- This weekly roundup brings you the latest stories from the world of business and finance.
- Top Business Stories: IMF says medium-term growth outlook is weakest in 30 years; US inflation slows to lowest in almost two years; Wages in Japan are not keeping pace with rising prices.
1. IMF warns of the best medium-term growth prospects in 30 years
The global economy is heading for its weakest medium-term growth in more than 30 years as the world grapples with geopolitical fragmentation, slower labor force growth and weaker prospects for previously fast-growing economies like China, the International Monetary Fund (IMF) has warned. in his latest World Economic Outlook.
It expects global growth of around 3% in 2028 – the lowest medium-term forecast in an IMF report since 1990.
“The global economy is currently unlikely to return to the growth rates that prevailed before the pandemic in the medium term,” said the IMF.
The IMF has cut its global growth outlook for 2023.
Image: IMF.
Rising geopolitical tensions over issues such as the war in Ukraine and Brexit are fragmenting the global economy, which could increase risks to financial stability, the report adds. This could affect cross-border investment, asset prices, payment systems and banks’ ability to lend.
The IMF has long warned of rising costs, economic friction and GDP output losses linked to the fragmentation of the global economy into geopolitical blocs.
The agency also slightly lowered its global growth outlook for 2023 as higher interest rates cool economic activity. It now forecasts global real GDP growth of 2.8% in 2023 and 3.0% in 2024, implying a slowdown from 3.4% growth in 2022.
Here’s our roundup of three key charts from the IMF’s World Economic Outlook.
2. US inflation slows to the lowest in almost two years, unemployment claims rise
US inflation fell to its lowest level in almost two years last month, but stubbornly high rents have kept underlying inflationary pressures simmering, likely prompting the Federal Reserve to hike interest rates again next month.
Prices rose 5% in the 12 months to March, compared to 6% in February, according to data released by the Bureau of Labor Statistics. That’s the ninth straight monthly decline in annual inflation, taking it to its lowest level since May 2021, though it’s still more than double the Fed’s inflation target of 2%.
US annual inflation fell for the ninth straight month.
Image: US Bureau of Labor Statistics.
“The bottom line is that inflation remains too hot for the Fed’s liking,” Sarah House, senior economist at Wells Fargo, told Reuters. “Nevertheless, there are forward-looking signs that inflation will continue to slow in the coming months.”
In an indication that higher borrowing costs are already slowing demand in the economy, the number of Americans filing new jobless claims rose more-than-expected last week.
Initial claims for state unemployment benefits rose by 11,000 to a seasonally adjusted 239,000 in the week ended April 8. Economists polled by Reuters had forecast 232,000 applications this week.
3. News in brief: business stories from around the world
Wages in Japan have failed to keep pace with rising prices, falling an inflation-adjusted 2.6% year on year in February, according to government data. This is the 11th straight decline and puts pressure on the new central bank governor to end Japan’s ultra-loose monetary policy with inflation at 3.1%. But new deputy governor Shinichi Uchida says the Bank of Japan will continue monetary easing to meet its 2% inflation target.
Ukraine’s GDP fell by 29.1% in 2022 as Russia’s massive invasion hit the economy. The figure is slightly better than the 30% drop the government had forecast. Russia’s war against Ukraine has damaged heavy industry, the electricity grid and agriculture, and has resulted in the loss of large tracts of land in the south and east.
Faster economic growth in Asia this year will be driven by China’s recovery from the pandemic and strong demand in India, according to the Asian Development Bank (ADB). The region’s economy will grow by 4.8% this year and next, according to the latest ADB forecasts, up from 4.2% in 2022.
The European Commission is drafting new plans to better protect taxpayers from bank failures, the Financial Times reports. The bill outlines rules that make it easier to move depositors’ money from struggling banks to healthy institutions or to close a bank without investing taxpayers’ money.
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The UK economy stagnated in February as strikes by public sector workers affected output, but a rebound in January was stronger than initially thought and reduced the risk of a recession in the first quarter. Economic output was unchanged in February from the previous month, but the Office for National Statistics revised upwards its estimate for January growth to 0.4% from 0.3%.
According to Moody’s Investors Services, a number of sub-Saharan African countries are facing another debt-repayment crisis due to rising food prices. Several countries will have to pay off record levels of debt from this year to 2025. The United Nations estimates that more than a quarter billion people are starving on the continent.
4. More on finance and business on the agenda
Discussions and action plans at the spring meetings of the IMF and World Bank focused on a single goal – financing an energy transition that is equitable for emerging economies and fast enough to meet the goals of the Paris Agreement. By 2030, investments of $4 trillion to $6 trillion annually will be required to achieve these two goals, but we’re only in the hundreds of billions right now.
Many European countries are creating favorable framework conditions for fast-growing technology companies through investment plans and support programs. This blog explores how the right mix of regulatory, tax, education and funding policies can fuel economic growth.
The global economy is entering a period of persistently higher inflation, fueled by four underlying forces, according to an economics lecturer. These forces are deglobalization, climate change, a wage-price spiral and highly liquid global markets.
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