Business

You can actually get more of a sense of the mood at the International Monetary Fund (IMF) from looking not at their latest forecasts, but at the kind of vocabulary they’re using around them.

Words like “ominous”, “perilous” and “significant vulnerabilities” rather sum it up. The IMF is getting very nervous about the state of the global economy and its underlying financial system.

The worries can be separated into the short term and the long term.

In the short run, the IMF thinks that central banks are trapped on the horns of dilemma. On the one hand, underlying inflation looks to be considerably more stubborn than previously hoped.

The cost of living crisis may persist longer than hoped, causing real economic pain across much of the world.

Please use Chrome browser for a more accessible video player


0:59

‘How is the UK doing right now?’

On the other hand, the efforts to bring that inflation under control (via higher interest rates) threaten to cause problems of their own.

The collapse of Silicon Valley Bank earlier this year (and, to some extent the government bond market rollercoaster in the UK last autumn) were both driven in part by rising interest rates.

More on Cost Of Living

That leaves central banks facing a nerve-wracking challenge – on the one hand, trying to resolve the cost of living crisis could actually provoke more financial explosions.

On the other hand, holding back on rate rises could allow inflation to become “embedded”, which could be even worse for everyone.

The long-term concerns are deeper-seated. The Fund is worried the outlook for global growth is getting weaker and weaker. Its latest long-term projections for the world are the weakest they’ve ever been.

Read more business news:
CBI boss Tony Danker sacked over ‘conduct at work’
UK to see return of ultra-low interest rates, IMF says

The “ominous” worry, says the IMF, is that this is a sign that the long shadow of protectionism is beginning to take its toll on global growth.

Countries around the world, including the United States, are pouring money into their industries in an effort to attract businesses back into the country, repatriating the manufacturing they once offshored to Asia.

That might sound positive to some US businesses (they are getting subsidies after all) but it might also result in a less efficient, less productive world.

Put it all together and it adds up to an unsettling outlook for the world economy.

Articles You May Like

Home Depot to buy building supply distributor SRS in $18B deal — its biggest acquisition ever
Apple could double down on China market, Wedbush says, as iPhone sales drop
Hyundai IONIQ 6, Kona EV are two of the cheapest cars (EV or gas) to lease at just $169/mo
Trump’s media firm hits £7.9bn peak value on stock market debut
Adam Neumann looks to buy back WeWork for more than $500M: sources