The World Bank has slashed its global GDP growth estimate for 2022 to 3.2% from 4.1% - nearly a full percent point drop. And this may not be the end of the bad news.
The 4.1% itself was supposed to be worrisome after 5.5% in '21.
In January the World Bank had said "At a time when governments in many developing economies lack the policy space to support activity if needed, new COVID-19 outbreaks, persistent supply-chain bottlenecks and inflationary pressures, and elevated financial vulnerabilities in large swaths of the world could increase the risk of a hard landing." And that was even without acknowledging the prospect of a potential Russia-Ukarine conflict.
The recent downgrade may not be the last one as this is mostly about the direct impact in Europe & Central Asia, like the 45% decline in the GDP of Ukraine and 11% plus contraction in Russia.
In my view, just as the January estimate did not acknowledge the trouble brewing on the Russia-Ukraine border which broke out into a war just about a month later, this does not go far enough in fully factoring in the destabilizing impact of high fuel and food prices elsewhere.
Food shortages and high prices can drive many changes around the world from the near inevitable crowding out of other spending to riots, famines & regime changes at the extreme end.
And of course, the risks listed out in January: the pandemic, supply disruptions (worse now), inflation expectations, the limited room for maneuver for governments and Central banks also still remain.
Bottomline: I see the risk of significant downward revisions to these global GDP estimate numbers.
It's going to be hard going and hard living for a considerable portion of the global population. Tough times ahead!
From the desk of Devina Mehra
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Economists Think Dollar's Fall May Explain the Recent ‘Rally’ by Steve Liesman
Einstein taught us about relativity in nature. Now come Devina Mehra and Shankar Sharma of First Global to teach us about relativity in financial markets -- and raise some serious questions about just what is driving stock prices.
First Global reports are quite credible and, on occasion, more than that.
What prompts this mention is Intel's earnings report and the fact that First Global has had a pretty good bead on the company and its stock.
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"It's better to take a slight hit on [profit] margins and keep on moving and inventing," says First Global Securities. And at least for now, Target is inventing in a way that appeals to consumers with money to spend.
Dead Batteries
At 11 times trailing earnings, Energizer is cheaper; Gillette's multiple is 25. But cheaper doesn't mean better, says First Global.
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