Can the world avoid a recession? Top economics stories to read this week

Morgan Stanley economists predict the Eurozone will enter a recession in the fourth quarter of 2022.

Morgan Stanley economists predict the Eurozone will enter a recession in the fourth quarter of 2022. Image: REUTERS/Dinuka Liyanawatte

Joe Myers
Writer, Forum Agenda
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  • This weekly wrapper brings you the latest stories from the world of economics and finance.
  • Top economics stories: France cuts growth outlook; World Bank Chief Economist "sceptical” on chances of avoiding recession; Sri Lanka halts fuel sales.

Economics stories from around the globe

The Bank of Japan will maintain its loose monetary policy, Governor Haruhiko Kuroda says, citing the smaller impact of global inflationary trends in the country.

It comes as Japanese retail sales rose for the third month in a row in May, climbing by 3.6% from the same month in 2021.

The Indian rupee fell to a record low of 78.97 against the US dollar on 29 June.

The International Monetary Fund (IMF) has concluded reviews for Ecuador's Extended Fund Facility, it said on 24 June, allowing for the immediate release of around $1 billion.

Inflation is set to hit close to 10% in Somalia, its central bank governor has said. Drought is driving the figure to its highest in more than a decade.

Hungary has increased its base interest rate by 185 basis points to 7.75% in a move designed to align its benchmark and one-week rates.

South Korea is facing consumer pessimism for the first time in over a year, with the composite consumer sentiment index dropping in May to 96.4 from 102.6. Anything below 100 indicates more pessimistic views than optimistic, reports Bloomberg.

Sri Lanka's economic crisis has pushed it to halt all fuel sales – except to those running essential services. “From midnight today, no fuel will be sold except for essential services like the health sector, because we want to conserve the little reserves we have,” government spokesperson Bandula Gunawardana said on 28 June, reported The Guardian.

Activity rose in China's services and factory sectors for the first time in three months in June, as a strict COVID-19 lockdown in Shanghai came to a close.

German inflation has dropped slightly, from 8.7% in May to 8.2% this month.

Viet Nam looks set to exceed its economic growth goal for 2022, with GDP rising by as much as 7% this year, reports Bloomberg.

Russia's economy shrank by 4.3% on the year in May, after falling by a revised 2.8% in April.

Have you read?

France cuts growth outlook

France has cut its growth outlook, with the finance ministry now expecting growth of 2.5% in 2022, down from a previous forecast of 4%. It blamed the Omicron COVID-19 wave at the start of the year and the war in Ukraine.

The central bank and official statistics agency INSEE both recently forecast 2.3% growth.

The finance ministry's expectations for the country's public-sector budget deficit remain unchanged, however, at 5% of GDP, despite extra spending on anti-inflation measures.

"We're at 5% even though the economic conditions have changed, in particular, because not only tax receipts but also social charges have been dynamic," a finance ministry official said, putting the extra income at roughly €50 billion ($52.2 billion).


Can the world avoid a recession? World Bank chief economist 'sceptical'

The World Bank's Chief Economist, Carmen Reinhart, has told Reuters that she's "sceptical" about whether a recession can be avoided in the US or globally, because of rising inflation, increasing interest rates and slowing growth in China.

“What worries everybody is that all the risks are stacked on the downside," Reinhart told Reuters, citing a series of adverse shocks and moves by the Federal Reserve to raise interest rates after a decade and a half of ultra-low and negative rates.

Asked if a recession could be avoided, she said: "I'm pretty sceptical. In the mid-1990s, under [Federal Reserve] Chairman [Alan] Greenspan, we had a soft landing, but the inflation concern at the time was around 3%, not around 8.5%. It’s not like you can point to a lot of episodes of significant Fed tightening that haven’t taken a toll on the economy.”

Earlier in June, the World Bank cut its global growth forecast to 2.9% for this year – a reduction of nearly a third.

And Morgan Stanley economists predict the Eurozone will enter a recession in the fourth quarter of 2022.

Some economics research to read this week

New research seeks to monitor food price inflation in Germany in real time. Here's what the team has found.

Rising prices and rising quantities food price inflation
Real-time food price inflation in Germany. Image: VoxEU: GfK household panel, own calculations.

Using data from Japan, economists have examined the impact of temporary contracts on female labour market outcomes.

New research re-examines historic inflation data, concluding that current inflation levels are much closer to past peaks than official data suggests.

What do 22 years of US earnings data tell us about employment and inequality? New research explores.

New IMF research examines capital markets regulation.

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Geo-economicsFinancial and Monetary Systems
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Revised figures for US Q4 growth, and other economic stories to read

Joe Myers

March 1, 2024

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