and is one of the many signatories of a dynamite letter to the board of directors, calling for Mr Altman and Mr Brockman to return and suggesting they may leave OpenAI if the men are not reinstated.

What caused this row?

So what was it that sparked this rapidly rolling snowball? We actually still don't know - but let's consider some options.

There are reports that Mr Altman was considering some hardware projects, including the funding and development of an AI chip, which would have been quite a different direction in which to take OpenAI. Had he made some commitments that the board was not aware of?

Or could it boil down to a very old, and very human tension: money?

In an internal memo, whose contents have been widely reported, the board made it clear that it was not accusing Mr Altman of any "financial malfeasance".

But we know that OpenAI was founded as a non-profit organisation. That means, a company which does not aim to make money. It takes back enough of what it brings in to cover its own running costs - and any extra gets invested back into the business. Most charities are non-profits.

In 2019, a new arm of the firm was formed - and this part of it was profit-orientated. The firm set out how the two would co-exist. The profit side would be led by the non-profit side, and there would be a cap imposed on the returns investors could earn.

Not everybody was happy about it - it was said to have been a key reason behind Elon Musk's decision to walk away from the firm.

OpenAI, however, now finds itself in the happy circumstance of being worth an awful lot of money. A staff stock sale, which has not gone ahead today, was reportedly valued at $86bn (£68bn).

Could it be that there were ambitions to make the for-profit side of the business more powerful?

How will this end?

OpenAI is in pursuit of AGI - artificial general intelligence. It doesn't exist yet, and it is a cause of both fear and awe. It's basically the idea that there will one day be AI tools that will be able to do a number of tasks, as well as, or better than, humans (that's us) currently can.

It's got the potential to shift the entire way in which we do things. Jobs, money, education - all of that gets thrown up in the air when machines can do stuff instead. It's an incredibly powerful bit of kit - or at least, it will be.

Is OpenAI closer to that than we realise, and does Mr Altman know this? At a very recent speech he said what was coming next year would make the current ChatGPT bot look like "a quaint relative".

I think it's unlikely. Emmett Shear, the new interim chief executive of OpenAI, posted on X that "the board did *not* remove Sam over any specific disagreement on safety".

He says there will be an investigation into what happened.

But Microsoft, OpenAI's biggest investor, has decided not to take a chance on Mr Altman taking this tech elsewhere. He will be joining the Seattle-based tech giant, it has been announced, to lead a yet-to-be-created AI research team. His co-founder Greg Brockman goes with him, and judging from the number of staff members posting on X today, it looks like he'll be taking some of OpenAI's top talent too.

Many OpenAI staff members are sharing the same post on X. It reads: "OpenAI is nothing without its people".

Is that a warning to Mr Shear that he might have some hiring to do? A BBC colleague outside OpenAI's headquarters just told me at 0930 in San Francisco, there were no signs of people arriving for work.

Or is it just a reminder that for all this saga has been about a form of technology that is reshaping the world, it is, at its heart, a very human drama.

Source: BBC

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Alex

Economic

Inflation has reached its lowest point in 2 1/2 years. The unemployment rate has stayed below 4% for the longest stretch since the 1960s. And the U.S. economy has repeatedly defied predictions of a coming recession. Yet according to a raft of polls and surveys, most Americans hold a glum view of the economy.

The disparity has led to befuddlement, exasperation and curiosity on social media and in opinion columns.

Last week, the government reported that consumer prices didn't rise at all from September to October, the latest sign that inflation is steadily cooling from the heights of last year. A separate report showed that while Americans slowed their retail purchases in October from the previous month's brisk pace, they're still spending enough to drive economic growth.

Even so, according to a poll last month by The Associated Press-NORC Center for Public Affairs Research, about three-quarters of respondents described the economy as poor. Two-thirds said their expenses have risen. Only one-quarter said their income has.

The disconnect poses a political challenge for President Joe Biden as he gears up for his re-election campaign. Polls consistently show that most Americans disapprove of Biden's handling of the economy.

Many factors lie behind the disconnect, but economists increasingly point to one in particular: The lingering financial and psychological effects of the worst bout of inflation in four decades. Despite the steady cooling of inflation over the past year, many goods and services are still far pricier than they were just three years ago. Inflation — the rate at which costs are increasing — is slowing. But most prices are high and still rising.

Lisa Cook, a member of the Federal Reserve's Board of Governors, captured this dynamic in recent remarks at Duke University.

"Most Americans," Cook said, "are not just looking for disinflation" — a slowdown in price increases. "They're looking for deflation. They want these prices to be back where they were before the pandemic. … I hear that from my family."

That's particularly true for some of the goods and services that Americans pay for most frequently: Bread, beef and other groceries, apartment rents and utilities. Every week or month, consumers are reminded of how far those prices have risen.

Deflation — a widespread drop in prices — typically makes people and companies reluctant to spend and therefore isn't desirable. Instead, economists say, the goal is for wages to rise faster than prices so that consumers still come out ahead.

How inflation-adjusted incomes have fared since the pandemic is a complicated question, because it's difficult for just one metric to capture the experiences of roughly 160 million Americans.

Adjusted for inflation, median weekly earnings — those in the middle of the income distribution — have risen at just a 0.2% annual rate from the final three months of 2019 through the second quarter of this year, according to calculations by Wendy Edelberg, a senior fellow at the Brookings Institution. That meager gain has left many Americans feeling that they have made little financial progress.

For Katherine Charles, a 40-year-old single mother in Tampa, Florida, inflation's slowdown hasn't made it easier to make ends meet. Her rent jumped 15% in May. Over the summer, to keep her electricity bill down, Charles kept the air conditioning off during the day despite Tampa's blistering hot weather.

She has felt the need to cut back on groceries, even though, she said, her 16-year-old son and 10-year-old daughter "are at the age they are eating everything in front of them."

"My son loves red meat," Charles said. "We cannot any longer afford it the way we used to. The economy's not getting better for nobody, especially not for me."

Charles, a call center representative with a company that handles customer service for the Medicare and Affordable Care Act health plans, received a raise to $18.21 an hour two years ago. But it wasn't much of an increase. She doesn't even remember how large it was.

This month, Charles took part in a one-day strike against her employer, Maximus. She and her co-workers are seeking higher wages and more affordable health insurance. Charles' two children are on Medicaid, she said, because Maximus' health insurance is too expensive.

Eileen Cassidy Rivera, a spokeswoman for Maximus, said that a recent survey of its 40,000 employees found that three-quarters of those who responded said "they would recommend Maximus as a great place to work."

"During the past five years, we have increased compensation, reduced out-of-pocket health care expenses and improved the work environment," Rivera added.

Rising prices have been a key driver of a wave of strikes and other forms of labor activism this year, with unions representing autoworkers, Teamsters and airline pilots winning sizable pay increases.

Other factors also play a role in why many people are still unhappy with the economy. Political partisanship is one of them. With Biden occupying the White House, Republicans are far more likely than Democrats to characterize the economy as poor, according to the University of Michigan's monthly survey of consumer sentiment.

Karen Dynan, a Harvard economist who served in both the George W. Bush and Obama administrations, noted that distinct swings in economic sentiment occur after a new president is inaugurated, with voters from the party opposed to the president quickly switching to a more negative view.

"The partisan divide is stronger than it was before," she said. "Partly because the country is more polarized."

Even so, many Americans, like Charles, are still feeling the pain of inflation. The national average price of a gallon of milk reached $3.93 in October, up 23% since February 2020, just before the pandemic struck. A pound of ground beef, at $5.35, is 33% higher than it was then. Average gas prices, despite a steep decline from a year ago, are still 53% higher at $3.78 a gallon, on average.

All those increases have far outpaced the rise in overall prices, which are up nearly 19% over the same period.

Edelberg said the jump in prices for items that people typically buy most often helps explain why many people are disgruntled about the economy — even as Americans have remained confident enough to keep spending at a healthy pace.

"Their purchasing power overall," Edelberg said, "is doing pretty well."

Yet broad national data doesn't capture the experiences of everyday Americans, many of whom haven't seen their wages keep up with prices.

"In real terms, most people are probably pretty close to where they were pre-pandemic," said Brad Hershbein, a senior economist at the Upjohn Institute. "But there are a lot of exceptions."

Lower-income Americans, for example, have generally received the largest percentage wage gains since the pandemic. Fierce competition for front-line workers at restaurants, hotels, retailers and entertainment venues forced companies to provide significant pay hikes.

But poorer people typically face a higher inflation rate, according to economic research, because they spend a greater proportion of their income on such volatile expenses as food, gas and rent — items that have absorbed some of the biggest price spikes.

"At the lower end of the income distribution, people got somewhat higher pay raises," said Anthony Murphy, a senior economic policy advisor at the Federal Reserve Bank of Dallas. "But I don't think it compensates them for the fact that inflation was so much higher. They're consuming a different bundle of goods than the average."

Census Bureau surveys that Murphy and his colleague Aparna Jayashankar have studied show that nearly half of Americans say they're "very stressed" by inflation, little changed from a year earlier, even though inflation has tumbled since last year.

Even for people whose incomes have kept pace with prices, research has long found that people hate inflation more intently than its economic impact would suggest. Most people do not expect their pay to keep up with rising prices. Even if it does, the higher pay may come with a time lag.

"They're obsessing over the fact that the prices they pay for the things that are very salient — gas, food, grocery store prices, rent — those things still seem elevated, even though they're not increasing as rapidly as they were," Hershbein said.

"If everyone had lost a job," he said, "we'd be focused on that."

Source: The Express

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Devin

Economic

Palestinian-Israeli conflict

For 60 years, the Star Street Inn guesthouse in Bethlehem has been essential to the livelihood of Mr. Ata Mohsen Serhan and his family.

"This old house, I got it from my father. You can see a good view from here," he told CNA from the terrace of his business, which overlooks the neighbourhood.

The income from guests staying at the lodging used to help provide for his three daughters and son.

However, the inn, located along one of the oldest commercial streets in the ancient city, has been closed since the war between Israel and Hamas began last month.

"I get money from this guesthouse for my family – food and other things," he said. "It is not a good life with this war."

As the conflict rages on, Mr. Serhan said he is now considering leaving the tourism industry, and looking for a new job in engineering instead.

Christmas Cancelled

The holy city of Bethlehem is believed to be the birthplace of Jesus.

It attracts more than a million tourists every year, particularly during the period leading up to Christmas.

However, events have been cancelled this year due to the war. Religious ceremonies and prayers will still be observed, but there will be no festive lights or celebrations.

Local authorities announced last week that they were dismantling Christmas trees and decorations installed several years ago, including in Manger Square in the heart of the city, where some of the biggest festivities typically take place.

Since the conflict, tourists have fled, and intensive restrictions have brought businesses in the area to a standstill.

With less than two months until Christmas, rows of shops are now shuttered along quiet and empty streets.

Those that remain open said they are struggling to stay afloat due to a lack of visitors.

Mr. Khalil Salahat, the owner of Old Cave souvenir shop, said firms that depend heavily on tourism – like his – make most of their revenue during this festive period.

"We are in November now – the season time before Christmas. All the good Christian people, they come during this time to Bethlehem. We wait all year for these two months," he told CNA.

"But now we have no tourists. Zero. We have nobody here. This has hurt our businesses and our lives."

Palestinian tour guides said their industry has been struggling since the Israeli occupation of the West Bank in 1967, but the current war is exacerbating their struggles.

Economic Impact

On Oct 7, Hamas militants launched a surprise cross-border attack on Israel, killing more than 1,400 people and capturing about 240 others as hostages.

Since then, Israel has retaliated with an offensive into the Gaza Strip, with an aim to wipe out the militant group. Gaza's Hamas-run government said at least 13,000 Palestinians have been killed.

In the West Bank, Israeli forces have also carried out raids against militants.

The conflict has heavily impacted the Palestinian economy, with the United Nations warning it could set Gaza and the West Bank back by more than a decade.

A UN Development Programme report assessing the economic consequences of the war showed the territories' gross domestic product (GDP) suffered 4.2 per cent in the first month of conflict.

It projects that the Palestinian economy is set to drop 8.4 per cent – a loss of US$1.7 billion – in the next month, thrusting nearly half a million more people into poverty.

Some 390,000 Palestinians have lost their jobs since the war began, according to UN agency the International Labour Organization.

This includes people from Gaza who work in the construction industry in Israel, whose work permits were cancelled following the attack by Hamas.

"There is no future to look forward to anymore. For us, the future has ended because of the war," Gaza resident Hazem Abu Mghanam told CNA.

Within the West Bank, some have found it difficult to get to work due to restrictions of movement, blocked roads and extra checkpoints affecting people's daily commutes.

The UN warns that economic devastation will further worsen the already-dire humanitarian situation and make recovery prospects challenging and slow.

Source: CNA

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Owen Li

Economic

Political

Argentina's libertarian President-elect Javier Milei has won a closely fought election. Now comes the hard part: dealing with economic crises.

Inflation is at 143%, net reserves of foreign currency are deep in the red, savers are ditching the peso, and a recession is looming – if not already here. Four in 10 Argentines live in poverty and a sharp peso devaluation is likely.

Milei, who is pledging economic shock therapy such as shutting the central bank and dollarization, won a second-round runoff vote on Sunday with some 56% to rival Sergio Massa's 44%.

Milei now faces the huge challenge of turning around the economy once he takes office on Dec. 10. Failure could lead to the already embattled country suffering a tenth sovereign debt default, poverty climbing and possible social unrest.

"It is an economy that is in intensive care," said Miguel Kiguel, a former undersecretary of finance at the Economy Ministry in the 1990s.

Inflation

Argentina's high inflation rate creates huge distortions in markets and for consumers, with prices changing weekly. A central bank poll of analysts forecast 185% inflation by the end of the year.

"One of the biggest challenges of the next administration will be to correct the distortion of relative prices that the economy has today," said Lucio Garay Mendez, economist at consulting firm EcoGo.

"In a context of high inflation and a stabilization plan, a correction is inevitable."

In a bid to tamp down inflation Argentina's central bank has hiked the benchmark interest rate to 133%, which encourages saving in pesos, but hurts access to credit and economic growth.

Peso Controls

Argentina's peso currency has been shackled by capital controls since a market crash in 2019, which has led to an unwieldy array of exchange rates, where dollars trade for well over twice the price of the official level near 350 per dollar.

Popular unofficial exchange rates include the "blue" dollar, the MEP, and blue-chip swap, though demand for dollars through parallel channels has over time spawned dozens of different rates including a "Coldplay dollar" and "Malbec dollar."

Milei has pledged to quickly undo capital controls and eventually dollarize the economy, while a sharp devaluation is likely in the near future to bring the official and parallel rates closer together.

Central Bank Reserves

Argentina's central bank reserves of foreign currency are near their lowest level since 2006, and in net terms are widely seen by analysts to be in negative territory after a major drought hit exports of key cash crops like soy, corn, and wheat.

The low reserves threaten the country's ability to repay debts to major creditor the International Monetary Fund (IMF) and private bondholders, as well as cover key imports. Argentina will need to revamp its creaking $44 billion IMF program.

The government has agreed on an extended currency swap with China to help cover some of its costs, and had to delay some payments to key trade partners such as Brazil.

Recession

Latin America's third-largest economy is on track to shrink 2% this year, according to the latest central bank analyst survey, partly due to the impact of the recent drought that cut corn and soy crops in half.

Along with triple-digit inflation, that is likely to sharpen poverty levels, with two-fifths of people already living under the poverty line as salaries and savings are eroded.

Silver linings?

Argentina, rich in grains, shale gas and lithium, could see a boost next year as better rains help the harvest, a new gas pipeline trims reliance on costly imports, and demand rises for the lithium needed for electric vehicle batteries.

Soy and corn are expected to have far stronger harvests, which will bring in much-needed foreign currency.

"The harvest will help bring a greater flow of income in the economy, as will the greater production of (shale oil formation) Vaca Muerta," said Eugenio Marí, chief economist at Libertad y Progreso Foundation.