Geo-Economics and Politics

What you need to know about the global economy this week

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The Bank of England has moved to calm the UK's bond markets. Image: REUTERS/Maja Smiejkowska

Joe Myers
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  • This weekly round-up brings you the latest stories from the world of economics and finance.
  • Top economy stories: Chief economists say global recession increasingly likely; OECD forecast for global growth cut; Bank of England moves to calm UK bond market.

Economy stories from around the globe

Sentiment among German exporters has fallen to its lowest level since the early stages of the COVID-19 pandemic, according to the IFO economic institute.

A preliminary survey has also shown that the downturn in German business activity deepened in September.

South Korean consumers' inflation expectations have fallen for a second month in a row, according to a central bank survey. The drop was small, but it follows six months of rises.

Spanish GDP grew faster in the second quarter than originally estimated - compared to the previous quarter. The National Statistics Institute upgraded the quarterly growth figure to 1.5% from an original 1.1%.

The US current account deficit narrowed sharply in the second quarter amid a surge in goods exports, data showed on 22 September.

Japan's 20-year bond yields have hit their highest level since 2015 - rising above 1%.

Global economic growth is slowing more than was forecast a few months ago, according to the OECD.

The Bank of England (BoE) has moved to calm Britain's bond markets, saying it would buy as much government debt as necessary. It comes after the UK government announced plans last Friday for tax cuts, which caused a drop in the value of the pound and market turmoil. "Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability," the BoE warned.

Thailand's central bank has raised its key interest rate by 25 basis points, bringing it to 1%, in an effort to tame inflation, which has hit a 14-year high.

Consumer morale was down in the Eurozone's three largest economies - Germany, France and Italy - as high inflation shows no sign of relenting.

A forecast from the Swedish National Institute of Economic Research suggests that the country's economic growth will stall next year.

World Bank President David Malpass issued a warning on the global economy, cautioning that there may be a prolonged period of low growth and high inflation - so-called stagflation.

Have you read?

Global recession increasingly likely, say chief economists

The World Economic Forum's Community of Chief Economists expect reduced growth, persistently high inflation and a continued decline in real wages, according to the latest quarterly Chief Economists Outlook.

Seven out of 10 consider a global recession to be at least somewhat likely and prospects for the global economy have further deteriorated since the May 2022 edition of the outlook.

“Growing inequality between and within countries is the ongoing legacy of COVID, war and uncoordinated policy action. With inflation soaring and real wages falling, the global cost of living crisis is hitting the most vulnerable hardest. As policymakers aim to control inflation while minimizing the impact on growth, they will need to ensure specific support to those who need it most. The stakes could not be higher,” says Saadia Zahidi, Managing Director at the World Economic Forum.

Graphic showing economists' views on the cost of living crisis.
The latest economic outlook presents a grim picture for the global economy. Image: World Economic Forum

World Bank cuts 2022 East Asia growth outlook

The World Bank has said that economic growth in East Asia and the Pacific will weaken sharply this year as a result of China's slowdown. However, the pace of growth will pick up next year, the bank forecasts.

The Washington-based lender said in a report it expected 2022 growth in the East Asia and Pacific region, which includes China, to slow to 3.2%, down from its 5.0% forecast in April, and the previous year's growth of 7.2%.

The weaker forecast was due mainly to a sharp slowdown in China, caused by its strict zero-COVID rules that have disrupted industrial production, domestic sales and exports, the World Bank said.

China, which constitutes 86% of the 23-country region's economic output, was projected to grow 2.8% this year, a significant deceleration from the bank's previous forecast of 5.0%. In 2021, China's economy expanded 8.1%, its best growth in a decade.

"As they prepare for slowing global growth, countries should address domestic policy distortions that are an impediment to longer-term development," said World Bank East Asia and Pacific Vice President, Manuela Ferro, in a statement.


Economics research to read this week

A VoxEU column looks at the economics of consumer subsidies for natural gas - and what it means in light of the Russian invasion of Ukraine.

Research explores the link between food crises and forced migration.

FAO Food Price Index in real terms
FAO Food Price Index in real terms. Image: VoxEU/FAO

A new IMF blog explores economic growth in sub-Saharan Africa and the impact it's had on inequality.

Graphic of regional inequality in sub-Saharan Africa
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The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Geo-Economics and PoliticsFinancial and Monetary SystemsEconomic Growth
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