World economy’s “tricky” phase
Many of the economic developments that shaped global policymakers’ discussions when they last gathered in the U.S. capitol have started to fade, though they have not disappeared entirely.
Zoom out: Supply chain disruptions have further eased, and commodity prices that surged in the wake of Russia’s invasion of Ukraine have since fallen back.
- But other stressors have emerged, including new strains in the financial systemalongside lingering price pressures that are proving more difficult to beat back.
Why it matters: This is the backdrop for this year’s IMF/World Bank spring meetings, in full force today, with a flurry of press briefings and bilateral gatherings.
- Side effectsof aggressive interest rate increases in recent months may be starting to take hold, with the banking system wobbling and global growth expected to stall.
- But inflation — the primary objective central bankers set out to defeat — is still far too high all around the world.
What they’re saying: The result is a “tricky” phase for the world economy, the IMF’s Pierre-Olivier Gourinchas said at a press conference.
- In the fund’s latest updateto its World Economic Outlook, officials say that “major forces that shaped the world economy in 2022 seem set to continue into this year, but with changed intensities.”
- “Despite the fillips from lower food and energy prices and improved supply-chain functioning, risks are firmly to the downside with the increased uncertainty from the recent financial sector turmoil.”
By the numbers: In new estimates, the IMF sees global growth falling from 3.4% in 2022 to 2.8% this year — a slight downgrade from last fall’s predictions.
- Speaking to reporters, Gourinchas said that recent banking stress appeared to be under control, thanks to policymakers’ interventions. If turmoil persisted, however, growth could drop more — to roughly 2.5% this year.
Adding to the bleak outlook, the group expects global inflation to be 7% this year and nearly 5% in 2024, both roughly 0.5 percentage points higher than estimated in January.
- The IMF noted that core inflation, which strips out food and energy costs, “had not yet peaked” in many nations — reflecting stubborn underlying price pressures.
The bottom line: The message from U.S. officials, including Treasury Secretary Janet Yellen, is expected to be sunnier than that of the World Bank and IMF, as our colleague Hans Nichols wrote ahead of the spring meetings kickoff.
Πηγή: axios.com
Plus
-Global Economic Recovery Endures but the Road Is Getting Rocky
The global economy’s gradual recovery from both the pandemic and Russia’s invasion of Ukraine remains on track. China’s reopened economy is rebounding strongly. Supply chain disruptions are unwinding, while dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronized tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back towards targets.
We forecast in our latest World Economic Outlook that growth will bottom out at 2.8 percent this year before rising modestly to 3 percent next year—0.1 percentage points below our January projections. Global inflation will fall, though more slowly than initially anticipated, from 8.7 percent last year to 7 percent this year and 4.9 percent in 2024.
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-Global Financial System Tested by Higher Inflation and Interest Rates
Banking oversight was significantly strengthened after the global financial crisis, in part by requirements for banks to hold more capital and liquid assets and be stress tested to help ensure resilience to adverse shocks.
Yet the global financial system is showing considerable strains as rising interest rates shake trust in some institutions. The failures of Silicon Valley Bank and Signature Bank in the United States—caused by the fleeing of uninsured depositors out of the realization that high interest rates have led to large losses in these banks’ securities portfolios—and the government supported acquisition of Switzerland’s Credit Suisse by rival UBS have rocked market confidence and triggered significant emergency responses by authorities.
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