Geopolitics

The expanded BRICS summit in Brazil unfolded without two of its most influential figures — Chinese President Xi Jlnping and Russian President Vladimir Putin. Their absence has raised concerns about the bloc’s cohesion at a time of mounting global and economic tensions.
Neither leader attended the summit in Rio de Janeiro nor sent a high-ranking representative to fill the void. Heads of state from other key member countries like Egypt, Iran, and Saudi Arabia were also notably absent. While the group photo in front of Rio’s iconic Sugarloaf Mountain appeared more organized than last November’s chaotic G20 image, the lack of BRICS’ central leaders made the alliance look unfinished and fragmented.

🔹 Putin Stays Home as Russia’s War Economy Falters
As the summit unfolded, Russia’s economy — long propped up by military spending and oil revenues — is beginning to show serious cracks. Industrial production is declining, inflation is high, and the central bank has been forced to cut interest rates in an effort to soften a looming recession.
While Putin publicly downplays the situation — quoting Mark Twain to say, “reports of our demise are greatly exaggerated” — the numbers tell a harsher truth. Russia’s GDP grew by only 1.4% in Q1 2025, down from 4.5% in Q4 2024. Car sales dropped 30% year-over-year in June, and manufacturing output has plunged to a three-year low.

🔹 Sanctions and Falling Oil Revenues Hit Industry Hard
Russia’s real economy is bleeding. Agricultural machinery giant Rostselmash cut production and sent 15,000 workers on early leave due to weak demand. In Siberia, power provider Rosseti Sibir faces bankruptcy amid mounting debt and has frozen new investments.
The country’s banks are also under pressure. After the war began, the Kremlin forced major banks to issue low-interest “war loans.” Now, with skyrocketing borrowing costs, many businesses can’t repay them — and if bankruptcies start, the government may need to step in to bail them out.

🔹 Military Spending Consumes Nearly Half of the Budget
Defense and security expenditures are expected to make up 40% of Russia’s total budget in 2025 — the highest share since the Soviet Union. That’s over 6% of GDP, far higher than the 3% spent by the U.S. or 2% by Germany. While such spending temporarily boosted growth, it has since triggered uncontrollable inflation. The central bank’s 21% interest rate now stifles economic activity and borrowing.

🔹 Xi’s Absence Signals Possible Strain in the Russia-China Alliance
Despite having supported Russia with discounted oil purchases and essential exports like electronics, China’s own challenges may have forced Xi Jlnping to skip the summit. With weakening domestic demand, a real estate crisis, and declining foreign trade, Beijing’s focus may have shifted inward.
His absence — along with that of Putin — casts doubt on the long-term solidity of the China-Russia alliance within BRICS. What was once seen as a powerful counterweight to Western dominance now appears fragmented. And financial pressure on Moscow continues to mount.

#putin , #BRICS , #china , #russia , #Geopolitics

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Sweden’s plans to loosen monetary policy in August have taken a hit. The latest data shows that inflation unexpectedly jumped to 2.9% in June, significantly exceeding analysts’ forecasts and casting doubt on whether the central bank will proceed with its planned interest rate cut.
🔹 Sharp Increase Compared to May
In May, the country’s CPIF inflation rate (which excludes mortgage interest costs) stood at 2.3%, and most June forecasts ranged between 2.4% and 2.5%. Sweden’s central bank, the Riksbank, had itself hoped for 2.4%. But the actual figure of 2.9% caught even seasoned analysts off guard.
Economist Johan Lof from Svenska Handelsbanken called the numbers a “significant surprise in terms of inflation growth,” warning that this spike adds uncertainty to the Riksbank’s upcoming August meeting.

💼 Markets Adjust Expectations
Market pricing has already reacted. While traders previously expected an 8 basis point cut in August, that projection has now dropped to just 7 basis points. Some investors believe a more significant move might be postponed until September, possibly with a 17 basis point cut.
Riksbank Governor Erik Thedéen and four other policymakers are scheduled to meet on August 19 to assess the situation. At their last meeting on June 18, they reduced the policy rate by 25 basis points and suggested more cuts could follow later this year—if inflation allowed.

⚠️ SEB and Nordea Sound the Alarm
SEB analyst Johan Javeus noted on X that the June inflation spike was a major obstacle and told those hoping for an August cut: "Think again."
Meanwhile, the Nordea financial group stated that its baseline scenario assumes the Riksbank will hold rates steady at 2.00%, and that the new inflation data reinforces this stance.

🌍 Eurozone Inflation Holds at 2%, but Risks Remain
While Sweden struggles with rising inflation, the eurozone remains relatively stable. According to Eurostat, eurozone inflation stands at 2%, precisely the target of the European Central Bank (ECB).
In June, inflation in Germany unexpectedly dropped to 2%, while France and Spain recorded slight increases. Overall, the situation is within expectations, and ECB is widely expected to keep its key deposit rate unchanged at 2% during its late July meeting. A final 25 basis point cut may follow in September.

🛢️ External Risks: Oil, Tariffs, and Geopolitics
ECB Chief Economist Philip Lane said the "main disinflation phase—from a peak of 10% to 2%—is now behind us." However, he emphasized that policymakers must remain alert to new disruptions.
These include:
🔹 Donald Trump’s tariff policy, which could impact global trade

🔹 Volatile oil prices

🔹 Tensions in the Middle East
Domestic data in Sweden also reflects a slowing economy: consumer confidence and the manufacturing PMI have both declined in recent months.

🔍 Summary
While the eurozone remains within its inflation target range, Sweden faces renewed inflationary pressure that may force the Riksbank to reconsider its monetary easing plans. The upcoming August policy meeting is shaping up to be a critical moment, and investors are watching closely.

#globaleconomy , #TRUMP , #Tariffs , #Geopolitics , #worldnews

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