1 Global growth outlook downgraded to 3.3% (San
Francisco Chronicle) The US economy's stumble at the start of 2015 is dragging
down the world's growth to the lowest level since the Great Recession, the
International Monetary Fund has said. The IMF forecasts 3.3 percent global
growth this year, down from the 3.5 percent it predicted in April. That would
be slowest pace of global growth since the world economy shrank slightly in the
recession year 2009.
The main culprit: The American economy, world's
biggest, shrank at a 0.2 percent annual rate from January to March, hurt by
nasty weather. The IMF last month cut the outlook for US growth to 2.5 percent
in 2015, from April's 3.1 percent. The US economy grew 2.4 percent in 2014. The
fund expects the US economy to grow 3 percent in 2016. IMF research chief
Olivier Blanchard downplayed the wider economic impact of the Greek debt crisis
and the possibility that Greece could be forced to abandon the euro currency.
"The effects on the rest of the world economy are likely to be
limited," he said.
The IMF expects global growth to improve to 3.8
percent next year. The multinational lending agency kept its forecast for
China's economic growth unchanged at 6.8 percent this year and 6.3 percent in
2016. The Chinese stock market has plunged, with the Shanghai Composite index
down 30 percent from its peak less than a month ago. But Blanchard said:
"We don't see it as a major macroeconomic issue." The IMF predicts
the eurozone will grow 1.5 percent this year, unchanged from April's forecast;
Japan will grow 0.8 percent, down from an April forecast of 1 percent; and the
Brazilian economy will shrink 1.5 percent, a downgrade from April's forecast
for a 1 percent drop.
2 Oil prices could fall further (BBC) Oil prices may
have further to fall despite stabilising in recent months - and even beginning
to rise modestly - because of a massive oversupply the International Energy
Agency (IEA) has said. The IEA said lower oil prices were likely to last well
into 2016. The agency added the world oil market was unable to absorb the huge
volumes of oil now being produced. It follows the massive drop in prices which
started last summer.
The price of Brent crude fell sharply last year from
$115 a barrel in June to $45 a barrel in January. The current price of Brent
crude is $59 a barrel. The fall in prices has led oil firms to cut back
investment in exploration, while North Sea oil has come under significant
pressure. All seven major global oil firms have also reported annual declines
in profit as a result of lower oil prices. Core members of the Organisation of
Petroleum Exporting Countries (Opec) have continued to produce the same level
of oil in the past year despite falling oil prices in an attempt to regain
market share.
US oil production has also soared in recent years,
as fracking - or the process of extracting oil from shale rock by injecting
fluids into the ground - has revolutionised oil production in the country.
Opec's
response to the fall in prices was to refuse to cut production. Many Opec
nations are able to tolerate a lower oil price despite losing money. For other
nations such as Russia the lower oil price is doing substantial harm to economic
growth The IEA said Opec crude oil production rose 340,000 barrels per day
(BPD) in June to 31.7 million barrels a day, a three-year high, led by record
output from Iraq, Saudi Arabia and the United Arab Emirates.
The IEA trimmed its forecast for global oil demand
growth this year slightly to 1.39 million BPD and said it expected global
demand growth to slow to 1.2 million BPD in 2016. The agency added non-Opec
supply growth was expected to grind to a halt in 2016 as lower oil prices and
spending cuts take their toll. It forecast zero growth in non-Opec oil supply
in 2016 after an increase of 1 million bpd in 2015.
3 Many more Greeces in the world (Heather Stewart in
The Guardian) The plight of Greece, brought to its knees by a crippling debt
burden, has been gripping and heartbreaking in equal measure: a full-blown
sovereign debt crisis on the doorstep of some of the wealthiest countries in
the world. Yet new analysis by the Jubilee Debt Campaign reveals that Greece’s
plight is far from unique: more than 20 other countries are also wrestling with
their own debt crises. Many more, from Senegal to Laos, lie in a debt danger
zone, where an economic downturn or a sudden jump in interest rates on world
debt markets could lead to disaster.
One of the lessons from the 2008 crash was that hefty
debt levels can leave countries vulnerable to sudden shifts in market mood. But
Jubilee reports that the rock-bottom interest rates across major economies,
which have been a key response to the crisis, have in many cases prompted
governments, firms and consumers to go on a fresh borrowing binge, storing up
potential problems for the future. Judith Tyson of the Overseas Development Institute
thinktank says the flipside of the latest round of borrowing has been investors
and lenders in the west looking for bigger returns than they could get at home,
a process known in the markets as a “search for yield”.
She warns that a number of countries have “loaded
up” on debt – and while some governments had invested the money wisely,
diversifying their economies and improving infrastructure, others have not. She
points to Ghana, in west Africa, where a sharp increase in borrowing has been
spent on what she calls “pork-barrel politics. They’ve spent it in a frivolous
way.” Jubilee’s analysis defines countries as at high risk of a government debt
crisis if they have net debt higher than 30% of GDP, a current-account deficit
of over 5% of GDP and future debt repayments worth more than 10% of government
revenue. “We estimate that 14 countries are rapidly heading towards new
government debt crises, based on their large external debts, large and
persistent current account deficits, and high projected future government debt
payments,” it says.
Falling commodity prices as growth in China slows,
as well as the strong dollar – a danger because much of African governments’
borrowing is dollar-denominated – will create pressures on many other
developing countries. But it’s not just in the developing world where low
interest rates and the legacy of the crisis have increased the temptation to
paper over the cracks with borrowed money. Jubilee found that net cross-border
lending worldwide, including the private sector as well as governments, has
increased from $11.3 trillion in 2011 to $13.8tn in 2014 – and forecasts that it
will reach $14.7tn this year.
Countries at high risk of government external debt
crisis: Bhutan, Cape Verde, Dominica, Ethiopia, Ghana, Laos, Mauritania, Mongolia,
Mozambique, Samoa, Sao Tome e Principe, Senegal, Tanzania and Uganda. Countries
currently in government external debt crisis: Armenia, Belize, Costa Rica,
Croatia, Cyprus, Dominican Republic, El Salvador, The Gambia, Greece, Grenada,
Ireland, Jamaica, Lebanon, Macedonia, Marshall Islands, Montenegro, Portugal,
Spain, Sri Lanka, St Vincent and the Grenadines, Tunisia, Ukraine, Sudan and
Zimbabwe.
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