London, July 7: Britain and the world face a worsening economic outlook, the Bank of England warned this week.
“The economic outlook for the UK and globally has deteriorated materially,” the bank said as it published its latest Financial Stability Report, adding that developments around the war in Ukraine will be a key factor.
It told banks to prepare to weather the storm of any potential recession, which the International Monetary Fund (IMF) and OECD say the UK is more susceptible to.
“The outlook since our last update in April has darkened significantly,” she said, with the IMF expected to release updated forecasts for 2022 and 2023 at the end of this month. She said the fund would downgrade its 2022 forecast for the third time this year. It currently projects economic growth of 3.6%.
“We are in very choppy waters,” Georgieva said. Asked if she could rule out a global recession, she said: “The risk has gone up so we cannot rule it out.”
Here is a summary of top global developments:
The Indian rupee hit a record low against the US dollar on Tuesday. It came after data showed India’s trade deficit reached an all-time high of $25.63 billion.
At the same time, the US dollar has continued to strengthen – hitting levels last seen in 2002 – while the euro fell to a two-decade low amid recession concerns. Meanwhile, the British pound dropped to a two-year low against the dollar on Wednesday.
Uganda has raised its benchmark interest rate from 7.5% to 8.5%, its highest in more than two years.
Inflation expectations have hit record highs in Canada, a Bank of Canada survey of consumers and executives has shown. The current period of high inflation is expected to last longer than previously thought.
Retail inflation in Thailand hit a 14-year high in June, with consumer prices increasing by 7.66% from the same period in 2021.
South Korean inflation also rose last month, hitting its highest since late 1998. Consumer prices rose by 6% on the year.
Australia’s central bank has raised interest rates, taking its cash rate to 1.35%.
China’s debt is likely to hit a record high in 2022, according to a government-backed think tank. Total debt as a percentage of GDP is forecast to reach 275% this year – an increase of 11.3 percentage points.
Oil prices fell on Tuesday, with West Texas Intermediate crude futures dropping below $100 per barrel, but then recovered some of their losses on Thursday. US bank Citi has warned that crude could fall to $65 a barrel if there is a recession.
The chances of a US recession have risen to 38%, according to forecasts from Bloomberg Economics.
Sri Lanka has raised key interest rates to their highest in two decades in an effort to tackle record annual inflation, which reached 54.6% in June. The move comes despite an ongoing economic crisis.
Swiss consumer price inflation hit a 29-year high in June at 3.4%. It’s the first time inflation has risen above 3% in Switzerland since 2008.
The President of the African Development Bank has said Africa needs more than $400 billion this year to help it recover from the COVID-19 pandemic.
