Washington
CNN
—
The global economy is at risk of stagnation in the coming years, and America’s strong economic strength alone may not be enough to save the world economy.
Kristalina Georgieva, managing director of the International Monetary Fund, warned a few weeks ago: “Without a course correction, we are certainly headed for a ‘tepid 20s’, a depressed and disappointing decade.”
This is partly due to Europe’s lackluster performance and slowing growth in China (despite strong first-quarter data). The good news is that despite significant economic obstacles in recent years, such as geopolitical conflicts and high interest rates, a global recession is unlikely. The bad news is that when economic growth slows, many people end up feeling poorer.
Solutions: Policymakers around the world need to address a number of economic issues, the IMF chief said.
It is important to encourage growth. When an economy expands, living standards improve, innovation is encouraged, and households become wealthier. That reality is gradually fading away in the 20-nation eurozone, where growth is flat. There are now fears that if the European Central Bank does not cut interest rates soon, there will be a full-blown recession.
The situation in China has not improved much. Growth in the world’s second-largest economy last year stalled due to high youth unemployment and a weak real estate sector, which is at its slowest pace in decades. (Q1 GDP statistics suggest the recovery may have begun early this year.)
This is in stark contrast to the United States, which has achieved strong growth due to solid consumer spending and improved productivity. America’s economic strength is precisely why the IMF last month revised its forecast for world economic output upward from the 2.9% forecast in October to a maximum of 3.2%.
Several countries, including the United States and some countries in the euro area, are expected to expand their workforces by 2023 due to “sound macroeconomic fundamentals that have been built over the past few years,” as well as immigration playing a key role. Georgieva said that she had benefited from this. Economic growth in Spain and France last year exceeded expectations.
But here are the main reasons why the US is outperforming. Robust productivity gains.
U.S. labor productivity, which essentially measures how efficiently workers produce goods and services, jumped in 2023 after declining the previous year.
It remains to be seen whether this momentum will continue. Data released by the Labor Department last week showed productivity growth in the first three months of this year was much lower than expected.worker efficiency Economists say this is a tailwind unique to the United States.
“Productivity is one of the big factors, and there are also cultural differences when it comes to spending compared to other countries in Europe,” Stephen Gallagher, chief U.S. economist at Société Générale, told CNN. Ta.
Americans have been overspending in recent years, helped by solid economic growth. The job market and savings increased during the pandemic. Although the US economy is not at the breakneck pace of his 2021, US consumers continue to spend robustly, which is driving growth. Consumer spending accounts for about two-thirds of U.S. economic output.
Gallagher said that while Americans are more likely to spend their surplus savings, in European countries people are “just more likely to keep their savings.”
Mr Gallagher said another key difference underpinning the US economy compared to the eurozone economy was the country’s energy sector. Unlike the Eurozone, the United States does not rely heavily on imports for its energy supply. Europeans pay much more for energy than Americans, and it becomes even more expensive when supplies are threatened by geopolitical conflicts, such as the ongoing Russia-Ukraine war or escalating tensions in the Middle East.
A “course correction” will not make the U.S. economy any stronger. Economic policymakers around the world need to address a variety of important issues.
“Policymakers have a choice at the moment. They can avoid difficult decisions and try to get by with less-than-good policies, or they can make other choices,” Georgieva said. said. “They can…choose good policies. Tackling inflation and debt decisively. And fostering economic transformation to promote productivity, inclusiveness and sustainable growth.”
“What we need is a ’20s of change,'” she says.
My colleagues Hande Atay Alam and Olesya Dmitrakova report that Turkey has suspended all import and export transactions with Israel in protest of the Gaza war.
“All import and export transactions related to Israel, including all products, have been suspended,” the Turkish Trade Ministry said in a statement Thursday. “Turkey will strictly and resolutely implement these new measures until the Israeli government allows an uninterrupted and sufficient flow of humanitarian aid to Gaza.”
An Israeli government official accused Turkish President Recep Tayyip Erdogan of breaking trade agreements by “blockading Israel’s import and export ports.”
“This is the behavior of a dictator who ignores the interests of the Turkish people and businessmen and ignores international trade agreements,” Israeli Foreign Minister Israel Katz said in a statement. Posted in X Thursday.
According to official data, trade between Turkey and Israel was worth $7 billion last year. Israel is among Turkey’s top 20 export destinations, purchasing $5.4 billion worth of goods and services. According to Reuters, the top exports from Turkey to Israel are steel, automobiles, plastics, electrical equipment and machinery.
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Monday: Revenues from Palantir Technologies, Tyson Foods, and Marriott Worldwide Vacations. Statement from New York Fed President John Williams.
Tuesday: Revenue from Disney, BP, UBS, Duke Energy, McKesson, Suncor Energy, Celius, Reddit, Lyft, Dutch Bros, Squarespace, TripAdvisor. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, spoke.
Wednesday: Revenues from Toyota, Uber, Anheuser-Busch InBev, Airbnb, Shopify, Fox Corporation, News Corporation, Duolingo, Icahn Enterprises, New York Times Company, Sunoco, Valvoline, The Cheesecake Factory, Compass, AMC Entertainment, Beyond Meat. Chinese customs reported the country’s trade surplus in April. Fed Governor Lisa Cook speaks.
Thursday: Revenues from Honda, Warner Bros. Discovery, Warner Music Group, Hyatt Hotels, Tapestry, Dillard’s, H&R Block, Planet Fitness, Hilton Grand Vacations, Sweetgreen, Krispy Kreme, Six Flags, and Papa John’s. Bank of England announces latest interest rate decisions. The U.S. Department of Labor has released the number of new applications for unemployment benefits for the week ending May 4th.
Friday: The UK’s Office for National Statistics has released gross domestic product figures for the first quarter. The University of Michigan will release preliminary consumer sentiment figures in May. Chicago Fed President Austan Goolsby speaks. China’s National Bureau of Statistics releases inflation data for May.