Coronavirus: IMF raises global growth forecast
The International Monetary Fund (IMF) revealed their bleak economic forecast last year, stating that more than 90 million people could be plunged into extreme poverty during the peak of the coronavirus crisis.
The news came shortly after UK Prime Minister Boris Johnson unveiled his three-tier lockdown system for England, which also saw the IMF update its forecast for the UK economy, anticipating that the UK economy would contract by 9.8% in 2020. The prediction turned out to be accurate, with GDP for 2020 contracting by 9.9% as restrictions became more severe.
However, this year has seen the IMF raise its global growth forecast as a result of the rapid deployment of coronavirus vaccines. The new forecast is that the global economy will grow by 5.5% in 2021 and 4.2% in 2022. Economic growth for the UK has been altered to 4.5%.
The IMF also acknowledged that the gap between rich and poor countries is likely to widen. Gita Gopinath, IMF chief economist, stated “with advanced economies generally expected to recover faster, progress made towards convergence over the last decade is at risk of reversing.”
WHO acknowledges economic strain of nationwide lockdowns
The World Health Organisation (WHO) came under fire last year after delivering a statement on lockdowns, which they have since claimed were “taken out of context.”
WHO officials warned government leaders to rely less on nationwide lockdowns as they cause significant harm to the economy.
Special envoy at the WHO, David Nabarro, insisted that national lockdowns should be used as a last resort and that governments should use other effective methods to tackle the coronavirus.
In an interview with BBC Radio 4, Mr Nabarro said: “When it comes to what the state does, it’s a combination of testing, contact tracing, isolating, and having the capacity to deal with outbreaks when they build up.”
However, Mr Nabarro said that the WHO does not advocate national lockdown as the primary method of containing the virus as the consequences of this is felt severely by the poor and disadvantaged people.”
More people are out of work, hospitality and tourism sectors are nearing a standstill, and poverty levels have skyrocketed, so a more sustainable approach is needed rather than “lurching from lockdown to lockdown” said David Nabarro.
Under-25s most hit by UK unemployment
According to the latest data from the Office of National Statistics (ONS), UK unemployment levels have spiralled to their worst level in nearly three years due to COVID-19.
The latest figures show that UK unemployment jumped up 5.1% in Q4 of 2020, with three fifths of this figure consisting of under-25s.
Last year, the ONS National Statistician for Economics, Jonathan Athow, said that a large number of redundancies stemmed from hospitality, recruitment and travel sectors – some of the worst-affected industries in the UK.
Although the number of people on payrolls increased by 83,000 in January this year, with the government imposing more stringent restrictions and measures to curb the spreading of the virus, the UK unemployment rate is expected to spike further, with the Bank of England predicting a 7.8% rise.
Chancellor Rishi Sunak’s furlough scheme was due to end this April; however, it’s thought that he will extend this to June during the Spring 2021 budget. UK Prime Minister, Boris Johnson, announced yesterday that non-essential businesses could begin to reopen from 12th April. Financial support until June would, therefore, help provide additional support as businesses get back on their feet.
Pound Sterling rises against major currencies
Whilst unemployment continues to remain a substantial issue for the UK, the British pound (GBP) has surged against its key currency rivals over recent weeks, supported by the UK’s coronavirus vaccination programme.
The British pound to US dollar (GBP/USD) exchange rate has edged higher today, surpassing the USD 1.40 resistance level to USD 1.41. The US has also been hit hard by unemployment during COVID-19, with new data revealing that US jobless claims rose to 861,000 during last week.
US dollar investors will be anxious about Chair of the Federal Reserve, Jerome Powell’s monetary policy speeches delivered today and tomorrow. Analysts at UniCredit stated ‘Mr. Powell will very likely reiterate that the Fed is a long way from meeting its goals and that it will likely take some time before “sufficient progress” has been made to taper its bond purchase program’.
It’s thought that the Fed will remain cautious on the US economic outlook and is unlikely to provide any further support for the US dollar (USD) this week.
Whilst the British pound (GBP) looks to be underpinned by rapid vaccinations and Prime Minister Boris Johnson’s roadmap yesterday, some currency analysts believe that Sterling could be running out of steam. Only time will tell if this is the case, as we advance towards the end of Q1.