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Fed looms over broader markets, dollar rises
Oil tumbles on demand concerns, U.S. rail strike averted
Treasury yields climb while oil gold tumbles
NEW YORK, Sept 15 (Reuters) – Wall Street indexes were firmly in the red after a choppy start to Thursday’s session while bond yields rose as investors digested economic data that provided the Federal Reserve little reason to ease its aggressive interest rate hiking cycle.
Oil futures tumbled more than 3% on demand concerns and after a tentative agreement that would avert a U.S. rail strike, as well as continued U.S. dollar strength with expectations for a large U.S. rate increase. read more
Economic data showed U.S. retail sales unexpectedly rebounded in August as Americans ramped up purchases of motor vehicles and dined out more while taking advantage of lower gasoline prices. But data for July was revised downward to show retail sales declining instead of flat as previously reported.
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Separately the Labor Department said initial claims for state unemployment benefits fell for the week ended Sept. 10 to the lowest level since the end of May. read more
Investors are widely expecting an aggressive rate hike after the Federal Open Market Committee (FOMC) meeting next week, but nervously awaiting hints from Fed Chair Jerome Powell about future policy moves, said Quincy Krosby, chief global strategist at LPL Financial.
“The market remains choppy knowing that there’s a Fed meeting next week. Even though participants agree that it’ll be a 75 basis points rate hike, it’s what the statement adds to previous commentary and what Chairman Powell says in his press conference” that have them worried, Krosby said.
The Dow Jones Industrial Average (.DJI) fell 173.07 points, or 0.56%, to 30,962.02; the S&P 500 (.SPX) lost 44.69 points, or 1.13%, to 3,901.32 and the Nasdaq Composite (.IXIC) dropped 167.32 points, or 1.43%, to 11,552.36.
MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.96% while emerging market stocks (.MSCIEF) lost 0.57%.
Stocks, bonds and currencies on Thursday were showing a market “increasingly understanding the Fed is going to hike more aggressively next week,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.
Referring particularly to the still strong labor market, Ladner said “economic numbers released today are tying a bow on the situation.”
Treasury yields rose with the two-year hitting fresh 15-year highs, after data on retail sales and jobless claims showed a resilient economy that gives the Fed ample room to aggressively hike interest rates.
Also already signaling a recession warning the inverted yield curve – the gap between 2-year and 10-year treasury yields – widened further to -41.4 basis points, compared with -13.0 bps a week ago.
Benchmark 10-year notes were up 4.5 basis points to 3.457%, from 3.412% late on Wednesday. The 30-year bond last fell 5/32 in price to yield 3.4779%, from 3.469%. The 2-year note last fell 5/32 in price to yield 3.8646%, from 3.782%.
“In this vicious cycle where the data continues to remain resilient, that would imply a Fed that would likely stay the course and continue to tighten policy,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.
Also clouding investors’ moods on Thursday was the World Bank’s assessment that the world may be edging toward a global recession as central banks across the world simultaneously hike interest rates to combat persistent inflation. read more
In currencies the dollar was slightly higher against the yen while the Swiss franc hit its strongest level against the euro since 2015. read more
The dollar index , which measures the greenback against a basket of major currencies, rose 0.091%, with the euro up 0.18% to $0.9995.
The Japanese yen weakened 0.19% versus the greenback at 143.44 per dollar, while Sterling was last trading at $1.1469, down 0.57% on the day.
Before the tentative labor agreement, fears of a U.S. railroad worker strike had supported oil prices due to supply concerns on Wednesday. In addition, the International Energy Agency (IEA) said this week that oil demand growth would grind to a halt in the fourth quarter.
U.S. crude settled down 3.82% at $85.10 per barrel while Brent finished at $90.84, down 3.46% on the day.
Gold dropped to its lowest level since April 2021, hurt by elevated U.S. Treasury yields and a firm dollar, as bets of another hefty Fed rate hike eroded bullion’s appeal.
Spot gold dropped 1.9% to $1,664.46 an ounce. U.S. gold futures fell 2.02% to $1,662.30 an ounce.
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Additional reporting by Herbert Lash in New York, Marc Jones in London, Stefano Rebaudo in Milan, Tom Westbrook in Singapore and Wayne Cole in Sydney; Editing by Kirsten Donovan and Jonathan Oatis
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Life expectancy is a key metric used to determine the heath of a country. The World Bank says it’s improving around the world.
How long will you live? It could be an inspiring or scary question.
But to a demographer It’s neither. It’s a key metric that says a lot about the health of a country.
In 1960 the average American’s life expectancy was almost 70 years old, according to the World Bank.
The U.S. ranked 189th in the world.
Today the nation has made progress, with an average life expectancy of 77.
But other countries have made greater strides. As of 2020, the U.S. was ranked 61st out of 237 nations.
Why have other countries surged ahead? And how could the U.S. improve?
To answer these questions we’re focusing on three countries: the U.S., the richest country in the world, according to the World Bank; Japan, the third richest; and Chile, ranked 43rd.
We spoke to Joseph Chamie. He’s the former director of the United Nations Population Division.
“The U.S. was doing very well right after World War II in 1950, ’55, relative to those countries,” said Chamie.
During the post-war boom, Americans benefited from medical advances, like penicillin and open heart surgery.
Japanese men had a life expectancy of 24 during the war, thanks in part to combat and food shortages.
“Japan’s life expectancy was lower than the U.S. in the early fifties. Of course they have to rebuild their societies,” said Chamie.
The new Japanese government passed 32 health laws between 1946 and 1955 aimed at regulating doctors and nurses, requiring school lunches, reducing pollution and preventing infectious disease.
Japanese life expectancy shot up 14 years between 1947 and 1955, according to government data.
“In the case of Chile, it was even more remarkable,” Chamie said.
Chileans’ life expectancy was 54 years old in 1950.
“Chile in particular saw a dramatic increase in life expectancy. They were able to provide health care systems, developing that preventive care, dropping infant mortality rates,” Chamie said.
Meanwhile in 1961, Japan established universal health insurance.
The government covered half of everyone’s medical costs.
“But there are many factors in Japan that were contributing to a lower mortality. One of them, of course, was diet and obesity. Eating more fish and more vegetables than the American diet,” Chamie said.
Americans lived longer as the 20th century progressed, but we also developed some unhealthy habits.
“In the U.S. the diet started increasing with greater and greater reliance on prepared foods, commonly called junk foods, fast foods. More and more people involved in work and doing less exercise.”
“In the U.S., many people are lacking health care systems in place, so they are not taking preventive action early enough to deal with illnesses. Especially the last 20, 30 years, drug addiction, opioids have gotten a become an epidemic level proportion. Obesity has also gotten much higher,” said Chamie.
“Chile and Japan, they’re providing health care systems, and also supporting people so they feel integrated in society,” Chamie said. “They did some comparisons of Japanese who went to Hawaii and California. And you find that they changed their diet, increased obesity and also lower life expectancy because of that diet change.”
“We’re spending a great deal of money on our health care and doing not as well as many other countries, including China, Japan and Chile,” he continued. “Individual responsibility is certainly one area. Second, providing health care systems and adequate services to assist people so that they will live to old age.”
So many factors determine how long we’ll live. But Chamie says learning from other countries’ successes might help us improve longevity here at home.
The declaration could spur further investment in treating the once-rare disease and worsen the scramble for scarce vaccines.
The chief of the World Health Organization said the expanding monkeypox outbreak in more than 70 countries is an “extraordinary” situation that now qualifies as a global emergency, a declaration Saturday that could spur further investment in treating the once-rare disease and worsen the scramble for scarce vaccines.
WHO Director-General Tedros Adhanom Ghebreyesus made the decision to issue the declaration despite a lack of consensus among experts serving on the U.N. health agency’s emergency committee. It was the first time the chief of the U.N. health agency has taken such an action.
“We have an outbreak that has spread around the world rapidly through new modes of transmission about which we understand too little and which meets the criteria in the international health regulations,” Tedros said.
“I know this has not been an easy or straightforward process and that there are divergent views among the members” of the committee, he added.
A global emergency is WHO’s highest level of alert, but the designation does not necessarily mean a disease is particularly transmissible or lethal. WHO’s emergencies chief, Dr. Michael Ryan, said the director-general made the decision to put monkeypox in that category to endure the gobal community takes the current outbreaks seriously.
Although monkeypox has been established in parts of central and west Africa for decades, it was not known to spark large outbreaks beyond the continent or to spread widely among people until May, when authorities detected dozens of epidemics in Europe, North America and elsewhere.
Declaring a global emergency means the monkeypox outbreak is an “extraordinary event” that could spill over into more countries and requires a coordinated global response. WHO previously declared emergencies for public health crises such as the COVID-19 pandemic, the 2014 West African Ebola outbreak, the Zika virus in Latin America in 2016 and the ongoing effort to eradicate polio.
The emergency declaration mostly serves as a plea to draw more global resources and attention to an outbreak. Past announcements had mixed impact, given that the U.N. health agency is largely powerless in getting countries to act.
Last month, WHO’s expert committee said the worldwide monkeypox outbreak did not yet amount to an international emergency, but the panel convened this week to reevaluate the situation.
According to the U.S. Centers for Disease Control and Prevention, more than 16,000 cases of monkeypox have been reported in 74 countries since about May. To date, monkeypox deaths have only been reported in Africa, where a more dangerous version of the virus is spreading, mainly in Nigeria and Congo.
In Africa, monkeypox mainly spreads to people from infected wild animals like rodents, in limited outbreaks that typically have not crossed borders. In Europe, North America and elsewhere, however, monkeypox is spreading among people with no links to animals or recent travel to Africa.
WHO’s top monkeypox expert, Dr. Rosamund Lewis, said this week that 99% of all the monkeypox cases beyond Africa were in men and that of those, 98% involved men who have sex with men. Experts suspect the monkeypox outbreaks in Europe and North America were spread via sex at two raves in Belgium and Spain.
“Although I am declaring a public health emergency of international concern for the moment, this is an outbreak that is concentrated among men who have sex with men, especially those with multiple sexual partners,” Tedros said. “That means that this is an outbreak that can be stopped with the right strategies in the right groups.”
Emergencies chief Ryan, explained what preceded the director-general’s decision.:
“(Tedros) found that the committee did not reach a consensus, despite having a very open, very useful, very considered debate on the issues, and that since he’s not going against the committee, what he’s recognizing is that there are deep complexities in this issue,” Ryan said. “There are uncertainties on all sides. And he’s reflecting that uncertainty and his determination of the event” to be a global emergency.
Before Saturday’s announcement, Michael Head, a senior research fellow in global health at Southampton University, said it was surprising WHO hadn’t already declared monkeypox a global emergency, explaining that the conditions were arguably met weeks ago.
Some experts had questioned whether such a declaration would help, arguing the disease isn’t severe enough to warrant the attention and that rich countries battling monkeypox already have the funds to do so; most people recover without needing medical attention, although the lesions may be painful.
“I think it would be better to be proactive and overreact to the problem instead of waiting to react when it’s too late,” Head said. He added that WHO’s emergency declaration could help donors like the World Bank make funds available to stop the outbreaks both in the West and in Africa, where animals are the likely natural reservoir of monkeypox.
In the U.S., some experts have speculated whether monkeypox might be on the verge of becoming an entrenched sexually transmitted disease in the country, like gonorrhea, herpes and HIV.
“The bottom line is we’ve seen a shift in the epidemiology of monkeypox where there’s now widespread, unexpected transmission,” said Dr. Albert Ko, a professor of public health and epidemiology at Yale University. “There are some genetic mutations in the virus that suggest why that may be happening, but we do need a globally-coordinated response to get it under control,” he said.
Ko called for testing to be immediately scaled up rapidly, saying that similar to the early days of COVID-19, that there were significant gaps in surveillance.
“The cases we are seeing are just the tip of the iceberg,” he said. “The window has probably closed for us to quickly stop the outbreaks in Europe and the U.S., but it’s not too late to stop monkeypox from causing huge damage to poorer countries without the resources to handle it.”
In the U.S., some experts have speculated that monkeypox might become entrenched there as the newest sexually transmitted disease, with officials estimating that 1.5 million men are at high risk of being infected.
Dr. Placide Mbala, a virologist who directs the global health department at Congo’s Institute of National Biomedical Research, said he hoped any global efforts to stop monkeypox would be equitable. Although countries including Britain, Canada, Germany and the U.S. have ordered millions of vaccine doses, none have gone to Africa.
“The solution needs to be global,” Mbala said, adding that any vaccines sent to Africa would be used to target those at highest risk, like hunters in rural areas.
“Vaccination in the West might help stop the outbreak there, but there will still be cases in Africa,” he said. “Unless the problem is solved here, the risk to the rest of the world will remain.”
Central bankers around the world are lifting interest rates at an aggressive clip as rapid inflation persists and seeps into a broad array of goods and services, setting the global economy up for a lurch toward more expensive credit, lower stock and bond values and — potentially — a sharp pullback in economic activity.
It’s a moment unlike anything the international community has experienced in decades, as countries around the world try to bring rapid price increases under control before they become a more lasting part of the economy.
Inflation has surged across many advanced and developing economies since early 2021 as strong demand for goods collided with shortages brought on by the pandemic. Central banks spent months hoping that economies would reopen and shipping routes would unclog, easing supply constraints, and that consumer spending would return to normal. That hasn’t happened, and the war in Ukraine has only intensified the situation by disrupting oil and food supplies, pushing prices even higher.
is expected to make its first rate increase since 2011, one that officials have signaled will most likely be only a quarter point but will probably be followed by a larger move in September.
Other central banks have begun moving more aggressively already, with officials from Canada to the Philippines picking up the pace of rate increases in recent weeks amid fears that consumers and investors are beginning to expect steadily higher prices — a shift that could make inflation a more permanent feature of the economic backdrop. Federal Reserve officials have also hastened their response. They lifted borrowing costs in June by the most since 1994 and suggested that an even bigger move is possible, though several in recent days have suggested that speeding up again is not their preferred plan for the upcoming July meeting and that a second three-quarter-point increase is most likely.
As interest rates jump around the world, making money that has been cheap for years more expensive to borrow, they are stoking fears among investors that the global economy could slow sharply — and that some countries could find themselves plunged into painful recessions. Commodity prices, some of which can serve as a barometer of expected consumer demand and global economic health, have dropped as investors grow jittery. International economic officials have warned that the path ahead could prove bumpy as central banks adjust policy and as the war in Ukraine heightens uncertainty.
blog post on Wednesday. Ms. Georgieva argued that central banks need to react to inflation, saying that “acting now will hurt less than acting later.”
rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:
Consumer confidence. In June, the University of Michigan’s survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living.
The housing market. Demand for real estate has decreased, and construction of new homes is slowing. These trends could continue as interest rates rise, and real estate companies, including Compass and Redfin, have laid off employees in anticipation of a downturn in the housing market.
Copper. A commodity seen by analysts as a measure of sentiment about the global economy — because of its widespread use in buildings, cars and other products — copper is down more than 20 percent since January, hitting a 17-month low on July 1.
Oil. Crude prices are up this year, in part because of supply constraints resulting from Russia’s invasion of Ukraine, but they have recently started to waver as investors worry about growth.
The bond market. Long-term interest rates in government bonds have fallen below short-term rates, an unusual occurrence that traders call a yield-curve inversion. It suggests that bond investors are expecting an economic slowdown.
In recent years, emerging markets have often raised interest rates in anticipation of the Fed’s slow and steady moves to avoid big swings in their currency values, which depend partly on interest rate differences across borders. But this set of rate increases is different: Inflation is running at its fastest pace in decades in many places, and a range of developed-economy central banks, including the European Central Bank, the Swiss National Bank, the Bank of Canada and the Reserve Bank of Australia, are joining — or may join — the Fed in pushing rates quickly higher.
“It’s not something we’ve seen in the last few decades,” said Bruce Kasman, chief economist and head of global economic research at JPMorgan Chase.
The last time so many major nations abruptly raised rates in tandem to fight such rapid inflation was in the 1980s, when the contours of global central banking were different: The 19-country euro currency bloc that the E.C.B. sets policy for did not exist yet, and global financial markets were less developed.
That so many central banks are now facing off against rapid inflation — and trying to control it by slowing their economies — increases the chance for market turmoil as an era of very low rates ends and as nations and companies try to adjust to changing capital flows. Those changing flows can influence whether countries and businesses are able to sell debt and other securities to raise money.
“Financial conditions have tightened due to rising, broad-based inflationary pressures, geopolitical uncertainty brought on by Russia’s war against Ukraine, and a slowdown in global growth,” Janet L. Yellen, the U.S. Treasury secretary, said in speech last week. “Now, portfolio investment is beginning to flow out of emerging markets.”
fastest pace since 1983. In the United Kingdom, it is similarly at a 40-year-high.
kick off rate increases back in December and has been steadily raising rates since. Policymakers are increasingly worried about inflation creating a cost-of-living crisis in Britain and worry that higher rates could compound economic pain. At the same time, they have signaled that they could act more forcefully, taking their cue from their global peers. There is a “willingness — should circumstances require — to adopt a faster pace of tightening,” Huw Pill, the chief economist of the Bank of England, said this month.
Understand Inflation and How It Impacts You
“Many central banks are looking at this as a sort of existential question about getting inflation and inflation expectations down,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.
The Fed raised rates by a quarter point in March, half a point in May, and three-quarters of a percentage point in June. While its officials have predicted that they will maintain that pace in July, they have also been clear that an even bigger rate increase is possible.
“Inflation has to be our focus, every meeting and every day,” Christopher Waller, a Fed governor, said during a speech last week. “The spending and pricing decisions people and businesses make every day depend on their expectations of future inflation, which in turn depend on whether they believe the Fed is sufficiently committed to its inflation target.”
The Bank of Canada has already gone for a full percentage point move, surprising investors last week with its largest move since 1998, while warning of more to come.
said in a statement.
of other central banks have made big moves. More action is coming. Central banks around the world have been clear that they expect to keep moving borrowing costs higher into the autumn.
“I wouldn’t say we’re at peak tightening quite yet,” said Brendan McKenna, an economist at Wells Fargo. “We could go even more aggressive from here.”
A key question is what that will mean for the global economy. The World Bank in June projected in a report that global growth would slow sharply this year but remain positive. Still, there is “considerable” risk of a situation in which growth stagnates and inflation remains high, David Malpass, head of the World Bank, wrote.
If inflation does become entrenched, or even show signs of shifting expectations, central banks may have to respond even more aggressively than they are now, intentionally crushing growth.
Mr. Kasman said the open question, when it comes to the Fed, is: “How far have they gone toward the conclusion that they need to kick us in the teeth, here?”
People wait for their turn to buy low-priced bun-kabab from a shop in Karachi, Pakistan June 10, 2022. REUTERS/Akhtar Soomro
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ISLAMABAD, July 16 (Reuters) – Pakistan is likely to get $4 billion from friendly countries this month to bridge a gap in foreign reserves highlighted by the International Monetary Fund, the country’s finance minister said, two days after sealing a deal with the lender.
The IMF has reached a staff level agreement with Pakistan that would pave the way for a disbursement of $1.17 billion. The board is also considering adding $1 billion to a $6 billion programme agreed in 2019. read more
“As per the IMF, there is a $4 billion gap,” the minister, Miftah Ismail, told a news conference in Islamabad, referring to the shortfall in foreign reserves.
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“We will, God willing, fill this gap in the month of July,” he said. “We think that we will get $1.2 billion in deferred oil payment from a friendly country. We think that a foreign country will invest between $1.5 to $2 billion in stocks on a G2G (government-to-government) basis, and another friendly country will perhaps give us gas on deferred payment and another friendly country will make some deposits.”
Depleting reserves, a widening current account deficit and the depreciation of the Pakistani rupee against the U.S. dollar have left the South Asian nation facing a balance of payment crisis.
Without the IMF deal, which should open up other avenues for external finance, Ismail said the country could have headed towards default.
He said the country will also get around $6 billion from the World Bank and the Asian Development Bank in FY2022-2023.
Pakistan secured a $6 billion IMF programme in 2019, but less than half of that amount has been disbursed to date.
Pakistan’s central bank has hiked its key interest rate to 15% to curb inflation, which hit 21.3% in June.
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Reporting by Asif Shahzad; Editing by Christina Fincher
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BOGOTÁ, Colombia — For the first time, Colombia will have a leftist president.
Gustavo Petro, a former rebel and a longtime legislator, won Colombia’s presidential election on Sunday, galvanizing voters frustrated by decades of poverty and inequality under conservative leaders, with promises to expand social programs, tax the wealthy and move away from an economy he has called overly reliant on fossil fuels.
His victory sets the third largest nation in Latin America on a sharply uncertain path, just as it faces rising poverty and violence that have sent record numbers of Colombians to the United States border; high levels of deforestation in the Colombian Amazon, a key buffer against climate change; and a growing distrust of key democratic institutions, which has become a trend in the region.
Mr. Petro, 62, received more than 50 percent of the vote, with more than 99 percent counted Sunday evening. His opponent, Rodolfo Hernández, a construction magnate who had energized the country with a scorched-earth anti-corruption platform, won just over 47 percent.
official figures.
part of a different rebel group, called the M-19, which demobilized in 1990, and became a political party that helped rewrite the country’s constitution. Eventually, Mr. Petro became a forceful leader in the country’s opposition, known for denouncing human rights abuses and corruption.
called his energy plan “economic suicide.”
riddled with corruption and frivolous spending. He had called for combining ministries, eliminating some embassies and firing inefficient government employees, while using savings to help the poor.
One Hernández supporter, Nilia Mesa de Reyes, 70, a retired ethics professor who voted in an affluent section of Bogotá, said that Mr. Petro’s leftist policies, and his past with the M-19, terrified her. “We’re thinking about leaving the country,” she said.
Mr. Petro’s critics, including former allies, have accused him of arrogance that leads him to ignore advisers and struggle to build consensus. When he takes office in August, he will face a deeply polarized society where polls show growing distrust in almost all major institutions.
He has vowed to serve as the president of all Colombians, not just those who voted for him.
On Sunday, at a high school-turned-polling station in Bogotá,Ingrid Forrero, 31, said she saw a generational divide in her community, with young people supporting Mr. Petro and older generations in favor of Mr. Hernández.
Her own family calls her the “little rebel” because of her support for Mr. Petro, whom she said she favors because of his policies on education and income inequality.
“The youth is more inclined toward revolution,” she said, “toward the left, toward a change.”
Megan Janetsky contributed reporting from Bucaramanga, Colombia, and Sofía Villamil and Genevieve Glatsky contributed reporting from Bogotá.
For large and small nations around the globe, the prospect of averting a recession is fading.
That grim prognosis came in a report Tuesday from the World Bank, which warned that the grinding war in Ukraine, supply chain chokeholds, Covid-related lockdowns in China, and dizzying rises in energy and food prices are exacting a growing toll on economies all along the income ladder. This suite of problems is “hammering growth,” David Malpass, the bank’s president, said in a statement. “For many countries, recession will be hard to avoid.”
World growth is expected to slow to 2.9 percent this year from 5.7 percent in 2021. The outlook, delivered in the bank’s Global Economic Prospects report, is not only darker than one produced six months ago, before Russia’s invasion of Ukraine, but also below the 3.6 percent forecast in April by the International Monetary Fund.
Growth is expected to remain muted next year. And for the remainder of this decade, it is forecast to fall below the average achieved in the previous decade.
poorer, hungrier and less secure.
Roughly 75 million more people will face extreme poverty than were expected to before the pandemic.
Per capita income in developing economies is also expected to fall 5 percent below where it was headed before the pandemic hit, the World Bank report said. At the same time, government debt loads are getting heavier, a burden that will grow as interest rates increase and raise the cost of borrowing.
“In Egypt more than half of the population is eligible for subsidized bread,” said Beata Javorcik, chief economist at the European Bank for Reconstruction and Development. “Now, that’s going to be much more expensive for government coffers, and it’s happening where countries are already more indebted than before.”
stock market’s woes. The conflict has caused dizzying spikes in gas prices and product shortages, and is pushing Europe to reconsider its reliance on Russian energy sources.
Global growth slows. The fallout from the war has hobbled efforts by major economies to recover from the pandemic, injecting new uncertainty and undermining economic confidence around the world. In the United States, gross domestic product, adjusted for inflation, fell 0.4 percent in the first quarter of 2022.
Russia’s economy faces slowdown. Though pro-Ukraine countries continue to adopt sanctions against the Kremlin in response to its aggression, the Russian economy has avoided a crippling collapse for now thanks to capital controls and interest rate increases. But Russia’s central bank chief warned that the country is likely to face a steep economic downturn as its inventory of imported goods and parts runs low.
Trade barriers go up. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to secure goods for their citizens amid shortages and rising prices, erect new barriers to stop exports. But the restrictions are making the products more expensive and even harder to come by.
Prices of essential metals soar. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
“Insecurity and violence continue to weigh on the outlook” for many low-income countries, the World Bank said, while “more rapid increases in living costs risk further escalating social unrest.” Several studies have pointed to rising food prices as an important trigger for the Arab Spring uprisings in 2011.
In Latin American and the Caribbean, growth is expected to slow to 2.5 percent from 6.7 percent last year. India’s total output is forecast to drop to 7.5 percent from 8.7 percent, while Japan’s is expected to remain flat at 1.7 percent.
The World Bank, founded in the shadow of World War II to help rebuild ravaged economies, provides financial support to low- and middle-income nations. It reiterated its familiar basket of remedies, which include limiting government spending, using interest rates to dampen inflation and avoiding trade restrictions, price controls and subsidies.
Managing to tame inflation without sending the economy into a tailspin is a difficult task no matter what the policy choices are — which is why the risks of stagflation are so high.
At the same time, the United States, the European Union and allies are struggling to isolate Russia, starving it of resources to wage war, without crippling their own economies. Many countries in Europe, including Germany and Hungary, are heavily dependent on either Russian oil or gas.
The string of disasters — the pandemic, droughts and war — is injecting a large dose of uncertainty and draining confidence.
Among its economic prescriptions, the World Bank underscored that leaders should make it a priority to use public spending to shield the most vulnerable people.
That protection includes blunting the impact of rising food and energy prices as well as ensuring that low-income countries have sufficient supplies of Covid vaccines. So far, only 14 percent of people in low-income countries have been fully vaccinated.
“Renewed outbreaks of Covid-19 remain a risk in all regions, particularly those with lower vaccination coverage,” the report said.
A general view of the city skyline during sunset as the spread of the coronavirus disease (COVID-19) continues, in Moscow, Russia May 14, 2020. REUTERS/Maxim Shemetov
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April 27 (Reuters) – Russia expects the economy to contract by 8.8% in 2022 in its base case scenario, or by 12.4% under a more conservative scenario, an economy ministry document showed on Wednesday, further evidence that sanctions pressure is taking its toll.
The conservative forecast is in line with that of former finance minister Alexei Kudrin, who said earlier this month the economy was on track to contract by more than 10% this year in its biggest decline in gross domestic product since 1994. read more
The economy ministry expects Russia’s economy to grow 1.3% in 2023, 4.6% in 2024 and 2.8% in 2025, the document showed. In the conservative scenario, the economy is seen contracting 1.1%.
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The extent of the damage to the economy this year is unclear due to uncertainty regarding possible new sanctions and trade issues. The government is likely to revise forecasts several times this year.
Inflation, which has already soared to 17.62% as of April 15, is seen accelerating to as high as 22.6% this year, the document showed, and remaining well above the central bank’s 4% target in 2023.
The central bank hiked rates to 20% from 9.5% in late February in an emergency move that Governor Elvira Nabiullina said helped stabilise the rouble and overcome an inflation spike.
The bank’s key rate was lowered to 17% on April 8 in another unscheduled move. Analysts polled by Reuters now expect rates to fall further, by 200 basis points to 15%, at the bank’s next rate-setting meeting on Friday.
Capital investment is set to slump by 25.4-31.8% after growth of 7.7% in 2021, while real disposable incomes, a highly sensitive metric for Russia, especially with rising prices hitting living standards, could drop 9.7% in 2022, according to the ministry’s conservative estimate.
The World Bank has forecast Russia’s 2022 GDP output will fall by 11.2% due to Western sanctions imposed on Russia’s banks, state-owned enterprises and other institutions. read more
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Reporting by Reuters; Editing by Alex Richardson and Angus MacSwan
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BEIRUT, Lebanon — Armed clashes between sectarian militias transformed Beirut neighborhoods into a deadly war zone on Thursday, raising fears that violence could fill the void left by the near-collapse of the Lebanese state.
Rival gunmen, chanting in support of their leaders, hid behind cars and dumpsters to fire automatic weapons and rocket-propelled grenades at their rivals. At least six people were killed and 30 wounded. Residents cowered in their homes, and teachers herded children into the hallways and basements of schools to protect them from the shooting.
It was some of the worst violence in years to convulse Beirut, aggravating the sense of instability in a small country already buffeted by devastating political and economic crises and inviting recollections of its civil war that ended more than three decades ago.
Since the fall of 2019, Lebanon’s currency has plummeted more than 90 percent in value, battering the economy and reducing Lebanese who were comfortably middle class to poverty. The World Bank has said Lebanon’s economic collapse could rank among the three worst in the world since the mid-1800s.
Grave fuel shortages in recent months have left all but the wealthiest Lebanese struggling with prolonged power blackouts and long lines at gas stations. The country’s once vaunted banking, medical and education sectors have all suffered profound losses, as professionals have fled to seek livelihoods abroad.
A huge explosion in the port of Beirut last year killed more than 200 people and exposed the results of what many Lebanese see as decades of poor governance and corruption. The Covid-19 pandemic has only aggravated the economic distress and sense of despair.
The fighting on Thursday was part of the continuing fallout from the port explosion.
Two Shiite Muslim parties — Hezbollah, an Iran-backed militant group, and the Amal Movement — had organized a protest calling for the removal of the judge charged with investigating the blast and determining who was responsible.
As the protesters gathered, gunshots rang out, apparently fired by snipers in nearby high buildings, according to witnesses and Lebanese officials, and protesters scattered to side streets, where they retrieved weapons and rejoined the fray.
posts on Twitter, saying that the clashes had been caused by “uncontrolled and widespread weapons that threaten citizens in every time and place,” a reference to Hezbollah’s vast arsenal.
His group accused Hezbollah of exploiting sectarian tensions to derail the port investigation over fears it could be implicated.
Hassan Diab, who, along with his cabinet, resigned after the port explosion.
There had been hope that Mr. Mikati would bring some stability as his new government took shape. But at the same time, tensions over the port investigation grew deeper.
The blast at the port was caused by the sudden combustion of some 2,750 tons of volatile chemicals that had been unloaded into the port years before, but more than a year later no one has been held accountable.
The judge investigating the explosion, Tarek Bitar, has moved to summon a range of powerful politicians and security officials for questioning, which could result in criminal charges against them.
Hezbollah has grown increasingly vocal in its criticism of Judge Bitar, and his inquiry was suspended this week after two former ministers facing charges lodged a legal complaint against him.
Families of the victims condemned the move, with critics saying that the country’s political leadership was trying to shield itself from accountability for the largest explosion in the turbulent country’s history.
On Monday, the judge had issued an arrest warrant for Ali Hussein Khalil, a prominent Shiite member of Parliament and a close adviser to the leader of the Amal party. The warrant leveled serious accusations against Mr. Khalil.
“The nature of the offense,” the document read, is “killing, harming, arson and vandalism linked to probable intent.”
On Tuesday, the Hezbollah leader Hassan Nasrallah issued some of his most scathing criticism of Judge Bitar, accusing him of “politically targeting” officials in his investigation and calling for a protest on Thursday.
When Hezbollah followers joined the protests to call for the judge’s removal, witnesses said, the sniper shots rang out.
Ben Hubbard reported from Beirut, and Marc Santora from London. Reporting was contributed by Hwaida Saad and Asmaa al-Omar from Beirut, and Vivian Yee and Mona el-Naggar from Cairo.
As the world economy struggles to find its footing, the resurgence of the coronavirus and supply chain chokeholds threaten to hold back the global recovery’s momentum, a closely watched report warned on Tuesday.
The overall growth rate will remain near 6 percent this year, a historically high level after a recession, but the expansion reflects a vast divergence in the fortunes of rich and poor countries, the International Monetary Fund said in its latest World Economic Outlook report.
Worldwide poverty, hunger and unmanageable debt are all on the upswing. Employment has fallen, especially for women, reversing many of the gains they made in recent years.
Uneven access to vaccines and health care is at the heart of the economic disparities. While booster shots are becoming available in some wealthier nations, a staggering 96 percent of people in low-income countries are still unvaccinated.
restrictions and bottlenecks at key ports around the world have caused crippling supply shortages. A lack of workers in many industries is contributing to the clogs. The U.S. Labor Department reported Tuesday that a record 4.3 million workers quit their jobs in August — to take or seek new jobs, or to leave the work force.
Germany, manufacturing output has taken a hit because key commodities are hard to find. And lockdown measures over the summer have dampened growth in Japan.
Fear of rising inflation — even if likely to be temporary — is growing. Prices are climbing for food, medicine and oil as well as for cars and trucks. Inflation worries could also limit governments’ ability to stimulate the economy if a slowdown worsens. As it is, the unusual infusion of public support in the United States and Europe is winding down.
6 percent projected in July. For 2022, the estimate is 4.9 percent.
The key to understanding the global economy is that recoveries in different countries are out of sync, said Gregory Daco, chief U.S. economist at Oxford Economics. “Each and every economy is suffering or benefiting from its own idiosyncratic factors,” he said.
For countries like China, Vietnam and South Korea, whose economies have large manufacturing sectors, “inflation hits them where it hurts the most,” Mr. Daco said, raising costs of raw materials that reverberate through the production process.
The pandemic has underscored how economic success or failure in one country can ripple throughout the world. Floods in Shanxi, China’s mining region, and monsoons in India’s coal-producing states contribute to rising energy prices. A Covid outbreak in Ho Chi Minh City that shuts factories means shop owners in Hoboken won’t have shoes and sweaters to sell.
worldwide surge in energy prices threatens to impose more hardship as it hampers the recovery. This week, oil prices hit a seven-year high in the United States. With winter approaching, Europeans are worried that heating costs will soar when temperatures drop. In other spots, the shortages have cut even deeper, causing blackouts in some places that paralyzed transport, closed factories and threatened food supplies.
China, electricity is being rationed in many provinces and many companies are operating at less than half of their capacity, contributing to an already significant slowdown in growth. India’s coal reserves have dropped to dangerously low levels.
And over the weekend, Lebanon’s six million residents were left without any power for more than 24 hours after fuel shortages shut down the nation’s power plants. The outage is just the latest in a series of disasters there. Its economic and financial crisis has been one of the world’s worst in 150 years.
Oil producers in the Middle East and elsewhere are lately benefiting from the jump in prices. But many nations in the region and North Africa are still trying to resuscitate their pandemic-battered economies. According to newly updated reports from the World Bank, 13 of the 16 countries in that region will have lower standards of living this year than they did before the pandemic, in large part because of “underfinanced, imbalanced and ill-prepared health systems.”
Other countries were so overburdened by debt even before the pandemic that governments were forced to limit spending on health care to repay foreign lenders.
In Latin America and the Caribbean, there are fears of a second lost decade of growth like the one experienced after 2010. In South Africa, over one-third of the population is out of work.
And in East Asia and the Pacific, a World Bank update warned that “Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century.” Businesses in Indonesia, Mongolia and the Philippines lost on average 40 percent or more of their typical monthly sales. Thailand and many Pacific island economies are expected to have less output in 2023 than they did before the pandemic.
debt ceiling — can further set back the recovery, the I.M.F. warned.
But the biggest risk is the emergence of a more infectious and deadlier coronavirus variant.
Ms. Gopinath at the I.M.F. urged vaccine manufacturers to support the expansion of vaccine production in developing countries.
Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world. In this latest report, it again called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus.
“We’re witnessing what I call tragic reversals in development across many dimensions,” said David Malpass, the president of the World Bank. “Progress in reducing extreme poverty has been set back by years — for some, by a decade.”
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