News (#5-6 May-June 2021)

Biznews

Cryptocurrencies

China bans financial institutions from conducting business involving cryptocurrencies

China has prohibited financial institutions and payment companies from providing services related to cryptocurrency transactions and warned investors against speculative trading in cryptocurrencies.

According to the ban, institutions — including banks and online payment channels — should not offer customers any cryptocurrency-related services, such as registration, trading, clearing, and settlement.

In effect China prohibited cryptocurrency exchanges and initial coin offerings but did not ban individuals from owning cryptocurrencies.

These measures were not Beijing’s first steps against the digital currency. In particular, in 2017, China closed its local cryptocurrency exchanges, thus suppressing the speculative market, which accounted for 90% of global bitcoin trading.

The statement by regulators also claimed that virtual currencies “are not supported by real value”, that it’s easy to manipulate their prices and that related trade agreements are not protected by Chinese law.

 

Tourism

Share of tourism in global economy slumps by half

Due to the pandemic, the contribution of the tourism industry to world GDP in 2020 fell by 49.1% compared to 2019. This is stated in the report by the World Tourism and Travel Council, prepared jointly with Oxford Economics.

Prior to the pandemic, the tourism and travel sector created one in every four new jobs in the world, 10.6% of all jobs (334 million persons) and 10.4% of global GDP (USD 9.2 trillion).

The tourism sector suffered losses of almost USD 4.5 trillion last year.

In 2020, 62 million jobs (-18.5%) were lost in the tourism industry, leaving 272 million employees still working in the industry.

The threat of job losses persists, as many jobs are currently supported by government programs, which could be lost without the complete recovery of the tourism and travel industry.

 

Banking & Finance

World Bank approved loan of USD 200 million to Ukraine for upgrade of higher education institutions

On 5 May the IBRD Executive Board approved the Improving Higher Education in Ukraine for Results project to provide a USD 200 million loan to Ukraine to improve the efficiency, quality, and transparency of the higher education system.

These funds will be used to purchase modern equipment, create laboratories for students and scientists, and carry out repairs to improve the efficiency of educational space at universities.

The project’s main objectives are to increase the competitiveness of higher education in the labor market by updating approaches to teaching, learning, and research under modern challenges.

Moreover, it is just as important for Ukrainian universities to regain their credibility among students, including at international level. The Ministry of Education will be implementing the project for 5 years.

Shortly, measures will be taken to execute the relevant Agreement between Ukraine and the IBRD and determine the criteria for selecting higher education institutions that will participate in the project.

 

Europe’s largest banks raised EUR 30 million to launch Visa and MasterCard competitor

More than 30 major European banks and payment services plan to create their own payment system, which would become a competitor for American services — the project by the European Payment Initiative has already received more than EUR 30 million from its sponsors.

The idea is to create a European payment champion to compete with PayPal, Mastercard, Visa, Google and Apple.

Deutsche Bank, BNP Paribas, ING, UniCredit and Santander are among the plan’s initiators.

The EPI team started working on the project 9 months ago — in the summer of 2020 when the European Central Bank supported the project.

It is expected that the service operating plan will be developed by September 2021, after which investors will decide whether they are ready to invest in its development, as it requires additional funding.

The first product is to be presented at the beginning of next year, and its functionality will be expanded in the second half of 2022.

 

European Investment Bank allocated further EUR 7 million for infrastructure in Ukraine

The European Investment Bank will grant Ukraine another EUR 7 million to implement the Reconstruction Program, which includes a social infrastructure reconstruction project.

The relevant agreement between the EIB and the Ministry for Communities and Territories Development was signed on 25 May.

Several hundred small and medium-sized projects at municipal level in Ukraine will be funded by the Reconstruction Program. These refer to social infrastructure, improving utility services, office buildings and key social infrastructure repairs (hospitals, schools, kindergartens, sports facilities).

 

M&A

Toyota to buy Lyft division for half a billion dollars due to drones

Toyota, the auto manufacturer, is to acquire Lyft’s autonomous division for USD 550 million. The division is involved in developing unmanned control technology.

The Lyft division works with the fifth level of car automation. Such transport can drive completely autonomously, without human control. Toyota has so far only offered partial second-level automation.

Due to the agreement, the auto manufacturer will also receive more than 300 employees who have been directly involved in the development of autonomous control technology.

On the other hand, Lyft will be able to become profitable in the shorter term — the company has suffered as a result of the pandemic and reduced public mobility. Moreover, the agreement will relieve the company of the risks related to the development of costly new technology for the market.

The acquired division will work with Toyota’s Woven Planet research unit.

 

Microsoft to acquire artificial intelligence developer Nuance for USD 20 billion

Tech giant Microsoft is acquiring Nuance Communications, a company dealing with artificial intelligence and speech recognition, for USD 19.6 billion. This acquisition will enable Microsoft to increase its presence on the healthcare market, namely in the part on artificial intelligence use. The companies have been cooperating for the last two years.

Nuance Communications shares have risen by around 20% so far this year. Developments produced by this company are the basis of Siri, Apple’s assistant. The company’s capitalization is about USD 13 billion.

The technology company intends to develop software that eliminates the need for physicians to record the words of patients and which can help predict the latter’s needs in a better way. This is one sphere the companies have been working on for two years.

As AI learns to recognize speech and make predictions, developers will over time be able to create technology that will simplify keyword searches in medical records and improve the accuracy of medical predictions.

Telehealth is another sphere the companies have been working on.

 

Sanctions

USA imposed sanctions on Russian vessels and firms connected to Nord Stream 2 pipeline

The USA has added a number of Russian vessels and companies involved in implementing the Nord Stream-2 project to its sanctions list.

In particular, the Russian Marine Rescue Service, Mortransservice LLC, and Samara Heat and Energy Property Fund JSC became subjects to sanctions.

Moreover, such vessels as Akademik Cherskiy, Artemis Offschore, Bakhtemir, Baltiyskiy Issledovatel, Finval, Kapitan Beklemishev, Murman, Narval, Sivuch, Spasatel Karev, Umka, Vladislav Strizhov, Yury Topchev were also added to the sanctions list. The latter two were added to the list of Specially Designated Nationals, whose subjects are prohibited from entering the United States, their assets within the country must be blocked, they are forbidden to conduct any business or conclude any agreements. Vladislav Strizhov and Yury Topchevare are related to Koksokhimtrans LLC, which is already on the sanctions list.

 

International Monitoring

J.P. Morgan forecasts GDP growth of 5.6% in Ukraine in 2021

Analysts at J.P. Morgan have confirmed their GDP growth forecast in Ukraine of 5.6% in 2021 and expect the discount rate to increase to 7%.

“We still believe that growth in 2021 will exceed 5%, mainly due to internal factors, but it will also be supported by external demand. As the European and world economies will be recovering in the second half of 2021, Ukrainian exports should also increase in volume and promote growth,” analysts claim.

They have highlighted solid performance in Q4 last year and strong growth in retail sales, which confirms that consumption will be an important driver of growth this year.

At J.P. Morgan they add that a serious reduction in investment and reserves has been the main negative factor resulting in a 4% decline in GDP last year, but the situation in these areas should improve this year.

In particular, analysts expect a rebound of investment by almost 30% after a decline of more than 24% last year, thus reaching the pre-crisis level. According to them, the replenishment of reserves will give a significant additional kick start to growth in 2021.

Among the risks, J.P. Morgan points to possible serious aggravation of the COVID-19 situation or geopolitical events.

Regarding cooperation with the IMF, experts still anticipate that Ukraine will receive IMF financing in Q3, despite slow implementation of requirements.

The IMF mission is likely to return in Q2 2021, and one of the main issues will be the discussion of laws on the High Council of Justice and NABU which have been submitted to Parliament and enhancing liability for electronic tax returns, as well as keeping the NBU independent.

US representatives name the resumption of cooperation with the IMF and IFI, as well as reforms in the justice sector as among the conditions of financial support for Ukraine.

Analysts also expect a rise in inflation to about 9% by Q3 2021 and a rise in the discount rate to 7% by the NBU at its next meeting.

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