Sluggish investment; rising commodity prices cause ‘volatility trap’: Goldman Sachs

IMF Chief Calls Inflation ‘Current Danger’ for World; economic growth is expected to slow — Macro Snapshot

RIYADH: The International Monetary Fund and the World Bank predicted slow growth in the global economy and the MENA region.

The war in Ukraine is pushing the International Monetary Fund to cut its global growth estimates for 2022 and 2023 as rising food and energy prices put pressure on fragile economies, IMF Managing Director Kristalina said Thursday. Georgiava.

Georgieva said in a “curtain-raiser” speech for the IMF and World Bank spring meetings next week that the fund would cut its growth outlook for 143 economies representing 86% of global economic output, but said that most countries would maintain positive growth.

Georgieva, who previously warned that war would dampen growth this year, said Russia’s invasion of Ukraine was “sending shockwaves around the world” and inflicting a massive setback on countries struggling to stand up. recover from the still raging COVID-19 pandemic.

She called high inflation a “clear and present danger” to the global economy.

Growth in the MENA region will be “uneven and insufficient”

Economic growth in the Middle East and North Africa (MENA) is expected to be “uneven and insufficient” this year, with oil exporters benefiting from soaring prices while rising food prices hit the entire region, it said. announced Thursday the World Bank.

The war in Ukraine is also disrupting supplies and fueling already high inflation, he added.

The region’s GDP is expected to expand by 5.2% this year after an estimated 3.3% expansion last year and a 3.1% contraction in 2020, the World Bank said in a report, noting that its own forecasts and those of others had been overly optimistic over the past decade. .

Gasoline boosts US retail sales

U.S. retail sales rose in March, mainly boosted by higher gasoline and food prices, but consumers are showing signs of reduced discretionary spending amid high inflation.

Retail sales rose 0.5% last month, the Commerce Department said Thursday. Data for February has been revised up to show sales rose 0.8% instead of 0.3% as previously reported.

Economists polled by Reuters had forecast retail sales to rise 0.6%, with estimates ranging from a 0.3% decline to a 2.2% rise.

Although soaring prices reduce consumers’ purchasing power, rising wages help cushion some of the blow from high inflation.

The unemployment rate is at its lowest level in two years of 3.6% and there were nearly a record 11.3 million job openings at the end of February, which according to economists, has made it easier for some cash-strapped Americans to take a second job or another. changes.

Better job security also allows some consumers to take on more debt. Another buffer against inflation also comes from the massive savings accumulated during the pandemic.

ECB sticks to its tightening plans

The European Central Bank on Thursday stuck to its intention to permanently end its stimulus program in the third quarter but gave no further clues about its timing, underscoring uncertainties related to the war in Ukraine.

The noncommittal tone of his statement pushed eurozone bond yields and the single currency lower as markets reduced expectations for the scale of rate hikes later this year.

“We will maintain the optional character, the gradual character and the flexibility in the conduct of our monetary policy,” ECB President Christine Lagarde told an online press conference, speaking from her home where she is recovering from coronavirus infection.

The Turkish Lira Holds Losses

The Turkish lira was unmoved on Thursday by the central bank’s decision to keep its benchmark rate at 14%, while the Russian ruble slipped ahead of the planned easing of capital controls next week.

The lira fell 0.2% to 14.61 to the dollar after the central bank’s widely expected decision, which came just as annual inflation was expected to top the current 61%.

Rising price pressures have been driven by rising energy costs and supply shocks, but inflation should start to subside due to central bank actions, he said. declared.

Ukrainian economy

Ukraine’s central bank said on Thursday the economy could contract by at least a third in 2022 and inflation could top 20%, reflecting the impact of the Russian invasion.

In a statement, the central bank said it would postpone a decision on its key interest rate for the second time since the war began on Feb. 24.

He added that maintaining a fixed exchange rate remained important for now but would revert to a floating rate as soon as the forex market could balance out.

Nepal will miss its growth target

Nepal will miss its growth target, a senior government official said on Thursday, pointing to the troubled state of an economy struggling with a pandemic-induced loss of tourism, a growing trade deficit and soaring prices. raw material.

This month, the Himalayan nation of 29 million people imposed restrictions on imports of luxury goods in a bid to rein in the outflow of its dwindling foreign exchange reserves and suspended its central bank governor, stoking concerns about a possible economic crisis.

Nepal’s gross domestic product growth target of 7% for the fiscal year to mid-July will not be met and growth could be “limited to just 4%”, a senior government official told Reuters. government with direct knowledge of the matter.

The official was not authorized to speak to the media and declined to be identified.

Chinese GDP Growth

China’s economic growth is expected to slow to 5.0% in 2022 amid fresh COVID-19 outbreaks and a weakening global recovery, a Reuters poll showed, increasing pressure on the central bank to quit. to relax its policy further.

Forecast growth for 2022 would be lower than the 5.2% forecast by analysts in a Reuters poll in January, suggesting the government faces an uphill battle to meet this year’s target of around 5.5%. Growth is then expected to accelerate to 5.2% in 2023.

GDP likely rose 4.4% in the first quarter from a year earlier, according to median forecasts from 41 economists polled by Reuters, topping 4.0% in the fourth quarter on a strong start during of the first two months.

South Korea steps up fight against inflation

South Korea’s central bank on Thursday raised its benchmark rate to the highest since August 2019 in a surprise move as it intensified the fight against runaway inflation, which threatens its economic recovery.

In its first-ever governorless rate review, the bank’s monetary policy council voted to raise interest rates by a quarter of a percentage point to 1.5%, a result less than half of economists had predicted in a Reuters poll.

Joo Sang-yong, acting chairman of the six-member board, said the bank could not wait for the official appointment of a new governor to continue its efforts to slow inflation and warned that growth prices could rise above 4% for some time, up from its February forecast of 3.1 percent.

Singapore tightens its policy

Singapore’s central bank tightened monetary policy on Thursday, saying the widely expected move will dampen inflation momentum as the city-state steps up its fight against soaring prices aggravated by war in Ukraine and economic woes. global supplies.

The policy tightening, the third in the last six months, came as separate data showed Singapore’s economic momentum waning in the first quarter.

“The door is definitely not closed yet,” said Selena Ling, head of research and treasury strategy at OCBC, referring to another potential tightening in October.

Australian unemployment

Australia’s unemployment rate held at a 13-year low in March as job growth slowed after months of strong gains, although record vacancies suggest it is just a question of time before unemployment falls further.

Figures from the Australian Bureau of Statistics showed an unemployment rate of 4.0% on Thursday, as analysts expected a drop to 3.9% and the lowest figure since 1974.

It will be a disappointment for Prime Minister Scott Morrison who had hoped a number below 4 would boost his economic credentials amid a tight election campaign.

It could also ease pressure on the Reserve Bank of Australia to raise interest rates next month, although markets are still betting that the first hike in a decade will come in June.

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