AFN Y2014 Year End Fiscal-Economic Report [WIP]

[Empire of Symphonia]

Asian Federation of Nations Ministry of Trade and Economics

Year 2014 Fiscal and Economic Report

Table of Contents

Topic 1 – Economic Report

Section 1. Overall Internal Economy AFN-UK
Section 2. Economic Relations between the AFN and Aquitayne
Section 3. Economic Relations between the AFN and Astyria
Section 4. Internal and External Issues

Topic 2 – Fiscal Report - To Be Released

Section 1. Overall Fiscal Situation
Section 2. Defense Budget
Section 3. Public Services Budget
Section 4. Internal and External Issues

[Empire of Symphonia]

Section I. The Overall Economy of the AFN

Real gross domestic product -- the output of goods and services produced by labor and property located in the AFN -- increased at an annual rate of 2.1 percent in the fourth quarter of 2014 (1 October 2014 – 31 December 2014), according to the "advance" estimate released by the Office of Economic Analysis. This is a relative decline in comparison to the third quarter (1 July 2014 – 30 September 2014), where real GDP increased 3.2 percent. In the first quarter (1 January 2014 – 31 March 2014), the real GDP grew at 2.9%, a relative decline from the previous year's 3.2% growth. The second quarter (1 April 2014 – 30 June 2014) saw moderate growth at 2.7%. This totals to a yearly average growth of approx. 2.725% annual growth rate, beating the 2013 approximation.

The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and federal, prefectural, and local government spending that was partly offset by negative contributions from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, also increased dramatically, as expected in the previous report.

The deceleration in real GDP in the fourth quarter reflected a further deceleration in private inventory investment, continued downturn in residential fixed investment, and decelerations in state and local government spending and in nonresidential fixed investment that were partly offset by accelerations in imports, PCE, and federal government spending and a deceleration in exports.

The price index for gross domestic purchases, which measures prices paid by all residents within the AFN, increased 1.3 percent in the fourth quarter, compared with an increase of 1.1 percent in the third. The second quarter saw a price index increase of 0.9 percent, and the first quarter saw an increase of 0.6 percent. Overall, inflation and price increases increased for the entire year, slowing down the growth in real GDP however slightly.

*Please note values are given in Imperial Kokus (I$) and NationStates Dollars (NSD$)

Economic Data (2014)	Value
GDP (Real) at 2014 Year End (estimate)	I$ 57.927 trillion (NSD$ 110.634 trillion)
GDP (Nominal) at 2014 Year End (estimate)	I$ 58.497 trillion (NSD$ 111.723 trillion)
2014 Growth Rate per annum (approx)	2.275%
2014 Average Inflation Rate	0.975% (below Federal Reserve target)
Latest Exchange Rate	1 Imperial Koku (I$) = 1.9099 NationStates Dollar (NSD$)
Real GDP per capita	I$ 41,693.26 (NSD$ 79,629.97)

The Empire of Symphonia continues to be the largest constituent member of the AFN in economic size. The Symphonian economy currently contributes I$27.805 trillion (48%)(NSD$53.105 trillion), and recorded an average growth rate of 1.3%. The second largest economy is the Empire of Hienkoku at 23% (I$13.323 trillion; NSD$25.446 trillion), which recorded an extremely slow growth rate of 0.3%. The Kingdom of Huanqiu remains the driver of the AFN economy, growing at 6.2% thanks in part due to its economic catching up effect with the help of AFN and foreign investors. Huanqiu, however, makes up 10.5% of the AFN economy (I$12.165 trillion; NSD$23.233 trillion). The Republic of Cheonsa also makes up 10.5%, with a growth rate of 0.2%. Xinhai and Singapore each grew about 1.79%, and each hold 2% of the total economy (I$2.317 trillion; NSD$4.426 trillion).

The major industries of the AFN continue revolve around the financial, information technology, and manufacturing sectors, which grew at 3.5%, 1.2%, and 2.9% respectively. The main reason for this growth can attributed to the growth in the job markets of West Genevira and Symphony due to private investment, especially as the leading business entities continue to expand their global outreach. Imperial Bank of Symphonia (IBS), Sho-Kunieda Heavy Industries, and a number of firms expanded operations globally, leading to increased domestic activity to help meet foreign demand.

The Metropolis of Symphony, an autonomous prefecture of the Empire of Symphonia, increased it share of the Symphonian economy, moving from 25% to approximately 27% over the past year. The Metropolitan Corporation of Symphony (MetroCorp) announced its decision to make the region a full free trade zone, with the intention of attraction foreign businesses and firms to open offices and factories in Symphony. Investors have reacted positively in that project, though initial openings have yet to introduced to the global market. Symphony and West Genevira each grew 4.2% this year, though their effect on the total Symphonian economy was hampered by negative growth in the Southlands region and the West Coast, as those regions continue to recover slowly from the Great Asian War and the Seong-Kiramashi Conflict.

The agricultural sector continued to decline, accelerating its decline to 5.6% this year. While demand for food products continues to grow, arable land continues to decline as the limited space of the Home Islands is increasingly taken up by the urban commercial and residential projects. Farmers are finding it more lucrative to transform portions of their land into residential complexes where they can charge rent. The mining and energy sectors also declined, growing at -3.2% and -2.1% total this year due to rapidly declining coal and iron deposits in the Central Mountains, as well as a registered decline in petroleum reserves/production from the Liaoning Oil Field in the Sea of Evendium.

Overall the economy of AFN continues to evolve slowly into a tertiary economy based on financial services, information technology, the manufacturing of high technology. Secondary and primary industries continue to decline and their share of laborers has lessened in recent years.

[Empire of Symphonia]

The Constitutional Monarchy of Aquitayne is a United Kingdom sister state and is the leading member of the personal union with the Empire of Symphonia. Trade relations have been excellent since the accession of the Empire of Symphonia and the rest of the AFN into the original Union of Epic Nations region, and have only grown since that time. The Glogoth trade embargo, which shook international markets mid-quarter last year, only served to further unify the economies of Aquitayne and Symphonia, further tying the United Kingdom together as a single economic unit.

Trade lanes between Aquitayne and the AFN consists mainly of shipping and some air transport. Aquitaynian goods are recorded moving to the ports of Hienkoku for transshipment to the rest of the AFN or sent to the Port of Symphony for transshipment to the rest of the region. AFN wares are sent to the ports of eastern Aquitayne, with most AFN-registered shipping destinations are concentrated in Telora. The Mican Strait continue to remain a source of agitation for most shipping companies, as the situation in Insula Fera continues to deteriorate. Companies cite increased pirate activity as one of the reason for increased costs of operations.

Aquitayne remains the largest destination for AFN wares and has grown since last year, importing approximately 39% of all AFN manufactured and basic products, which notably include computers hardware, computer software, aircraft components, silk cloth, exotic fruit, financial services, rare earth metals, iron, and coal. It is the single largest export market for Symphonian products and is projected to remain in that position for the next fiscal year, though the Contruum Ministry notes that increased economic activity with interregional partners may change the current status.

Similarly, Aquitayne remains the largest market from which the AFN imports its products, namely agricultural products, raw natural goods, and steel. As an island nation, the AFN's declining natural resource base means that companies must turn to foreign suppliers to meet production requirements. Declining production in the AFN has meant that it imports 57% of its domestic needs from Aquitayne, as companies and buyers flock to lower prices from Aquitaynian sellers. The single common market of the United Kingdom means that the costs of importing from Aquitayne are much more palpable for domestic consumers.

The accession of the AFN to the International Organization For the Control Of the Monetary System (IOFCOM) caused concern with Aquitaynian investors and businesses, citing concerns that foreign supervision of the Imperial Koku, which is the traditional reserve strength of the United Kingdom Aero, would devalue the currency and negatively effect the balance of trade within the UK and with the region. With Symphonia's large trade deficit, there is some concern that IOFCOM would remove the ability of the UK and AFN governments to defend the Imperial Koku. In response, the Contruum Ministry stated that it would not adhere to IOFCOM demands should there be demands that the AFN reduce its production to meet IOFCOM standards.

United Kingdom institutions note that the Contruum Ministry may attempt to make the Imperial Koku one of the world reserve currencies through cooperation with other leading financial entities in global economy, notable recent allies with Reino do Brazil, Lolomz, Yohannes, and The Recon Empire.

[Empire of Symphonia]

The region of Astyria is home to some of the largest economies in the NationStates World. ViZion and Romberg are notable examples of major players in the World Market, as are Neu Engollon, the Dangish Empire, the Blackhelm Confederacy, and other nations. Undoubtably, the region of Astyria is among the more powerful of the Global Economics and Trade Regions.

The United Kingdom of Aquitayne and the Empire of Symphonia is the informal, unofficial representative entity of the AFN and Aquitaynian economies in the region, especially at the E10 Council of Nations. The Council, which represents some of the largest and dynamic economies in Astyria, has sought to try to improve economic cooperation between Astyrian states, though talks have yet to yield anything of note. As of now, almost all Symphonian trade is diversified and is conducted with nations in Astyria. Aside from Aquitayne, Symphonia's largest trade partners are ViZion, the Dangish Empire, the Blackhlem Confederacy, Romberg, Stretta, and Nikolia. The remainder of Symphonia's imports also come from within the region. A number of consumer services are provided from ViZionese companies, and a large portion of agricultural and natural resource imports come from the Blackhelm Confederacy, almost 23.7%.

The Metropolis of Symphony has sought closer cooperation with Astyrian companies, especially those from tertiary industries. ViZionarian, Aquitaynian, and some Neu Engollian companies. Foreign companies in the communications, entertainment, food, and hospitality industries have been invited to join the Symphony Free Trade Zone that will soon come into effect. Almost all are exclusively Astyrian companies, though MetroCorp has announced that foreign applicants will be welcomed soon.

[Empire of Symphonia]

The economy of the AFN is well on its well on its way to becoming one that is dominated by consumer spending. However, analysts are worried about decline in industrial and manufacturing power, following the current trend of the declines in the extractive and agricultural sectors. Approximately 50% of the total economy is dependent on consumer spending, and capital inflow continues to play a key role in the economy. The savings rate increased to 16.3% of total real GDP, from a low of 14.7%.

The economic climate remains stable, thanks in part to former Prime Minister Singh's economic reforms in tax law and sector regulation. Mr. Singh closed loopholes in individual and corporate tax law, however was also able to convince the AFN Congress to reduce overall tax rates in all sectors. Akira vi Contruum, the current prime minister, has maintained Mr. Singh's direction, and has sought to relax current regulations to help boost domestic producers.

Overall, the economy has returned into a period of moderate growth as the AFN Federal Reserve continues its policy of monetary expansion via quantitative easing. The immediate issue of inflation should not reach critical levels until the inflation index returns to approximately 2%, at which it is currently around 0.975%. AFN analysts forecast a growth in inflation by the third quarter as the economy picks up in growth. The Contruum Ministry has stated that it may increase tax rates or seek to end quantitative easing in order to counteract the effects of inflation.

The trade deficit is currently at I$10.491 trillion (NSD$ 6.164 trillion), thanks in part to large energy and agriculture imports, along with growing steel and metal imports. .