The IMF gave the gloomiest economic forecast
[ad_1]
“Problems are generated by the West itself”
Today, the outlook for the global economy looks bleaker than a month ago, the IMF report says. According to one of its authors, an economist at the Tryggvi Gudmundsson Foundation, this is indicated by the decline in the index of business activity in the G20 countries in recent months. The state of the global economy is negatively affected by three main factors: high inflation in the West, weak growth in China, and finally, the consequences of the geopolitical crisis around Ukraine and anti-Russian sanctions.
This is the second time in the past month that the IMF has named these three underlying risks. In October they were mentioned by the Fund’s chief economist, Pierre-Olivier Gurinsha. It is noteworthy that this organization is not distinguished by an alarmist attitude, and usually does not give sharp forecasts. This time, its representatives spoke extremely frankly. The motive is clear: according to the charts on the IMF website, in October the level of business activity decreased in all developed countries except Japan and the United States (among emerging economies – in Russia, Turkey, South Africa and China). According to Bloomberg, citing the IMF’s October report, global inflation will peak in 2022 and then slow to 4.1% by 2024.
But for us, in this context, the Russian theme is important, more precisely, the risks associated with it for the global economy. In the past, due to the small share of the Russian Federation in world GDP, this was not relevant, now the situation has changed radically. After all, the same raw material crisis in the EU, as Pierre-Olivier Gurinsha notes, was largely the result of “wide and irreversible changes in the geopolitical structure of energy supplies after the outbreak of hostilities in Ukraine.”
If we talk about Europe, its problems were exacerbated not today, but as a result of the 2020 pandemic and the then immoderate injection of liquidity into the economy, which turned into high inflation. Already in the summer of 2021, Europeans are faced with a price increase of 5% instead of the usual 1.5-2% per year. Large-scale (more than 10,000) anti-Russian sanctions and the break in the raw materials partnership with Moscow have given the situation a new degree of intensity. The burden on business has grown, the profitability of enterprises has collapsed, more than 250 thousand of them have closed since the beginning of the year in the UK, more than 50 thousand in Germany, and about 30 thousand in France.
“The West has created problems for itself in national economies,” says Georgy Svirin, specialist in international financial markets at the Finmir marketplace. – During the pandemic, regulators did not turn off the printing press in time, not taking into account the threat of inflation. As a result, GDP indicators improved, but prices also crept up. And at the beginning of 2022, as a result of the events around Ukraine, logistical ties were again disrupted, as they had been two years earlier. Due to the sanctions, the export supplies of Russian energy resources and food to Western countries were in a suspended state, and subsequently completely reduced to zero.
Konstantin Ordov, head of the Department of Financial Markets at the Plekhanov Russian University of Economics, disagrees with this point of view, believing that the current geopolitical conflict affects the world economy to a minimal extent. The combined GDP of Russia and Ukraine barely exceeds 2% of global GDP, he recalls. However, the West is not unreasonably concerned about two circumstances related to current events – a sharp rise in prices and interruptions in the supply of agricultural products (in particular, grain) and increased risks for Europe’s energy security.
“However, the problems that could trigger a global economic collapse at any moment did not arise today and, of course, were not generated by Russia,” says Ordov. – Since the recession of 2008-2009, the debt load of countries, companies and individuals in the world has only increased, more and more speculative financial instruments, such as derivatives, have appeared, and market uncertainty has increased. In a short period, in 2019-2020, a huge mass of unsecured foreign exchange liquidity was thrown into the markets, the US Federal Reserve alone printed $3 trillion in 2019, in addition to the $4 trillion it already has. Thus, ideal conditions were created for the unbridled growth of inflation, which has already broken records thirty years ago. Against this background, the Russian-Ukrainian factor does not look so significant.”
Returning to the theme of the regular reports of the International Monetary Fund, we note that historically there has been a skeptical attitude towards them in the expert community. According to the British edition of The Economist, high inflation caught many Western countries by surprise, as the IMF and the US Federal Reserve gave erroneous forecasts for price increases, significantly underestimating them.
Newspaper headline:
Will Moscow lead to a crisis?
[ad_2]
Source link
