Economic growth goes south
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Developing countries in the Middle East and North Africa will be the fastest growing developing countries this year, helped by rising energy prices. In other regions, following the developed countries, growth rates will also slow down in emerging economies – in China, GDP growth this year, according to the Focus Economics consensus forecast, may be only 4.1%, while in Eastern Europe the figure will decrease by 1.6%, this estimate takes into account the forecast for the reduction of Russian GDP in 2022 by 8.1%.
Rising oil prices will allow the Middle East and North Africa (MENA) to become the fastest growing region this year, ahead of Asian countries. The GDP growth rate here will amount to 5.3%, follows from the Focus Economics forecast for emerging markets. In second place will be Asian countries without Japan (4.5%), next year they will again outstrip the MENA region due to a slowdown in energy exporting countries. In sub-Saharan Africa, GDP growth this year will be 3.6%, but with population growth averaging 2.5% per year, per capita GDP in the region is growing slowly. Growth rates in Latin America also remain relatively low (2.5%, including in Brazil, the increase will be 1.5%), while in Eastern Europe this year there will be a decline in GDP by 1.6%, next year – return to weak growth, economists expect. The forecast for the region provides for the continuation of the conflict in Ukraine and the preservation of sanctions against the Russian Federation.
The lowest level of price growth this year will remain in Asian countries – 3.6% (next year – 3%), all other macro-regions will face double-digit inflation: in Latin America it will average 15.6% (next year is expected slowdown to 11.9%), in sub-Saharan Africa – 14.8% (11.8% in 2023), in the MENA region – 14.5% (9.5%), in Eastern Europe – 22, 2% (12.4%). Average Central Bank rates in Asian countries may rise by only 60 basis points (bp) this year, in other regions, except for Latin America, by more than 200 bp. p., in the countries of Latin America – by 700 b.p. P.
Among the key risks, Focus Economics highlights the entry into recession of the US and the euro area (business activity indicators indicate its decline in the third quarter), as well as slowdown in China against the backdrop of lower consumer activity and a decline in the real estate sector. Thus, the value of the Purchasing Managers’ Index (PMI), according to Caixin, in China in August amounted to 49.5 points against 50.4 points a month earlier (a value below 50 points indicates a reduction in business activity). The GDP target for this year is 5.5%, but the consensus forecast of analysts provides for growth of only 4.1% (next year – 5.1%).
Additional risks are associated with the conflict in Ukraine and relate to a possible reduction in food exports from the country and energy supplies from Russia to Europe (it is assumed that a truce may lead to an increase in supplies from Ukraine, but will not lead to the lifting of sanctions). In Russia, the consensus forecast of international analysts (minus 8.1% this year) is still significantly higher than official estimates of the decline (according to the Ministry of Economy’s forecast in August, it should be 4.2%). The most positive forecast for the Russian Federation in the consensus assessment provides for a reduction in GDP by 3.5%, the most negative – by 15%; GDP is expected to contract by 2.5% next year. Lower natural gas exports and oil sales at lower prices will further slow growth, but a strong ruble will support easing inflationary pressures in the second half of the year.
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