IMF Cuts Global Growth Forecast Amid Supply Chain Disruptions, Pandemic Pressures

The IMF, a grouping made up of 190 member states, promotes international financial stability and monetary cooperation. It also acts as a lender of last resort for countries in financial crisis.

In the IMF’s latest World Economic Outlook report released on Tuesday, the group’s economists say the most important policy priority is to vaccinate sufficient numbers of people in every country to prevent dangerous mutations of the virus. He stressed the importance of meeting major economies’ pledges to provide vaccines and financial support for international vaccination efforts before new versions derail. “Policy choices have become more difficult … with limited scope,” IMF economists said in the report.

The IMF in its July report cut its global growth forecast for 2021 from 6% to 5.9%, a result of a reduction in its projection for advanced economies from 5.6% to 5.2%. The shortage mostly reflects problems with the global supply chain that causes a mismatch between supply and demand.

For emerging markets and developing economies, the outlook improved. Growth in these economies is pegged at 6.4% for 2021, higher than the 6.3% estimate in July. The strong performance of some commodity-exporting countries accelerated amid rising energy prices.

The group maintained its view that the global growth rate would be 4.9% in 2022.

In key economics, the growth outlook for the US was lowered by 0.1 percentage point to 6% this year, while the forecast for China was also cut by 0.1 percentage point to 8%. Several other major economies saw their outlook cut, including Germany, whose economy is now projected to grow 3.1% this year, down 0.5 percent from its July forecast. Japan’s outlook was down 0.4 per cent to 2.4%.

While the IMF believes that inflation will return to pre-pandemic levels by the middle of 2022, it also warns that the negative effects of inflation could be exacerbated if the pandemic-related supply-chain disruptions become more damaging and prolonged. become permanent over time. This may result in earlier tightening of monetary policy by central banks, leading to recovery back.

The IMF says that supply constraints, combined with stimulus-based consumer appetite for goods, have caused a sharp rise in consumer prices in the US, Germany and many other countries.

Food-price hikes have placed a particularly severe burden on households in poor countries. The IMF’s Food and Beverage Price Index rose 11.1% between February and August, with meat and coffee prices rising 30% and 29%, respectively.

The IMF now expects consumer-price inflation in advanced economies to reach 2.8% in 2021 and 2.3% in 2022, up from 2.4% and 2.1%, respectively, in its July report. Inflationary pressures are even greater in emerging and developing economies, with consumer prices rising 5.5% this year and 4.9% the following year.

Gita Gopinath, economic advisor and research director at the IMF, wrote, “While monetary policy can generally see through a temporary increase in inflation, central banks should be prepared to act swiftly if the risks to rising inflation expectations are high. become more important in this unchanged recovery.” Report.

While rising commodity prices have fueled some emerging and developing economies, many of the world’s poorest countries have been left behind, as they struggle to gain access to the vaccines needed to open their economies. More than 95% of people in low-income countries have not been vaccinated, in contrast to immunization rates of about 60% in wealthy countries.

IMF economists urged major economies to provide adequate liquidity and debt relief for poor countries with limited policy resources. “The alarming divergence in economic prospects remains a major concern across the country,” said Ms. Gopinath.

By: Yuka Hayashi

Yuka Hayashi covers trade and international economy from The Wall Street Journal’s Washington bureau. Previously, she wrote about financial regulation and elder protection. Before her move to Washington in 2015, she was a Journal correspondent in Japan covering regional security, economy and culture. She has also worked for Dow Jones Newswires and Reuters in New York and Tokyo. Follow her on Twitter @tokyowoods

Source: IMF Cuts Global Growth Forecast Amid Supply-Chain Disruptions, Pandemic Pressures – WSJ

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Natural Gas Market Soars To Record Heights

European and UK gas prices surged Wednesday to record peaks, energised by fears of runaway demand in the upcoming northern hemisphere winter. Europe’s reference Dutch TTF gas price hit 162.12 euros per megawatt hour and UK prices leapt to 407.82 pence per therm in morning deals.

However, prices later erased gains to flatline in early afternoon trade. “It’s panic and fear with winter just around the corner,” Commerzbank analyst Carsten Fritsch told AFP.

Soaring gas prices — coupled with oil which has struck multi-year highs — have fuelled fears over spiking inflation and rocketing domestic energy bills. Gas demand is also heightened in Asia, particularly from China, while key Russian exports are falling.

However, Russian President Vladimir Putin declared Wednesday that Europe was to blame for the current energy crisis, after soaring gas prices spurred accusations that Moscow is withholding supplies to pressure the West.

“They’ve made mistakes,” Putin said in a televised meeting with Russian energy officials. He said that one of the factors influencing the prices was the termination of “long-term contracts” in favour of the spot market.

Some critics have accused Moscow of intentionally limiting gas supplies to Europe in an effort to hasten the launch of Nord Stream 2, a controversial pipeline connecting Russia with Germany.

At the same time, global gas stockpiles remain worryingly low.

“Natural gas prices have climbed to new peaks … as insufficient levels of inventories ahead of the winter season drive concerns for a spike in inflation and energy prices for consumers,” XTB analyst Walid Koudmani told AFP.

“These supply constraints could translate into higher costs of fuel moving into the winter months, a prospect which could further slow down economic recovery and worsen moods across markets.”

Europe’s energy crisis has also been exacerbated by a lack of wind for turbine sites, coupled with ongoing nuclear outages — and the winding down of coal mines by climate-conscious governments.

Gas demand has also galloped higher in recent months as economies reopened worldwide from their Covid-induced slumber. “The rebound in industrial activity across the world following months of Covid-related restrictions and widespread remote working … boosted demand for natural gas,” noted UniCredit economist Edoardo Campanella.

European gas futures have now multiplied by eight since April. And the market is set to shoot even higher, according to French bank Societe Generale. “Never before have power prices risen so far, so fast,” wrote Societe Generale analysts in a client note.

Shows evolution of the price of natural gas in Europe this past year to September 28 on the Dutch TTF Gas market Shows evolution of the price of natural gas in Europe this past year to September 28 on the Dutch TTF Gas market Photo: AFP / Patricio ARANA

“And we are only a few days into autumn — temperatures are still mild. “A cold winter could cause severe problems for Europe’s energy markets, where politicians are already trying to contain the fallout.”

European leaders are divided on how to respond to the record rise in energy prices, with France and Spain calling Wednesday for bold EU-wide action, while others urged patience. The European Commission — which is the European Union’s executive arm — will next week propose measures to mitigate the price surge for consumers.

Those suggestions will then be discussed by the bloc’s leaders at a summit in Brussels on October 21-22. Britain is particularly exposed to Europe’s energy crisis because of its reliance on natural gas to generate electricity.

By Roland Jackson

Source: Natural Gas Market Soars To Record Heights

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