Global Economic Prospects – January 2022

From the World Bank report:

Macroeconomic imbalances have reached unprecedented proportions. Government spending, deficits, and debt in several advanced economies have reached record highs relative to GDP. Central bank balance sheets have absorbed unprecedented amounts of long-term assets financed by bank reserves, resulting in an inequitable allocation of capital. Spending in developing countries surged to support economic activity during the crisis, but many countries are now facing record levels of external and domestic debt. Adding to these debt-related risks is the potential for higher interest rates: it is difficult to predict how rapidly interest rates will rise as advanced economies slow down their expansion in monetary policies. With fiscal and monetary policy in uncharted territory, the implications for exchange rates, inflation, debt sustainability, and economic growth are unlikely to be favorable for developing countries.

The world is facing growing income inequality across and within countries. The COVID-19
crisis wiped out years of progress in poverty reduction. As government’s fiscal space has
narrowed, many households in developing countries have suffered severe employment and
earning losses—with women, the unskilled, and informal workers hit the hardest. School closures and sustained disruptions to healthcare services can do lasting damage to human capital, especially among children and the most vulnerable. At the other end of the income scale, booming asset prices are boosting the wealth of richer segments of the population, adding to inflation. This increasing divergence of fortunes is especially troubling given the possibility of social discontent in developing countries.

Compounding this rising inequality, the world is undergoing a phase of exceptional uncertainty. The emergence of the Omicron variant is a stark reminder that the COVID-19 pandemic is not over. New variants of the virus can put even highly vaccinated countries under pressure and threaten to wreak havoc in those with low vaccination rates—which are the poorest and most vulnerable of all. Supply bottlenecks have hit developing countries hard—these countries are often the last in the global supply line, outbid by countries with greater financial resources and larger orders. Ports operating below capacity, pandemic-related delays in orders for new vessels, and containers stranded in the “wrong” ports have increased shipping costs and supply constraints to unprecedented levels. Volatile commodity prices and extreme weather events driven by climate change are aggravating food insecurity risks, further burdening health and nutrition.

Progress in vaccination is key to restoring mobility and overcoming supply-chain disruptions….

Video here.

29 thoughts on “Global Economic Prospects – January 2022”

  1. Moses Herzog

    Thanks for the pdf link Menzie. You know what a moocher I am for FREE info and free downloads. Would imagine lots of GVC particulars here. Hopefully.

    1. Barkley Rosser

      rsm,

      No confidence intervals were reported here, so you at least can ignore this. No news at all here, just a bunch of bureaucrats mouthing off again.

  3. ltr

    https://news.cgtn.com/news/2022-01-17/China-s-GDP-tops-114-36-trillion-yuan-in-2021-16T64Jt0na8/index.html

    January 27, 2022

    2021: China’s GDP growth beats expectations with 8.1%, fastest in 10 years
    By Wang Tianyu

    China’s gross domestic product (GDP) grew by 8.1 percent last year, the largest jump since 2011, data from the National Bureau of Statistics (NBS) showed on Monday.

    The expansion is slightly above the IMF and World Bank’s expectations of 8 percent growth and beyond the 6 percent target set by the government.

    Facing challenges brought by the pandemic, China has seen its economic activities cool down after a strong rebound in the first half of 2021.

    From October to December, the country’s economy grew by 4 percent from a year earlier, a further deceleration from the 18.3 percent jump in the first quarter, according to NBS.

    Despite beating Reuters’ forecast of 3.6-percent and Bloomberg’s 3.3-percent, the fourth-quarter pace was still the weakest in one and a half years, leaving room for speculation on further monetary stimulus.

    https://news.cgtn.com/news/2022-01-17/China-s-GDP-tops-114-36-trillion-yuan-in-2021-16T64Jt0na8/img/6d78f455a374470787accaa83dfadc71/6d78f455a374470787accaa83dfadc71.jpeg

    To counter the slowing economic growth, China cut its reserve requirement ratio by 50 basis points in December. The cut, the second such move of the year, would release 1.2 trillion yuan ($190 billion) in long-term liquidity, said People’s Bank of China (PBOC) at the time. The country also lowered its one-year loan prime rate (LPR) in December.

    On Monday, the PBOC offered 700 billion yuan’s worth of one-year medium-term lending facility (MLF) loans to some financial institutions and conducted 100 billion yuan of seven-day reverse repos to maintain liquidity in the banking system.

    The interest rates for the MLF and the reverse repos were both lowered by 10 basis points – to 2.85 percent from 2.95 percent and to 2.10 percent from 2.20 percent, respectively.

    “We expect Beijing to significantly step up easing after mid-March,” Nomura’s Chief China Economist Lu Ting wrote in a note.

    China has pledged to safeguard macroeconomic stability and keep major economic indicators within an appropriate range in 2022, according to the annual Central Economic Work Conference at the end of last year.

    GDP per capita surpasses global average ….

    1. ltr

      https://news.cgtn.com/news/2022-01-12/China-s-CPI-up-1-5-PPI-up-10-3-in-December-16KQLFMEDsY/index.html

      January 12, 2022

      China’s factory gate prices further ease, consumer prices drop in December

      The Producer Price Index gained 8.1% for the year.
      The Consumer Price Index gained 0.9% for the year.

      https://news.cgtn.com/news/2022-01-12/China-s-CPI-up-1-5-PPI-up-10-3-in-December-16KQLFMEDsY/img/8b3ffe51d14e42f5a5a6d3014bc60107/8b3ffe51d14e42f5a5a6d3014bc60107.jpeg

      https://news.cgtn.com/news/2022-01-12/China-s-CPI-up-1-5-PPI-up-10-3-in-December-16KQLFMEDsY/img/27b7e31ac68c4fa2a9e1dcbd08788341/27b7e31ac68c4fa2a9e1dcbd08788341.jpeg

    3. Ivan

      China has two big problems that could threaten economic growth.
      1. An aging and now it appears shrinking population. Life spans are getting very good and long but young woman don’t want to have children.
      2. A population that is more obsessed with saving than spending. So far desperate attempt to stop the building boom has failed. The ignorant masses want to own.
      The fact that they are run by a dictator would suggest that they could make the tough radical policy changes to address these problems. But the problem with dictators is that nobody want to tell them the bad news (for fear of having their ears substantially separated from their shoulders). So they rarely know how bad the problems really are or that they can only be solved by the “nasty” solutions.

      1. Barkley Rosser

        A substantial part of the last quarter slowdown is due to the problems in the overblown real estate sector as manifested by the Evergrande mess.

    1. Barkley Rosser

      For better or worse reportedly OPEC has actually been holding production down below their quota levels, which is certainly a major factor in this recent runup.

      1. paddy kivlin

        reading the above and more reports, i see no reason for opec, or domestic drillers to supply more crude.

        too much uncertainty.

        1. Barkley Rosser

          paddy,

          For the reason that any cartel has a tendency to instability. As the price rises, individual OPEC members can make a lot more money by increasing their production. We have seen this before many times. Indeed, unclear how and why this under quota production is going on now, although it is probably mostly due to Saudi Arabia consciously acting, along with some unconscious outcomes happening in some other members, such as reduced production in Libya due to political/military conflicts.

          Something else driving the price up is indeed the increase in actual war and threatened war, Houthi attacks on UAE production facilities in the first case, and rising worries that Russia will attack Ukraine on the second.

    1. pgl

      You always seem SO happy when oil prices rise. I bet you also endorse all that monopsony power in the petroleum refinery sector. How much are you contributing to the McConnell agenda to screw the common man and suppress their votes?

      1. Bruce Hall

        Oil producers like higher prices to the point where they severely limit driving and demand. Why not? Businesses are not charitable organizations. You don’t seem to complain when oil prices are so low that drillers lose money, so apparently you think that businesses should be charitable organizations. Shouldn’t you be condemning Apple and Google and Samsung for the price of their cell phones that “screw the common man”?
        https://www.nasdaq.com/articles/how-apple-is-squeezing-out-more-profit-from-its-iphones-2021-02-04

        And, oh God, De Beers is also “screwing the common man” trying to get engaged:
        https://finance.yahoo.com/news/beers-implements-big-diamond-price-115241999.html
        De Beers raised prices by about 8% at its first sale of the year, according to people familiar with the situation who asked not to be identified because the information is private. The biggest increases were for smaller, cheaper stones.

        BTW, here is a map of refineries in the U.S.
        https://earthjustice.org/features/147refineries

        You complain there isn’t enough refinery competition to keep gasoline prices low; your left wing compatriots complain because there are too many. You guys need to get your narratives aligned.

  6. Anonymous

    editing for justice:

    should read:

    The COVID-19 excused government over reach, wiped out centuries of progress in respect for individual rights.”

    and yes the recondite,, misguided plutocratic response to the virus will cost multiples of the no improvement in mortality or health care burden from their power grabs..

    1. pgl

      The text was “The world is facing growing income inequality across and within countries. The COVID-19 crisis wiped out years of progress in poverty reduction”

      Your version is not only dishonest in the extreme but beyond repugnant. Unless you are trying to defend the liberty to infect your neighbors with a deadly disease. I guess your real name is Tucker Carlson.

  7. pgl

    https://twitter.com/JohnJHarwood/status/1482721085305065482?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1482721085305065482%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fjabberwocking.com%2F

    Trump has me confused. He says whites in New York cannot get the vaccine. Huh – I got 3 doses of the Pfizer vaccine and it was incredibly easy. I think I live in Brooklyn and the mirror tells me I’m white. Now maybe I should find another mirror as Trump is saying I must be either a black man or Asian. He wouldn’t lie about something like this after all – right?

    2. rjs

      his message wasn’t meant for you, pgl….Trump was booed when he told his crowds to get vaccinated, so now he is trying to trick his audience into believing it’s being withheld from them…

    3. Bruce Hall

      Trump was definitely confused. He was thinking about monoclonal antibodies.
      • https://www.dailymail.co.uk/news/article-10412189/Midwest-Catholic-hospital-chain-ends-rule-against-white-patients-having-COVID-monoclonal-antibodies.html
      • https://www.educationviews.org/whites-to-the-rear-biden-admin-guidance-says-race-or-ethnicity-a-factor-in-prioritizing-covid-treatment/
      • https://www.wsj.com/articles/new-york-race-based-covid-treatment-white-hispanic-inequity-monoclonal-antibodies-antiviral-pfizer-omicron-11641573991

      So, nothing to see there.

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