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Barclays says global recession unlikely, cuts growth expectations

Reuters

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Barclays says global recession unlikely, cuts growth expectations

FOREX. A man walks past a currency exchange point, showing an image of the US dollar in Cairo, Egypt, March 22, 2022.

Mohamed Abd El Ghany/Reuters

'Higher prices for energy and food will squeeze real wages, dragging consumption lower and complicating the growth/inflation trade-off for central banks,' Barclays economists write

A global recession is unlikely despite the raging war in Ukraine, Barclays said on Thursday, March 24, even as the brokerage cut its 2022 growth forecast to 3.3% from 4.4% before the conflict.

Barclays, which also raised its global inflation expectations to 5.6% from 3.2%, said the main impact of the war is a supply side shock for both energy and food.

“Higher prices for energy and food will squeeze real wages, dragging consumption lower and complicating the growth/inflation trade-off for central banks,” Barclays economists wrote.

Russia’s invasion of Ukraine, which began on February 24, has triggered a rally in commodities, with oil climbing over $139 per barrel earlier this month. It has also sparked fears of reducing stockpile of basic food materials, as well as shortage of fertilizers.

While the eurozone remains deeply hurt, Barclays expects minimal impact to growth in the United States and China.

The brokerage’s action comes after the International Monetary Fund warned that the deepening crisis in Ukraine could lead it to lower its global growth forecast. The IMF had projected global growth of 4.4% in January. – Rappler.com

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