The global economy is still in the balance due to uncertainty and risky macro data.
The global economy is navigating troubled waters, even as soaring energy prices and recession appear to have been averted.
A careful observation of the latest global macroeconomic events that occurred in this week of April, which is drawing to a close, has highlighted 6 reasons why growth and development expectations are still clouded, from Europe to the USA to China.
Jerome Powell signaled that the Fed will wait longer to cut borrowing costs after a series of surprisingly high inflation data, reducing room for more accommodative policies around the world.
Global finance chiefs gathered in Washington for the spring meetings of the International Monetary Fund and World Bank, meanwhile, are assessing the strength of the U.S. economy as high interest rates and a strong dollar constrain other currencies to fall and complicate plans to reduce borrowing costs.
Meanwhile, escalating conflict in the Middle East is raising concerns about a broader regional war that could push oil prices above $100 a barrel.
In this framework, an uncertain picture is made up of at least 6 risks coming from all the major powers.
1. Fragmented World
The high tide for global interest rates has passed, but respite for the world economy may be limited as policymakers remain wary of the threat of inflation. Powell’s latest twist creates a dilemma for central bankers around the world.
The IMF has raised its expectations for global economic growth this year, citing strength in the United States and some emerging markets, while warning that the outlook remains cautious amid persistent inflation and geopolitical risks.
The increasingly promising economic story of 2024 so far is one of a world headed for a soft landing. Unfortunately, that same world is becoming even more dangerous, divided, indebted, and unequal.
2. USA destabilizes the world
US retail sales rose more than expected in March and the previous month was revised higher, demonstrating resilient consumer demand that continues to fuel a surprisingly strong economy.
While President Joe Biden this week lauded the booming U.S. economy as the most robust in the world during a reelection campaign tour of Pennsylvania, global finance chiefs gathered in Washington had a different message: The U.S. must “calm down".
While the world’s largest economy is helping to support global growth, it also means the U.S. is “slightly overheated”, said the IMF’s Kristalina Georgieva, partly thanks to its fiscal stance. Washington, with the budget gap pushing towards 7% of GDP. US debt risks being unsustainable, while a strengthening dollar is sending other currencies into crisis, especially in Asia.
3. Europe and the issues to be resolved
European Commission President Ursula von der Leyen is unleashing a barrage of trade restrictions against China in a bid to deliver on her pledge to make the EU a more relevant political player on the global stage. It is in the clean technology sector that the Union is fighting most fervently to avoid competition from cheap Chinese imports of everything from electric vehicles to solar panels.
UK inflation meanwhile slowed less than expected last month as fuel prices rose, prompting traders to further unwind bets on how many interest rate cuts the Bank of England will make this month. year.
4. The recovery in China
China reported faster-than-expected economic growth in the first quarter, along with some numbers that suggest things will get tougher in the rest of the year.
GDP rose 5.3%, accelerating slightly compared to the previous quarter and beating estimates. But much of the rebound occurred in the first two months of the year. In March, retail sales growth collapsed and industrial production fell short of forecasts, suggesting challenges ahead.
5. Middle East
Israel reportedly responded to Iran on Friday morning, after days of frantic diplomacy by the United States and European nations in which they tried to convince Israeli Prime Minister Benjamin Netanyahu not to respond too aggressively, if at all. everything, to the Iranian attack.
Their main concern is to avoid a wider war in a region already racked by the Israel-Hamas conflict which could push oil prices above $100 a barrel.
However, the scenarios all remain open and possible, with energy prices currently under observation, but not with certainty. Furthermore, Tehran’s control of the Strait of Hormuz, a passage of goods, makes the dispute even more dangerous for the global economy, trade relations, and the costs of raw materials.
6. India and agricultural prices
India expects an above-normal monsoon this year, fueling optimism that heavy rains will boost agricultural production and economic growth, as well as prompting the government to ease curbs on exports of wheat, rice, and sugar.
The forecast of a normal monsoon season bodes well for easing food costs and ultimately consumer price inflation, said Anubhuti Sahay, head of economic research for Asia Southern at Standard Chartered Plc.
Original article published on Money.it Italy 2024-04-20 13:18:05. Original title: Tutti i rischi per l’economia globale in 6 punti
