Citing Russia’s War, IMF Cuts Global Growth Forecast to 3.6%

A person walks outside of the International Monetary Fund (IMF) building, during the first day of the World Bank/IMF Spring meetings in Washington, Tuesday, April 19, 2022. (AP)
A person walks outside of the International Monetary Fund (IMF) building, during the first day of the World Bank/IMF Spring meetings in Washington, Tuesday, April 19, 2022. (AP)
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Citing Russia’s War, IMF Cuts Global Growth Forecast to 3.6%

A person walks outside of the International Monetary Fund (IMF) building, during the first day of the World Bank/IMF Spring meetings in Washington, Tuesday, April 19, 2022. (AP)
A person walks outside of the International Monetary Fund (IMF) building, during the first day of the World Bank/IMF Spring meetings in Washington, Tuesday, April 19, 2022. (AP)

The International Monetary Fund on Tuesday downgraded the outlook for the world economy this year and next, blaming Russia's war in Ukraine for disrupting global commerce, pushing up oil prices, threatening food supplies and increasing uncertainty already heightened by the coronavirus and its variants.

The 190-country lender cut its forecast for global growth to 3.6% this year, a steep falloff from 6.1% last year and from the 4.4% growth it had expected for 2022 back in January. It also said it expects the world economy to grow 3.6% again next year, slightly slower than the 3.8% it forecast in January.

The war - and the darkening outlook - came just as the global economy appeared to be shaking off the impact of the highly infectious omicron variant.

"The war will slow economic growth and increase inflation," IMF chief economist Pierre-Olivier Gourinchas told reporters on Tuesday.

Now, the IMF expects Russia’s economy - battered by sanctions - to shrink 8.5% this year and Ukraine’s 35%.

US economic growth is expected to drop to 3.7% this year from 5.7% in 2021, which had been the fastest growth since 1984. The new forecast marks a downgrade from the 4% the IMF had predicted at the beginning of the year. Hobbling US growth this year will be Federal Reserve interest rate increases, meant to combat resurgent inflation, and an economic slowdown in key American trading partners.

Europe, heavily dependent on Russian energy, will bear the brunt of the economic fallout from the Russia-Ukraine war. For the 19 countries that share the euro currency, the IMF forecasts collective growth of 2.8% in 2022, down sharply from the 3.9% it expected in January and from 5.3% last year.

The IMF expects the growth of the Chinese economy, the world’s second biggest, to decelerate to 4.4% this year from 8.1% in 2021. Beijing’s zero-COVID strategy has meant draconian lockdowns in bustling commercial cities like Shanghai and Shenzhen.

Some commodity-exporting countries, benefiting from the rising price of raw materials, are likely to defy the trend toward slower growth. For example, the IMF raised its growth forecast for oil producer Nigeria - to 3.4% this year from the 2.7% the fund said it expected back in January.

The world economy had bounced back with surprising strength from 2020’s brief but brutal coronavirus recession. But the rebound presented problems of its own: Caught by surprise, businesses scrambled to meet a surge in customer orders, which overwhelmed factories, ports and freight yards. The result: long shipping delays and higher prices.

The IMF forecasts a 5.7% jump in consumer prices in the world’s advanced economies this year, the most since 1984. In the United States, inflation is running at a four-decade high.

Central banks are raising interest rates to counter rising prices, a move that could choke off economic growth. By driving up prices of oil, natural gas and other commodities, the Russia-Ukraine war has made their task of fighting inflation while preserving the economic recovery even trickier.

The conflict also has "triggered the biggest refugee crisis in Europe since World War II," the IMF noted, and cut supplies and raised prices of fertilizer and grain produced in Russia and Ukraine, threatening food security in Africa and in the Middle East. In a speech last week, IMF managing director Kristalina Georgieva warned of the threat of "more hunger, more poverty and more social unrest."

The IMF emphasized the uncertainty surrounding its forecasts and the difficulty governments and central banks face in trying to adjust to rapidly changing circumstances. "The war may get worse. The sanctions may tighten up. COVID may roam again around the world," Georgieva said on Tuesday. "For policymakers -- a tough time."



Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion
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Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's liquidity levels continued to grow strongly, reaching SAR2,825,715 million at the end of May 2024, marking an annual growth of approximately 8.6%, reported the Saudi Press Agency on Sunday.

This represented an increase of more than SAR222,928 billion compared to the same period in 2023, which stood at SAR2,602,786 million. These levels reflect the broad money supply (M3) as reported in the Saudi Central Bank (SAMA)'s monthly statistical bulletin for May 2024.

Since the beginning of the year, liquidity has grown by 4%, representing an increase of more than SAR104,757 billion. At the end of January, it stood at SAR2,720,957 million.

Liquidity levels also achieved a monthly growth of approximately 1.2%, with an increase of about SAR32,402 billion compared to the end of April of the same year when it stood at SAR2,793,313 million.

These liquidity levels strongly support economic and commercial activity, contributing effectively to the economic development process and enabling the achievement of the goals of Saudi Vision 2030. This reflects the strength and solidity of the banking and financial sector.

A breakdown of the four components of the broad money supply (M3) is as follows: Demand deposits, the largest contributor to the total money supply (M3) at 49.2%, recorded a level of SAR1,390,893 million at the end of May 2024.

Time and savings deposits, the second-largest contributor to the total money supply (M3) at 31.5%, recorded a level of SAR889,558 million.

Other quasi-money deposits amounted to SAR314,807 million, representing a contribution of approximately 11.1% to the total money supply (M3), making it the third-largest contributor. Lastly, "currency in circulation outside banks" amounted to SAR230,456 million, contributing approximately 8.2% to the total money supply (M3).

Quasi-money deposits consist of residents' deposits in foreign currencies, deposits against letters of credit, outstanding transfers, and repurchase agreements (repos) conducted by banks with the private sector.

Domestic liquidity includes M1, which comprises currency in circulation outside banks in addition to demand deposits only, and M2, which includes M1 plus time and savings deposits. The broad definition, M3, includes M2 plus other quasi-money deposits.