Fragile confidence hampers global economic recovery

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Fragile confidence hampers global economic recovery

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Businesses and households in major economies are struggling to recover from an era of high inflation, as precarious growth prospects and political uncertainty weigh on their confidence.

Even though economic activity remains relatively solid, confidence indicators have fallen sharply or remain stuck in negative territory, according to a study by the Financial Times.

Results from the Brookings-FT Tracking Indices for the Global Economic Recovery, or Tiger, suggest that sentiment is the driving factor. the global economy weak point.

THE US presidential election November 5 and geopolitical turmoil, including the Middle East conflict and Russia’s invasion of Ukraine, all contribute to this pessimistic sentiment.

“There is this feeling of sadness and uncertainty,” said Eswar Prasad, a senior fellow at the Brookings Institution. “Confidence indicators are doing very poorly in countries that are doing well, as well as in countries that are not doing very well. »

The findings come as policymakers and economists prepare to gather for the annual meetings of the IMF and World Bank in Washington next week.

Speaking before the meetings, IMF Managing Director Kristalina Georgieva warned that the fund’s forecasts point to a “merciless combination low growth and high debt – a difficult future.”

She stressed the need for governments to tackle their frayed public finances, but warned that the difficult economic environment could hamper efforts to reduce debt levels.

The IMF will update its global growth forecast next week, after predicting global expansion of 3.2 percent in 2024 and 3.3 percent in 2025 in its July report. As the world overcomes its once-in-a-generation inflationary shock, rising prices would leave a lasting legacy on household incomes, Georgieva warned.

While indicators of real economic activity have increased in the United States and China, confidence has been hit hard and remains well below its long-term levels, the biannual index suggests. Confidence has also been shaken in Japan and Germany.

Prasad said fragile confidence indicators reflected not only concern over the duration of the recovery, but also political uncertainty and the shadow of “growing geopolitical instability in many hotspots.”

This happened despite the fact that the American and Indian economiesThe , in particular, are still in “high gear”, according to the index.

Indicators for other major economies, including Germany, are much less optimistic. The real activity indicator for Germany is now at its lowest level since 2020, when the Covid-19 pandemic forced economies around the world into lockdown, with confidence also well below its long-term level. term in the euro zone’s largest economy.

Germany is facing its first two-year recession since the early 2000s after the October 9 government. revised downwards its growth forecasts for 2024.

Some confidence levels in the UK have risen, according to the Tiger Index, even as business leaders await clarity on economic policies from Chancellor Rachel Reeves in her long-awaited Budget on October 30.

Data visualization by Keith Fray

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