The global economy’s trajectory toward a soft landing offers little solace to the G-20 nations, who face a economic rife with challenges and uncertainties.
As delegates gather in Washington for crucial meetings of the International Monetary Fund, World Bank, and Group of 20, they are confronted with a complex mix of factors, including slowing growth, persistent inflation, elevated interest rates, mounting debt levels, and geopolitical tensions.
The revision of global growth forecast slightly upward to 2.9% for the year has been dubbed a “great escape” from previous projections, but still significantly below pre-pandemic levels.
Similarly, IMF chief Kristalina Georgieva anticipates a modest uptick in the IMF’s forecast, yet she warns of a protracted period of sluggish growth and disappointment in the years ahead.
Key figures at the meetings, such as Federal Reserve Chairman Jerome Powell, US Treasury Secretary Janet Yellen, UK Chancellor of the Exchequer Jeremy Hunt, and central bank heads from major economies, will be closely scrutinized for insights into policy responses to these challenges.
However, the G-20’s ability to address these risks may be hindered by political divisions among its members. Ongoing conflicts, such as Russia’s war in Ukraine and the Israel-Hamas conflict in Gaza, and now the Israel-Iran conflict threaten to escalate geopolitical tensions and disrupt energy markets, fueling concerns about inflation.
The IMF has warned of a growing fragmentation in the global economy, with the US and EU on one side and China and Russia on the other, vying for influence, particularly in emerging markets. This geopolitical rivalry poses significant challenges for global economic stability and cooperation.
Emerging Market Nations Grapple with Mounting Debt Distress
Meanwhile, emerging market nations grapple with mounting debt distress, stemming from years of reliance on cheap credit, primarily from China. As creditors seek to protect their interests, the competition for scarce capital intensifies, with far-reaching implications for global finance and Beijing’s role therein.
Relative to expectations that the price for taming runaway inflation would be a rash of recessions, a year of modestly slower global growth looks like a great escape.
The next big question – with growth surprisingly robust will central bank pivots be delayed? Elsewhere, Chinese economic data, UK inflation and wage numbers, and Canada’s budget will be among the key highlights.
China is in the spotlight, with release of first-quarter gross domestic product data likely to show it’s on track to meet the official 5% growth forecast for 2024.
The first-quarter expansion probably came in right at 5% year-on-year, a result that would still support the case for a tad more policy support, though Goldman Sachs expects a more robust 7.5% annualized growth rate for the first three months.
Industrial output growth is seen slowing in March, with retail sales holding steady. The drop in property investment may have accelerated a tad.
China finishes the week with trade data that’s expected to show slower headline growth of exports in March, mainly due to a high baseline last year.
Elsewhere, consumer inflation in Japan probably slowed in March to 2.7%, marking a full two years that the rate has stayed at or above the BOJ’s 2% target. Japan also gets trade stats, which are forecast to show growth in exports holding steady.
Europe, Middle East, Africa
The region’s data highlight will be the UK. Wage numbers on Tuesday and Wednesday’s consumer-price report will be scrutinized by BOE officials who are considering when to start cutting rates.
With the outcome for underlying inflation, which strips out volatile elements such as energy, still likely to land above 4%, and an even higher result probable for pay growth, policymakers may take only limited comfort from the numbers.
Retail sales will also be released later in the week, which may point to the strength of the British consumer at a time when the economy is showing signs of a factory-led recovery taking hold.
In the euro zone, meanwhile, industrial production on Monday will be the key data point, with an increase anticipated by economists for February that won’t make up for a slump in the prior month. Germany’s ZEW investor sentiment index will also be published.
In Nigeria, data is expected to show that annual inflation in March quickened from 31.7% in February because of a sharp drop in the naira, which lost about 30% of its value against the dollar during the first quarter. That was largely due to a second devaluation in January aimed at allowing the naira to trade more freely and close the gap with the unofficial market rate.
Meanwhile, in Ghana, inflation for March 2024 increased sharply to 25.8% from 23.2% recorded in February 2024.
Data from Israel will likely show inflation remained muted, accelerating slightly to 2.6% in March from 2.5% as the war against Hamas continues to induce a consumption slump.
In South Africa, price growth is predicted to remain sticky at 5.4% in March versus 5.6% a month earlier due to higher fuel costs.
The monetary authority In neighboring Namibia is expected to keep its key rate unchanged at 7.75% to safeguard its peg with the rand, and because of upside risks to its inflation outlook from drought conditions and higher oil prices.
Attention generally will focus mostly on the other side of the Atlantic, where almost all the region’s finance ministers and central bankers are in Washington for the IMF meeting.
As the world economy steer through these turbulent waters, the G-20 faces a daunting task in fostering cooperation and charting a path toward sustainable growth and stability in an increasingly uncertain global economy.
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