IMF lowers forecast, warns of recovery challenges


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“Multiple challenges” stand in the way of global economic recovery, according to the IMF, which warned of weaker growth and higher inflation in an update to its report. World Economic Outlook.

The fund lowered its forecast for gross domestic product growth, which it said would slow from 5.9% in 2021 to 4.4% this year, before weakening further in 2023 to just 3.8. %. And this without the potentially harmful effects of geopolitical crises such as the situation in Ukraine.

But far more important than the IMF forecasts are the assumptions on which they are based, writes chief economic commentator Martin Wolf.

In addition to assuming that inflation will eventually decline, the fund also assumes that the pandemic will be brought under control globally by the end of this year, implying successful vaccination in most countries, and that existing vaccines will remain effective. Beyond these downside risks, the “normal” to which we can return is not the old one, he adds.

The link between managing the pandemic and reviving the economy, or as Martin puts it, the idea that “vaccines are as much economic policy as health policy”, is also the topic of Economists Exchange. from today, our series of conversations between FT commentators and leading economists on the recovery from the pandemic.

Economics editor Chris Giles notes that two years later, there is still no consensus on how to combine effective disease control with economic success. China’s zero Covid strategy, for example, stands in stark contrast to the approach of most advanced economies to maximize vaccination and then learn to live with the disease.

Cambridge University’s Flavio Toxvaerd tells Chris that simplistic ‘health versus wealth’ arguments and lack of rigorous cost-benefit analysis in public policy have led to missteps such as the Eat Out initiative to Help Out from the UK. Thinking like an economist might have simply been about sending a check to hard-hit hospitality businesses or insisting the program was take-out only, rather than encouraging people to mingle, he says.

Professor Toxvaerd uses the metaphor of a patient undergoing chemotherapy to hit back at those who focus on the damage caused by lockdowns.

“You can say chemotherapy has terrible side effects for a patient compared to a healthy individual, but that’s of course not the right comparison,” he argues. The comparison is, what would the patient go through in the absence of treatment? »

Recent news

For last minute updates, visit our live blog or listen to the news of the day in three minutes with our audio summary.

Need to know: the economy

the US Federal Reserve releases its latest monetary policy update today at 2 p.m. ET / 7 p.m. London time, followed by a press conference with Fed Chairman Jay Powell. The statement will be carefully scrutinized by investors who have seen stocks soar in recent days on expectations of an increasingly hawkish central bank stance. Check and our live blog for more details.

Latest for UK and Europe

Decline in government borrowing than expected means UK Chancellor Rishi Sunak has some leeway to help households suffering from the cost-of-living crisis, including by limiting increases in energy bills or even reversing the planned tax hike in April . Rise in inflation is also a major concern for companies in the country, which assess the share of their additional costs that can be passed on to customers.

Column chart of billions of pounds showing the impact of Covid-19 on public sector borrowing easing

German business confidence this month rose for the first time since last June as supply chain issues eased and businesses began to look to the future with more optimism. In Germany and elsewhere in the EU, it is also a good time to be a job seeker. buoyancy labor market With record unemployment and rising wages, employers are having to get creative with finding talent, including rolling out eye-catching initiatives like cash bonuses just for showing up for an interview.

Line chart of EU companies declaring labor as a factor limiting production (%) showing that labor shortages have reached record levels

Latest World

our latest great read examines the US administration’s failures to control the spread of the Omicron variant, which exposed the continuing dysfunction of the nation’s public health institutions. Omicron fears, as well as concerns about inflation, are also weighing on consumer confidence.

That of the WHO Covax program to ensure poorer countries get their share of vaccines is unable to accept new vaccine donations because it has run out of money to buy essential supplies such as syringes. About 86 countries continue to have vaccination coverage rates below 40%.

Asian Americans, the fastest growing minority in the United States, has been disproportionately affected by the pandemic, writes Patti Waldmeir in Chicago. Up to 30% live in intergenerational households and often work in front-line positions in health care, restaurants and grocery stores.

Need to know: business

“We are really on the verge, from a behavioral point of view, of going from a pandemic to an endemic,” said Jeff Campbell, chief financial officer of Amex, as the company released its first long-term revenue forecast since Covid-19 hit. The card company said revenue would grow 18-20% this year, through the mid-teens in 2023, and 10% annually from 2024.

“Government fraud is rampant. Public estimates are just under £30 billion a year. There is a total lack of focus on the cost to society, or even to the taxpayer. » Theodore Agnew writing for the FT on why he quit his ministerial post on Covid loans. British banks fended off criticism.

Shares in an industrial giant GE fell after the company blamed shortages of semiconductors and other parts for lower fourth-quarter revenue. A report from the US Commerce Department said increased demand for chips meant companies had an average of just five days of supply.

Microsoft gave an optimistic outlook for the current quarter, driven by continued demand for its cloud services, which saw a 32% increase in revenue in the final quarter of last year and a 37% increase in new bookings. Earnings per share rose 22% more than expected to $2.48.

low cost carrier Wizz Air said the Omicron variant was causing losses, but expected passenger demand to rebound later this year. The London-listed airline announced an operating loss of 213.6 million euros for the last quarter of 2021.

“Normally at the end of January there’s a bit of a ‘Wahey, thank goodness we’re getting paid’,” says a Briton pub manager of its clientele. This weekend, however, could be a bit more lucrative than usual for drinkers across the country: it’s the first in a long time without any Covid restrictions. . .

The world of work

Is it time to end work from home? For her latest Working It podcast, Isabel Berwick talks to Camilla Cavendish and Pilita Clark – who have both written articles on hybrid working that have gone viral – and leads them to respond to reader comments. Enjoy listening and let us know what you think!

At least one company is betting big on returning to the office in the long term. City is spending £100m on a three-year project to revamp its iconic Canary Wharf tower in London.

Covid cases and vaccinations

Total number of global cases: 355.0m

Get the latest global picture with our vaccine tracker

and finally

Are you tired of beach vacations? Browse our collection of great sporting adventures, from skiing through the Dolomites in a single day to a cross-Channel swim in the Caribbean and a safari marathon in Kenya.

© James Mollison

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