Doing Analysis

Mere three weeks past its tenth birthday, after a prolonged period of relatively stable trading at around 6,400 US dollars, a sudden plunge in price which bottomed at 4,282 US dollars (a 33% drop) sent crypto enthusiasts into panic mode yet again. As usual, with no real-world explanation, and probably as a result of manipulations us mere mortals and owners of fractions of BTC will never fully understand, everything went red. The initial drop was so steep it easily plummeted through and below long-term support at 6,000 USD, an event which triggered the first wave of massive panic selling. Four days later, another freefall happened.

The sad truth is, as much as it hurts, there seems to be absolutely nothing little people can do, but watch as their fortunes fade.

Theories vs. conspiracies – who or what is to blame?

Unless you are trading in the right place at the right time, by the moment you realize something is wrong with Bitcoin, your portfolio is usually down by a two-figure percent. This is due to the fact that, with all its price fluctuations, Bitcoin is still considered to be the only stable coin in the market, so something “being wrong” with it usually means a disaster is looming. Once you are at peace with the fact that there’s probably not much you can do if you’re a holder, things like this don’t excite you too much. You probably take a cup of coffee – your heart rate consistent – and start exploring post-apocalyptic YouTube videos, tweets and subreddits.

“Binance transferred out 110,000 BTC,” “Is Bitcoin Cash hard fork to blame?” “Craig Wright responsible for Bitcoin Market crash,” “US Justice Department Probes Tether for Bitcoin Price Manipulation” – these are just some of the headlines offering possible “explanations” as to what actually happened.

Since its birth, Bitcoin has definitely gained adoption and become, although in a somewhat limited sense, a medium of exchange. Everybody remembers the story of Laszlo Hanyecz who bought two pizzas from Papa John’s for 10,000 BTC; the use case for the currency has definitely taken off ever since, as it is now possible to buy all sorts of things and pay for services using BTC. However, this is still very far from the worldwide adoption, and no real adoption means that the market is still ruled by shadowy deals, FUD and FOMO.

Bitcoin 101

For those less familiar with how things work, here’s an oversimplified story about the Bitcoin Protocol.

When a computer is sending Bitcoin, a data chunk is created, containing information about the source and the destination of this transaction. All the transactions that occur within the network are kept in public ledgers, of which a full copy is present in every computer participating in the network – the blockchain. This part is crucial, because this is the only way to keep all of the ledgers in sync, and being public in the first place means there is no way to falsify data. The network is vast, so computers receive a lot of transactions, which are batched together into blocks.

After performing some additional (and highly demanding) mathematical operations, a block can either be declared valid and broadcast onto the network, or be discarded as if it had never existed. Finding a valid block means you get a reward, a piece of Bitcoin.

Now let’s imagine what would happen if there weren’t any miners. Suppose someone wanted to send some BTC; a data chunk is created, but there is nobody to confirm or deny ledger legitimacy. This means that, in theory, one could create an infinite number of almost identical data chunks with different destinations; this is called double spending.

The collapse of the mining industry ̶ the nth episode

We now understand that it is essential to have miners in the ecosystem for both basic functional and security purposes. The other reason is purely economic: as with any commodity, the price of BTC (FUD and FOMO aside) is driven by demand and supply. If the supply is limited or, in this case, capped, and demand is low, the price is likely to go down; this is why news about miners decimated by this market decline selling their equipment “by the pound” comes at the worst possible moment.

The calculations to determine actual levels of decimation are simple. The most sophisticated Bitcoin miner in existence today, the Antminer S9i, would use roughly 51 MWh of energy to mine a single bitcoin. This translates to $6,120 in the United States, which is bad enough, but not nearly as bad as EUR 15,300 (around $17,500) in Germany and Denmark. On the other side, Ukraine, with its price of EUR 0.4 ($0.46) per kWh (calculated price per 1 BTC mined is $2,355) might just be the next promised land of the mining nomads, as the Ukrainian state agency responsible for licensing regimes does not require any special licenses to mine any of the cryptocurrencies.

To make things even more catastrophic, a large number of small miners leaving the network would probably centralize the industry even further, leaving all of the decision-making in the hands of only a few mining corporations, primarily based in China. Such a high concentration of power could trigger yet another hash war, with the market still recuperating from the BCH split which is the most probable cause of the current market decline. The situation is rather simple: if two major mining companies disagree on the direction in which Bitcoin should be headed, it will almost certainly lead to yet another fork and further shake the trust of the community in the most dominant cryptocurrency.

Grim times are definitely ahead for Bitcoin, this being a scenario which is becoming more and more likely. Price-wise, despite the weak stability at around $4,500 BTC has managed to keep for the last 48 hours, further drops are expected, and might as well continue throughout December. For many investors who entered the game in December of 2017 or January of 2018, this spells apocalypse.

For several years, there had been talks about the need for a profound reform of French vocational training, and in March 2018, the Ministry of Labor came forward with the central principles of the envisioned reform. Some of these new provisions will affect both employees and employers, as well as the manner in which the entitlement to training is calculated.

French unemployment rate was 9.1% in the third quarter of 2018, which is slightly below market expectations, but still the same as during the same period of last year. This is in correspondence with the average unemployment rate of 9.27% that France has seen from 1996 to 2018, with the all-time low reached in 2008 at 7.2%, and the record high at 10.7% in 2008.

The unemployment rate is forecasted to be 8.7% in December 2018, and to fall to 8% in a year. According to the long-term forecasts, it is projected to be around 7.2% in 2020.

Reducing unemployment by changing vocational training

Macron’s government wants to reform the French system of professional training by introducing retraining systems so that both the workforce skills are improved, and the unemployment is reduced. The minister of labor, Muriel Pénicaud, aims to change the annual scheme of €32 billion because she feels that it benefits primarily those who are already qualified and as such have the least risk of losing their jobs. This new reform has the goal of provisioning more funds to the less-qualified workers in companies which are smaller.

The government believes that a total of 10 to 20% jobs will disappear in the next ten years due to automation and robotics, and fortunately, experts claim that at the same time, the same number of new jobs will be created. To keep up with this, people will need to start thinking about alternative future careers, and the government intends to help them make this transition easily.

This scheme has been controlled by business trade associations and the unions for decades, and the government believes that they have not been doing a good job at it, which is why the scheme will now be government-controlled only.

Since Emmanuel Macron has big plans for reducing unemployment, from 9% to 7% by 2022, narrowing the skills gap is essential for this.

France has one of the biggest economies in the world, and its GDP (worth $2582.5 billion in 2017) is responsible for 4.17% of the world economy. French GDP saw an increase of 0.4% in the third quarter of 2018, and the year-on-year change in GDP was 1.5%. Given that the economy shows no signs of stopping, the lack of workforce is evident – last year there were between 200,000 and 300,000 unfilled vacancies.

Fundamental changes in annual training program and personal training account

The vocational training in France has two components – the annual training plan and the personal training account.

The annual training plan is established by the employer and discussed with the representatives of the employees. The purpose of this plan is to train the employees so that they can acquire the required skills they need for particular jobs, and also maintain them. The employer pays the training sessions, and they are mandatory to be taken by the employee.

The reform proposes for the training plan to not only include the training actions, but also the identification of what needs to be trained and the creation of individual training paths, and support after the training.

All employees have the other component, the Personal Training Account, and it follows them at all the jobs they have throughout their careers. Each year these accounts are credited with entitlements to training hours, with the aim of improving skills and vocational knowledge, leading to a qualification.

Euros instead of hours

Employees without qualifications are currently entitled to 48 hours of training annually, and a maximum of 400 hours and those with qualifications are entitled to 24 hours until they have acquired 120 hours, and after that 12 hours annually, with a limit of 150 hours.

These new reforms and measures are meant to make changes to this system that has reportedly become too bureaucratic and complex and favors employers whereas blue-collared workers are not entitled to professional training.

That is why the principal part of the reform concerns the changes to these personal training account. The government announced in March that from January 2020, all workers, including part-time employees, will get a voucher worth €5000 to spend on a training course of their own choice. For people without qualifications, the value of the voucher will increase to €8000. This is the most significant change, as the employees will now be entitled not to 24 hours of training program annually, but €500, totaling €5000 over ten years.

Retraining and apprenticeship programs

This measure will be supplemented by a retraining program for one million unemployed people and one million high school dropouts, and will cost €3 billion annually over the next five years.

Another part of the reform is the government’s plan to come up with more apprenticeship programs, which is why it is in talks with employers’ organizations and unions about this matter.

Even though the majority of entrepreneurs and business leaders has welcomed the initiative for this reform, the unions are almost all against it because they feel that it will lead to a reduction of their financial resources, among other things.

Conclusion

One thing is certain – the current vocational training has been outdated for years, and it does not comply with the needs of both employees and employers, thus contributing to the high rate of unemployment. Even with some minor changes that the reform is bound to undergo, the benefits that it could bring to employers and employees are multifold.

Quite unexpectedly, the most advanced and largest economy in Europe has experienced its first contraction in more than three years. The figures have shown that due to slimmer exports, the German economy contracted in Q3 in 2018 – the GDP dropped 0.2% between July and September. This was the first quarter-on-quarter fall for this economy ever since 2015. The drop, affecting the foreign exchange markets as well, was slightly higher than predicted (the estimation was 0.1%), but on a positive note, experts believe that this is only a temporary disruption, as it is mainly caused by lower consumer spending and a weaker trade position.

A history of the low employment rate

Germany is the largest country in the European Union with an estimated population of around 82,356,000 in 2018. Germany’s capital, Berlin, is its largest city and the second-most populous city proper and the seventh most populous urban region in the EU. It is estimated that around 3.72 million people live in Berlin in 2018.

Germany is famous for its record low unemployment rate. As a matter of fact, the German unemployment rate has been at a 38-year low at 3.4% in September 2018. The total number of unemployed people fell by 0.7% from August 2018 to 1.45 million in September, and the employment went 0.1% up to 41.56 million.

The unemployment rate is expected to remain at 3.4% during this quarter, and to slightly go up and stay at 3.7% in one year’s time. When it comes to the long-term forecast unemployment rate, it is projected to circle 4% in 2020, which is still going to be very low, meaning that the historically low German unemployment rate trade is bound to continue.

Germany has rather favorable employment laws, such as termination protection, holidays, applicable collective bargaining agreements, and provisions on sick pay, maternity pay, working time, protection of disabled employees and notifications regarding mass redundancies. The German people enjoy a feeling of job security and have above-inflation pay increases and low borrowing costs. This affects their spending habits in general and leads to economic expansion primarily due to increased household spending.

The possible shortage of skilled labor

At the beginning of 2018, some experts expressed their concern that in order for the German economy to continue on its road of prosperity and stability it would need to address the concern of potential future shortage of high-skilled workers. One study even claimed that by 2030 Germany could lack as many as 3 million skilled workers.

The managing director of the Employer’s Association for Electrical and Metal Industries, Oliver Zander, said that the country had a huge problem of lack of skilled workers and that the trend was increasing. Twenty percent of the firms in his industry reported delays in production because of job vacancies.

Germany is currently in need of one million workers, and on average it takes 103 days to fill a post, compared to 63 days in the previous year. One of the main reasons for this shortage is the country’s aging population, meaning that the number of people who are of working age is falling sharply.

Berlin took note of these estimates, and the Federal Employment Agency developed a plan to help address the situation. It is recommended that the number of students dropping out of high school is reduced and vocational training promoted, working hours increased so that those who are working part-time can move up to full-time jobs, and both the number of women in the workforce and the workers aged 55-64 increased, as well.

Another solution is to find more foreign, high-skilled workers coming from non-EU countries. The German government is working on a new immigration law, which aims at attracting more skilled labor to the country, and the officials are hopeful to table formal legislation by the end of the year.

Initiative to introduce a minimum tax for digital giants

Germany’s finance minister, Olaf Scholz, proposed the introduction of a minimum corporate tax rate across all industrialized countries, as a means to combat tax avoidance and be a replacement for the EU’s planned digital tax. He also expressed his hope that the digital tax proposal would be favored at an EU finance ministers’ meeting in December.

This initiative is mainly directed at US digital giants, which practically pay no tax on their business activities in Europe. France and Germany represent a united front on this matter, and they proposed a discussion on the minimum tax rate that would then become standard, which would prevent such international firms from evading tax.

Both countries want to make sure that companies like Amazon, Apple, Google, Facebook and digital platforms such as YouTube and Airbnb, pay domestic taxes which will be in proportion to the profits they make in Europe’s largest market since their fiscal exposure is currently minimal.

However, this plan requires the support of all 28 members of the EU, and it is opposed by a number of them. Some countries with low-taxes have so far resisted this attempt to harmonize tax rates across the Union – Ireland being the chief opponent. Having in mind that Google shifts the majority of its profits from EU to Ireland by using accounting tricks, this comes as no surprise.

Scholtz stated that a worldwide minimum tax level that no state might go below was needed, as well as accompanying measures that would make the evasion of taxation difficult, disabling the money from going to tax havens due to gaps in national tax rules. He added that this minimum corporate tax rate and effective taxation of digital companies should be pushed ahead from January 2021, in case the EU states fail to come to an international agreement.

However, there are concerns that this initiative might lead to an EU-US trade war, as this could be perceived as an attack on American digital giants, which would, in turn, threaten German vehicle exports.

The financial crisis of 2008, considered by many experts to have been the worst one since the Great Depression of the 1930s, threatened to take down the global financial system after the collapse of the Lehman Brothers Holdings Inc. investment bank. Although the crisis had begun the previous year, following definitive warning signs as pointed out by many experienced economists, global markets plummeted in October of 2008, paving the way for the Great Recession.

Facing possible financial disaster, many people had lost their faith in financial institutions. However, out of nowhere, and created by an unknown individual or a group, a beacon of light would rise.

The emergence of Bitcoin

Bitcoin is a cryptocurrency, the first of its kind to offer an efficient means of online transfer of value. It is controlled by a decentralized network with a transparent set of rules and represents a powerful alternative to centralized money transfers controlled by banks.

On the last day of October in 2008, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was released to the public. It was signed by one Satoshi Nakamoto, a name which would become a symbol of ingenuity and struggle against financial oppression amongst the followers of free and decentralized Internet. Although his (her?) true identity remains unknown to the day, there were definitely some viable candidates to fill the shoes, most notable being Nick Szabo and Craig Wright.

Why does Bitcoin have any value and how high can it go?

This is indeed a good question, but to answer it correctly, aside from math and economy we must also make several assumptions.

The first one is that Bitcoin gets its value from being both a medium of exchange and a store of value. The second component is directly dependent on the first one because for Bitcoin to be used as a store of value, it has to have at least some practical utility. The second one is that the supply of Bitcoin in circulation will approach the maximum of 21 million as specified in the protocol, but will probably never reach it, as the complexity of calculations needed to mine a single Bitcoin will approach positive infinity. And, of course, we have to assume that Bitcoin will gain legitimacy, leading to adoption and large-scale investments and eliminating speculation and speculative interest as primary generators of value.

Even in case all of this comes true one day, there are way too many variables to predict the value of Bitcoin correctly. Eventually, it comes down to a single, simple operation: the value of a single BTC is calculated by dividing its total market cap (MC) by the number of coins in circulation. It is impossible to predict how things are going to go down for crypto. Assuming that the technology is adopted, the security improved and the institutional money comes flowing in, it is safe to assume that within reasonable time, the market cap of Bitcoin might go as high as 10.8 trillion US dollars, putting the value of a single Bitcoin at 514,000 US dollars. To put things in perspective, after a 3-month bull-run at the end of 2017, when the entire world entered a crypto-craze, market caps of all cryptocurrencies combined didn’t even go near 1 trillion US dollars; they went as far as 830 billion USD on January 6th, 2018. A couple of weeks prior to the event, on December 17th, 2017, Bitcoin peaked at 20,052.60 US dollars, according to data available on CoinMarketCap.

Is it safe to invest in Bitcoin?

Since its birth, Bitcoin has definitely gained adoption and become, although in a somewhat limited sense, a medium of exchange. Everybody remembers the story of Laszlo Hanyecz who bought two pizzas from Papa John’s for 10,000 BTC; the use case for the currency has definitely taken off ever since, as it is now possible to buy all sorts of things and pay for services using BTC. However, this is still very far from the worldwide adoption, and no real adoption means that the market is still ruled by shadowy deals, FUD and FOMO.

So, is it safe to invest in Bitcoin? In a nutshell, no. But there is a high probability that, over a period of several years, as technology, security and crypto-economy mature even further, larger amounts of money start pouring into crypto. At the moment, cryptomarket is experiencing a sudden 10% dip, again without any viable explanation, dropping the price of BTC to 5,640 US dollars. If you believe that someday it might reach half a million dollars, you would still get around 90 USD for each USD you invest now.

There are also alternatives to consider. There are altcoins among the top 20, such as XRP, Stellar (XLM) and IOTA (MIOTA), for example, which have use cases, strong teams, and affiliations. TRON (TRX) is probably the one most talked about since it is primarily focused on Asia, which is a huge market. It is currently trading at 1.87 cents, which represents a 93,5% drop from its all-time high. Cardano (ADA) is still under development; technologically, it is doing well and should emerge as one of the fastest and most versatile Altcoins. Trading at 0.06 USD, it is currently worth only 4.51% of its ATH of 1.33 USD, which it hit on January 4th, 2018. For those looking for more exotic investments, Smartlands (SLT) with its ultra-low supply, rock-solid legal framework, and full transparency, aiming at real estate and agriculture, might just be the hidden jewel everyone is looking for when entering the world of crypto.

Of course, hinting at these particular Altcoins is also pure speculation. There is no way to be certain what will happen, but if history does repeat itself once again, spreading your portfolio among these and investing no more money than you are willing to lose might make you some really nice profits, maybe even sooner than you might expect.

Not too long ago, probably the worst thing that could befall someone is Spain was being called a mileurista (mil euros is Spanish for “one thousand euros”). Mileuristas were young people, aged around 30 on average, earning €1,000 a month at most – hardly enough to make a decent living – without any bonuses and without any right to complain. Paradoxically, they were probably among the best-educated generations in the country’s history.

As if it was not enough, a series of events that followed in the years to come slowed the Spanish economy down even further, sending the unemployment rate upward until it hit a staggering 27% in the first quarter of 2013; suddenly, being a mileurista, or even having any job at all, didn’t sound that bad.

Things have since improved, at least when it comes to the unemployment rate – sitting just above 14.5%, it is currently in a downtrend, heading towards its 10-year minimum. The real figures might be much lower, as millions are estimated to be working in the grey market. Monthly salaries are a whole different story, however. If the budget plan for the next year is adopted, the minimum monthly salary could be increased from current 736 EUR to around 900 EUR, which would undoubtedly be an improvement, but still just enough to cover household expenses.

In 2017, the Gross Domestic Product (GDP) in Spain was worth around $1.300 billion, representing 2.12% of the world economy. The 2018 forecasts predict a 9% growth in value ($1.420 billion at the end of Q4) while at its peak, in 2008, Spain’s GDP reached $1.635 billion – again, paradoxically, coinciding with the period of mileuristas and their, virtually capped, low salaries. Further forecasts predict a somewhat decelerated growth in a two-year period, with values peaking around 6% lower than ATHs.

The autonomous community of Catalonia

Situated in the southeast part of the country, Catalonia is the most popular choice among tourists in Spain and one of the most developed tourist regions in the entire world, offering sights such as the city of Barcelona, the beaches of the Costa Brava, Costa del Maresme and Costa del Garraf. Catalonia also offers several ski resorts, situated near Lleida, in the High Pyrenees. The Catalans take tourism very seriously – as of 2012, Catalonia is charging tourist tax, which is used not only to promote tourism further but also to maintain and upgrade the underlying infrastructure.

Last December, however, things took a turn for the worse, as tourist arrivals in Catalonia saw a dramatic 13.9% year-on-year drop – only a couple of months after Spain broke its tourism record with 81.8 million visitors, making it the second-most popular tourist destination in the world. Despite the crisis, Catalonia continued to lead Spain’s tourism in both the number of tourists and tourist spending (a total of $21.7 billion in 2017).

A highly industrialized community with developed training economics, Catalonia has been integrated into various road and travel networks since the Middle Ages, topography being such that most lines radiate to and from Barcelona. The port of Barcelona, currently the third container port in Spain, is an important industrial, but also a worldwide commercial and tourist port. The land road infrastructure is extensive, with more than 12,000 kilometers of roads. Catalonia was also the birthplace of the first railway construction in the Iberian Peninsula, linking Barcelona with Mataró, and is currently the link between Spain’s High-speed rail (AVE) and France’s TGV network on the other side, offering an uninterrupted high-speed network stretching from Madrid to Marseille.

While the development of GDP in Spain was closely linked to the average change of GDP in the Eurozone, having its ups and downs in the last 15 years and experiencing an overall growth of around 44%, GDP of Catalonia has experienced a growth of 50 percent during that time, reaching $252 billion at the end of 2017. GDP of Catalonia makes up roughly one-fifth of Spain’s GDP, fluctuating only marginally in percentage over the last ten years, and is usually the highest among autonomous communities. Catalonia is traditionally considered the engine which drives the culture and the economy of Spain forward, being highly industrialized and offering attractive tourist destinations at the same time.

The autonomous community of Madrid

Dominated by the country’s capital, Madrid, the Autonomous Community of Madrid’s active businesses, including construction, transportation, retail and wholesale trade, hospitality and property activities, stand in the third place in Spain, with levels of industry ranked fourth in Spain.

High and medium technology activities and services, such as research and development and IT activities, manufacture of IT and telco equipment, office machines and electronic products, radio equipment and devices, medical and surgical as well as optical and timekeeping equipment, are concentrated in this province.

The city of Madrid, serving as a hub for flights between Europe and Latin America, is the primary generator of tourism incomes. Being a mature market and an established destination, further focuses on promoting the city’s tourism product have helped drive growth in recent years. Several million people visit the city every year, and nearly 10 million did so in 2016 – higher than in any previous year this century – impressive numbers split evenly between domestic and international arrivals. On average, foreign visitors spend more and account for around 65% of the city’s tourism revenue.

Generating 85,400 jobs directly supported by travel and tourism, the sector provides 2.7% of the city’s employment. Despite a slight drop in the number of direct tourist-related jobs in the last decade, an average 1.4% annual growth over the next ten years is expected in terms of employment.

Tourism’s share of Madrid’s overall GDP is relatively low (2.8%) in comparison to the entire sector’s 5.1% of national GDP. Madrid’s contribution to Spain’s overall tourism GDP is 10.6%, which is a significant figure. It is lower than many other capital cities, but this comes expected, as a result of the diversity of Spain’s overall tourism product.

Lagging 1,5% behind Catalonia, at $248.5 billion, but also with the highest income per capita in Spain, at 37,940 USD, is the autonomous community of Madrid, whose commercial productive structure heavily relies on prominent industry, service, and construction sectors.

Oleksandr Danylyuk, Ukrainian Finance Minister, said in a statement on Tuesday that Ukraine could avoid default on its debt obligations in the year to come only if it continued to cooperate with the International Monetary Fund (IMF). He also expressed the government’s intention to send more than $14.39 billion for servicing and paying off the debt.

Without IMF’s support, Ukraine would lose access to the financial resources of both the institutional investors and international organizations when in fact it needs to cooperate with international creditors and partners – mainly the IMF – and prioritize fiscal sustainability.

Ukrainian Prime Minister, Volodymyr Groysman, reported on October 19th that Ukraine and the IMF had agreed on a new agreement and program with a $3.9 billion loan for 14 months, which would take place in 2019. Additionally, a new program would be approved after the adoption of the state budget for 2019. Ukraine also finally accepted the IMF’s demand to increase gas prices, which has been long overdue, and here is a timeline of the events that led to this.

September 2018

The IMF representatives paid a visit to Kiev in September when the next portion of the IMF’s program totaling $17.5 billion was under discussion. The payment of funds from this package was frozen from April 2017 due to Kiev’s slowdown in both the implementation of economic reforms and the government’s refusal to raise gas prices. These talks were of the utmost importance because of the expected peak of Ukraine’s debt obligations due in 2018-2020, and the concerns that Ukraine is unable to meet the conditions set by the IMF and control its growing debt.

The general feeling was that these negotiations lasting from the 6th to the 19th of September were under pressure because the Ukrainian government extended special obligations for the national oil Company – Naftogaz, until the 1st of October. This means that the company would be required to sell gas at reduced prices to intermediaries, which would delay meeting the IMF condition of increasing them. This put the government in a very delicate position, as an election is due next year and there was a strong public opposition to the increase in gas prices that the IMF requires.

The UN Human Rights Council reported that the current loan program significantly affected and diminished the living standard throughout the country, as there was a decrease in energy consumption by as much as 30%.

Ultimately, on September 20th, it was reported that the IMF and the Ukrainian government did not reach an agreement and that the IMF would not restart financing as long as the state budget for 2019 was not adopted. The Ukrainian government was caught off guard by this request, as the budget is typically passed in December. This which would mean that Ukraine would not receive funds until the very end of the year, at best, and that it would be even closer to defaulting its debts.

Furthermore, due to the lack of external financing, the foreign exchange reserves would shrink, which would, in turn, cause a collapse in the currency. This would consequently cause upset on the foreign exchange markets as well. It was estimated that there was only $0.8 billion in foreign exchange accounts and that it would be enough to last until November.

October 2018

The IMF issued a report in October stating that Ukraine had the lowest GDP in Europe, putting it in the first place on the list of the poorest European countries. The reason behind this was Ukraine’s inability to achieve economic growth in the past four years. The Fund also estimated that the GDP would experience a decrease from 3.3% to 2.7% in 2019.

In October 2018 Ukraine’s gross domestic product per capita was $2,656.01, and this put Ukraine on the 134th place in the world, and the last place in Europe. When it comes to the average salary in the second quarter of 2018, it was also the lowest in Europe at the estimated value of $325,23.

However, there was some favorable Forex news in October. In the week prior to October 15th, the U.S. dollar dropped two kopiykas below UAH 28, thus breaking the psychological mark. The national bank set the hryvnia to dollar rate at UAH 27.98 per dollar. October 12th. But despite this, the experts believed that this favorable period for the national currency would be short and that it would decline. The IMF confirmed this and predicted that the national currency would devalue by 5.89%, to UAH 28.655 per dollar in 2019.

November 2018

Starting from November 1st, Ukrainians now have to pay 23.5% more for gas. In order to qualify for additional financial aid from the IMF, the Ukrainian government made this rather unpopular decision because it desperately needs the assistance package that was agreed on with the IMF.

Kurt Volker, U.S. Special Representative for Ukraine, says that this increase will help reform both Ukraine’s energy sector and the entire economy. The energy sector has been going through great instabilities, and this would help stabilize it. He also expressed his opinion that gas prices for the population were not reflective of the reality.

This price increase primarily took place to help resume the funding by the IMF, but those most affected by it come winter would be low-income families. This is why the Cabinet of Ministers of Ukraine reserved UAH 55 billion for subsidies for these families in the 2019 state budget draft.

Ukrainians will probably be faced with another price increase in May 2019, according to the Cabinet of Ministers’ decree published on the government website. The gas price for the population will be $220/one thousand cubic meters without taxes from November 1st, 2018 to May 1st, 2019, and then it would go to $350/one thousand cubic meters from May 1st, 2019 to December 31st, 2019.

One thing is certain – 2019 will be a very challenging year for Ukraine, as the financial and economic situation is rather gloomy at the end of 2018. We should also have in mind that Ukraine has both economically and politically difficult elections coming in 2019, so it is doubtful that this will be the year that brings long-term economic stability that Ukrainians desperately need.

The Bolivarian Republic of Venezuela is currently facing a crisis which is among the worst ever experienced in the Americas and certainly the worst domestic one in the country’s history. The crisis is arguably the result of the Bolivarian Revolution which began under the administration of the late president Hugo Chávez and continued under the rule of Nicolás Maduro.

Essentially, the Bolivarian Revolution is the manifestation of Bolivarian ideals fixed against corruption, imperialism, and inequality, named after Simón Bolívar, a Venezuelan general who fought for independence throughout South America. In theory, Bolivarianism is the foundation of participative democracy, equity of people and life in abundance; in practice, however, not only has it failed to deliver, but it has also led the country well past the economic point of no return and to the very brink of civil war.

Crisis in Numbers

Although inflation was already high throughout Chávez’ presidency, it started its exponential growth in 2014, reaching 69% and coinciding with the fall in oil prices. Considering the fact that the oil generates the entirety of the country’s export revenues, this only fueled the runaway inflation effect. In the years to follow, the inflation rate increased further to 181%, 800%, 4,000% respectively, and finally, to around 490,000% in 2018, with some estimates showing it could go as high as 1.37 million percent by the end of the year.

Another obvious sign of the deep crisis is a 38.7% drop in GDP in the 4-year period which started in 2014. The Gross Domestic Product in Venezuela was worth around 540 billion US dollars (17,951 US dollars per capita) in 2014, dropping to estimated 331 billion US dollars, or 10,399 USD per capita, at the end of 2018.

As a direct result of the crisis, Venezuela is suffering its highest unemployment rate in recorded history. While the government has essentially stopped disclosing hyperinflation estimates and unemployment data as of January 2018, various econometric models suggest that the unemployment rate might hit 35% as early as December 2018 with a strong possibility of reaching whopping 44% sometime in the next two years.

The Venezuelan Exchange

While Venezuela is a major worldwide oil exporter, it also imports almost everything else. Dollars earned on oil exports should, in theory, be used in import transactions. However, the government has been issuing petrodollars at subsidized rates, which has created economic and social problems, as common people do not feel any benefits from this. At the same time, depending on the purpose, the Venezuelan exchange rate system offers different rates to different people, preferred rates being reserved for only a handful of influential people.

Common people also tend to hold US dollars instead of Bolivars and convert them to more of the domestic currency in black markets. Any rise in demand for dollars, which is a fairly common situation, immediately drives the black-market price up, which is a basic loopback feeding mechanism of inflation.

Petro: a digital savior or an ICO scam?

After a long period of confusion and absence of almost any news regarding the state-backed cryptocurrency which is expected to recover the country’s stumbling economy, Petro is now available for sale and can be bought for either Bitcoin or Litecoin. The news comes in the form of a tweet from the official account of Tareck El Aissami, Vice President of the Economy: “The Petro may be acquired by legal and natural persons from its web portal.”
What exactly is Petro and how can it help recover Venezuelan economy? To put it simply, the idea behind Petro is for oil, which is the country’s primary export product, to become tokenized – essentially, its value would be linked to Petro, instead of USD. Petro is a NEM-based token, and as such, it can be easily made available worldwide and bought for BTC, LTC or other cryptocurrencies, depending on the trading platform. This would be an efficient way to bypass US-imposed economic sanctions.

There is, however, a downside to the entire story.

Although some initial announcements came as early as December 2017, in September 2018 there was still no evidence of Petro-denominated economic activity. In October, due to the continued absence of national cryptocurrency, BTC trading volumes in Venezuela hit their ATHs as people tried to counter the effects of the runaway hyperinflation. Most people in Venezuela still remain in the dark about the state-backed cryptocurrency, same as the people outside.

Can tourism to be revived?

Before the crisis, formerly one of the wealthiest countries of its region was also a favorite among tourists, with its breathtaking Caribbean coastline and glorious Angel Falls, earning as much as $1 billion yearly only a decade ago. But today there are many roadblocks stopping the revival of tourism, the first and the biggest one being – not too many people want to visit a country with the world’s highest current inflation rate, saddled with corruption, crime, and violence. The 2017 annual report from the Interior Ministry made Venezuela one of the most dangerous countries in the world, stating that, on average, 53 people a day were killed.

Even so, tourism still seems to be at the very top of the government’s agenda, with the focus on the Humboldt hotel, built in the hills of Caracas. Hailed as “the first seven-star hotel in Venezuela,” the hotel’s grand opening is now nearly a year overdue, with no further mentions.

On the other side, set deep within the almost impenetrable national park of Canaima, lies Angel Falls, the highest waterfall in the world and definitely Venezuela’s premier highlight. Canaima is a prized UNESCO-listed natural wonder, a place where modern civilization is but a distant memory, and getting there and actually visiting Angel Falls is a big bite even for the most experienced nature lovers and adventurists. Unfortunately, being so remote and mysterious is precisely what prevents this beauty of nature from generating any substantial revenue – its isolation makes it so unique, yet in order to attract more tourists, it would have to become less isolated and more accessible, losing a part of its magic in the process.

Japan, an island country in the Pacific Ocean, has always been known for its incredibly developed economy, and this trend shows no signs of stopping. As a matter of fact, the Japanese economy is bound to set a record growth streak in the following year. However, at the same time, Japan is also faced with the record amount of government debt despite having one of the strongest economies in the world.

Aging nation

According to the current United Nations estimates, Japan has a population of around 127,085,000 people, which constitutes 1.67% of the entire world population. Japanese population for 2025 is forecasted to be roughly 124,310,000, and to additionally drop to 118,500,000 in 2035. Although Japan is one of the most developed countries in the world, it also has one of the lowest fertility rates, which in turn leads to the aging workforce on the one hand, and on the other fewer younger workers able to support the economy through consumption and taxation.

The Japanese unemployment rate was relatively low in September 2018, at 2.3%, which was a slight decrease from the month before. It was below the market expectation and at the lowest point since May. There were 70,000 fewer unemployed, and the employment was increased by 30,000 to 66.6 million. The unemployment rate is expected to be 2.3% by the end of this quarter, and to be slightly higher (2.4%) in one year’s time. From 1953 to 2018, the average unemployment rate in Japan was 2.73%, and it was the highest ever in June 2002, at 5.5%, which is still relatively low compared to the average unemployment rate in many other developed countries.

Top economic growth

Japan saw the fastest economic growth from April to June this year since 2016 due to capital spending which rose much quicker than it had been anticipated. However, some experts expressed concerns that natural disasters and global trade tensions can affect the outlook. Both business and consumer activity were affected by a string of natural disasters happening in recent months (floods, typhoons, and an earthquake), and the trade war between the USA and China could affect Japan’s economy relying on export, and global growth as well.

The VAT rate – what’s to come

Japanese Prime Minister, Shinzo Abe, announced that the government would lift the VAT rate (the consumption tax) to 10% in October 2019, from the current 8% in October 2018. However, he also noted that the government could postpone raising the VAT rate in case unprecedented recession occurs (for example, something like the great global crisis of 2008) or in case of another major economic turmoil happening.

Just like before, this tax rise is probably going to affect consumption, so the Prime Minister and his government are going to advise ministries and agencies to take the necessary steps in order to prevent the deterioration of the economy, and in turn encourage car and house purchases by giving incentives in the form of tax breaks. One possibility is to give up to ¥500,000 (approximately $4,426.50) to people who want to purchase a house and have an annual income of 7.75 million (approximately $68,610.75) or less. Another one is to reward credit card purchases of goods at small stores with monetary points since the government wants to promote cashless payments.

The VAT rate has been at 8% since April 2014, and Primer Minister Abe has already managed to delay the scheduled rise twice – from October 2015 to April 2017, and now to October 2019. The general feeling after the rise in April 2014 was that this increase was responsible for the possibility of the country falling into a brief recession.

Furthermore, raising the VAT rate is historically rather unpopular with voters, but the IMF has nevertheless asked Tokyo to increase it as an effort to improve its finances and ensure sustainable revenues. Christine Lagarde, the chief of the IMF, expressed her concern that Japan would continue to face challenges as both the population and the size of the economy were forecasted to shrink by a quarter in the next forty years.

Advice from the IMF

Lagarde met with Prime Minister Abe last month to discuss the VAT rate rise and the necessary steps that the Japanese government had to take to avoid the negative impact on the economy. The International Monetary Fund suggested that the consumption tax increase planned for 2019 should be accompanied by appropriate mitigating measures so that both near-term reflation and growth momentum remained protected. Additionally, the fiscal stance needs to remain neutral for the minimum of the next two years.

Some experts believe that the rise in VAT rate is essential to provide the financial support of unstable social security expenditures – mainly medical fees – in the society that is aging rapidly. Furthermore, the Prime Minister himself said that pension and health insurance were at the top of the list when it came to social security system reforms and consequently, as they represented the greatest challenge that the government needed to address in the near future.

Confidence in the yen

Even though Japan is the third largest economy in the world, it has one of the highest debt-to-GDP ratios among the wealthy nations. In 2017, the government debt was equal to 253% of Japan’s GDP when it was the highest in recorded history. However, the markets have always shown confidence in the government’s ability to reduce the debt and believed in Japanese yen since whenever a downturn in internationals confidence occurs, the yen appreciates as investors buy more of it.

The yen on the foreign exchange markets

The Japanese yen is also one of the major players when it comes to forex trading and international trade. There are only seven currencies accounting for as much as eighty percent of the forex market, with the yen being one of them. It is supported by the Bank of Japan, which always takes the necessary steps to minimize inflation and encourage growth. Throughout the years, the Bank of Japan has had the policy of low rates in the hope to encourage both the demand and economic growth mainly because of the persistent threat of deflation.

Bulgaria, a country in southeastern Europe, has been undergoing significant economic changes in recent months, and the trend of rising prices that is ongoing can impact not only the economic but the political situation as well.
According to the latest United Nations estimates Bulgaria has a population of 7,021,848 in October 2018, which is roughly 50,000 less than during the same month in 2017. Its population constitutes 0.09% of the entire world population, and 73.9% of Bulgaria’s population is urban.

When it comes to the unemployment rate, it is below the European unemployment average, and the median value from 1991 to 2018 was estimated to be 11.62% (it was the highest in February 2001 –19.27%). In August 2018, the Bulgarian unemployment rate was 5.7%, which was a slight 0.1% decrease from the previous month. It is forecasted to be 7% by the end of this quarter, at 6.8% in a year, and around 5.6% in 2020, showing a tendency to decrease over the years.

Last year, Bulgarian GDP was worth $56.83 billion and had an annual growth rate of 3.4%. This year, the economy saw an advancement of 0.8% on quarter in the three months to June. The average GDP growth rate in Bulgaria for the last 11 years has been around 0.99%. In 2017, Bulgaria experienced solid economic growth, and the economy was expected to grow an additional 3.8% by the end of this year.

Trade is a significant part of the Bulgarian economy, as the combined values of exports and imports equal 124% of GDP. There are nontariff barriers impeding some trade, while the rate of the average applied tariff is 1.6%. Due to the government’s efforts and reforms and the liberalization of trade, as well as an advantageous taxation system, the openness to foreign investments is above average. Bulgaria has among the lowest corporate tax rates in the region and low labor costs, so the market is very friendly when it comes to foreign investments and foreign exchange markets (in June 2018, the foreign exchange reserves were at $24.8 billion).

However, in July 2018, FDI in Bulgaria saw a decrease of -€56.8 million. According to the Bulgarian National Bank, there was a drop in the inflows by an annual 42% in January and February of 2018 to $253.4 million (0.4% of the forecasted GDP for 2018), and the total FDI was at $42.8 billion (91.5% of the GDP) in December 2017.

The consumer price index increased by 0.23% in September and was at 6859.03 index points, following a 0.1% increase in August. The annual CPI variation rate was 3.6%, whereas the monthly variation rate and the accumulated inflation were at 0.3% and 2.1% respectively. This coincides with a 4.6% annual increase in the prices of housing water, electricity, gas and fuels.

Are 2019 elections responsible for price increases?

Financial experts expressed a growing concern when in September 2018, the Bulgarian PM, Boyko Borisov, and Minister of Finance, Vladislav Goranov, claimed that there would be a 10% increase in public service employees’ pay in 2019. They felt that this would cause the consumer to go up, and so would the price of the natural gas, which they estimated would happen in October – and they were completely in the right.

Furthermore, they believed that this was partially due to the elections set for next year, even though Goranov firmly declined it. Bulgarians will vote on two elections in 2019, for the European Parliament in May, and mayors and municipal councils in the autumn.

Due to the increase in gas prices, the price of the majority of basic commodities and goods would follow this trend, as well – most notably, heating, food and transport. This means that the cost of living would be pushed up by seven leva per person. The Confederation of Independent Trade Unions in Bulgaria claims that people residing in the Bulgarian capital, Sofia, will be the ones most affected by the increased costs of living.

Sofia is the most populated city, and more than two-thirds of dwellings have central heating, which is their only source of heating. Due to the increased price in natural gas, and electricity and heating consequently, the average household would have to pay 11 leva more for the heating bill per month.

Even though it may not seem alarming, the Confederation also states that almost 37% of Bulgarians could not afford to heat their homes in 2017. Given that a significant part of the Bulgarian population lives below the poverty line, even this seemingly slight increase would reduce consumption, thus worsening poverty and social exclusion.

We should also have in mind that Bulgarians have the lowest average pension in the European Union at €190 a month, and more than a quarter of pensioners receives the minimum pension (€106).

In addition, there have been many factors affecting the increase in food prices to contribute to the overall gloomy economic situation. Summer of 2018 was unusually rainy, which had a significant effect on some of the crops (wheat and grapes in particular).

Even though the Minister of Agriculture, Roumen Porodzanov, was adamant that there would be no bread shortages and price increases, given that the crops were rather sparse, so the wheat price is expected to rise, and with the natural gas prices also going up, it is only natural to presume that the price of bread is going to rise as well.

There are also concerns that the cost of living could potentially be impacted by the spread of African Swine Flu, which would have a major effect on pork prices. So far, the government has failed to contain its spread and having in mind that pork accounts for 80% of the country’s entire meat consumption and it is the most widely-produced meat, the situation is pretty unsettling.

Flourishing tourism

One thing that works in Bulgaria’s favor is a 7.6% increase in inbound tourism that happened in 2017. Throughout the years, tourism has played a crucial role in the Bulgarian economy, and there were more than 8.9 million foreign tourists last year, which led to an increase of 9.3% in income from tourism.

This rise in the tourism industry is partly due to the increased number of Chinese visitors who came to Bulgaria – the number of Chinese citizens who came to Bulgaria was reportedly increased by 43% in 2017. The National Bank of Bulgaria reports that the revenue coming from foreign tourists was €2.8 billion from January to August 2018, which was 7.2% more than during the same period last year.

Next year marks three decades of the fall of Nicolae and Elena Ceaușescu. In the twilight of the 30th anniversary of the Romanian Revolution, the country is seemingly following a well-paved road of development and showing a clear downward trend of the unemployment rate in the past three years. There are currently 385.5 thousand unemployed people in the country (accounting for 4.3% of the population), which is a sharp decline from around 6.6% back in Q4 of 2015.

The current population of Romania is around 19 and a half million, based on the latest United Nations estimates. In comparison to the 2011 census, the population is showing a decline of roughly 600,000 or around 3% which means that the country is facing a gradual drop in population, primarily due to negative net migration rate and sub-replacement fertility rates.

It is interesting to point out that, in the last two years alone, and despite the overall economic growth and prosperity, as well as the general content of the population, there have been several massive protests. These protests against the Romanian government were aimed against bills regarding pardoning and amnesty of committed crimes. While these controversial bills might be an indicator of corruption in the highest levels of the government, the scale of protests still taking place from time to time is a clear sign of a growing sense of morale and justice within the general populace.

Bucharest – the actuator of the economic growth

A little less than 10% of the total population of the country, around 1.8 million people, reside in Bucharest and its surroundings. Although it is the center of industry and economy, accounting for 25% of Romania’s industrial production and 23% of the country’s GDP, it is ranked low among world capitals in regard of quality of life. Romanian Order of Architects described the city’s urban situation as “critical” a couple of years ago, criticizing the city’s public management policies in the report they released in 2016.

But there’s the other side of the coin – IT developers are quickly becoming recognized as a new financial elite, earning, on average, as much as 4 times the country’s average salary (around $29,000 per year, compared to $7,500), with wages reaching as much as $5,000 per month ($60,000 per year). This is why Bucharest is already being perceived as the center of the emerging IT industry of not only Romania but entire Eastern Europe. And there’s a pretty good reason for this.

Becoming the IT leader of Eastern Europe

The main reason for this highly accelerated development of the IT market, aside from offering various incentives to foreign corporations, is the tax exemption established back in 2001. Reducing the standard flat tax rate of 16% to zero means that the salaries are, in effect, 19% larger.

The scope and definition of qualifying activities for tax exemption extend beyond pure software development and include broad fields such as “information and technology” which involves telecommunication companies, tech support, ICT consultancy, project and DB management. However, there’s a catch – this only applies to employees who hold higher education degrees. In 2010, for example, out of the 90,000 ICT employees in Romania, only about 16,000 people benefited from the exemption. On the other side, such bills act as potent incentives for people to seek further education.

Just this October, computer gaming industry was also given a significant boost as the national communications minister, Petru Bogdan Cojocaru, announced an enormous €94-million new investment fund for game development companies at the Dev.Play conference. The minister said that “If this scheme proves successful, it will open the way for other support mechanisms and additional funding”. The scheme will consist of numerous individual project investments of between €500,000 and €3 million over the next three years, but only companies with 100% Romanian capital will be eligible.

In conclusion, such incentives and tax exemptions make Romania especially interesting for foreign investors. Foreign Exchange Reserves in Romania currently average at €24,744 million (from 2000 until 2018), but recent averages are much higher – in the last year alone, for example, they were around €36,500 million. Only recently, after a drop to a local minimum of €34507.80 million in August of 2018, the Foreign Exchange Reserves are on a steady rise again, having reached €34824.70 EUR Million in September.

The WTTC Economic Impact Report

For some reason, Romania has a notoriously bad reputation as a tourist destination, yet tourist testimonials time and again tend to prove otherwise. Offering a wide variety of destinations, such as Black Sea resorts, medieval towns, castles and fortresses, the Danube delta, the Carpathian Mountains or traditional villages, Romania has a lot to offer.
The total contribution of travel and tourism to GDP, which includes broader effects from investments, the supply chain and induced income impacts, was around $7.9 billion (5.2% of GDP) in 2016, followed by a rise of approximately 4.6% the next year, and is expected to rise up to 5.8% of GDP by 2027. Travel and tourism also contribute to employment, directly generating around 203,000 jobs or 2.4% of total employment in the country. Counting in wider effect from investments, supply chains, and induced income impacts, travel and tourism indirectly create around 373,000 additional jobs.

These figures place Romania at the bottom of the most recent research on the economic impact of travel and tourism on the countries of the world. This official research was conducted by The World Travel and Tourism Council, the global authority on the economic and social contribution of travel and tourism, and was published in 2017. These results are not all necessarily bad, because they also mean there is a lot of room for exponential growth, and in order to induce such growth, further investments have to be made. Numerous blogs and TripAdvisor reports indicate that the traditional village tourism is a popular choice among foreign tourists, and perhaps this is the area in which potential future investments should be made.