Africa & World Economy

Understanding the Rise in US Long-Term Rates

By Okeowo EbenezerPosted on April 23, 2021Posted in Africa & World EconomyTagged Bond, COVID-19, Fiscal Policy, GDP, Inflation, Interest Rate, Monetary PolicyNo Comments

The rise in long-term US interest rates has become a focus of global macro-financial concerns. The nominal yield on the benchmark 10-year Treasury has increased about 70 basis points since the beginning of the year. This reflects in part an improving US economic outlook amid strong fiscal support and the accelerating recovery from the COVID-19 crisis. So an increase would be expected. But other factors like investors’ concerns about the fiscal position and uncertainty about the economic and policy outlook may also be playing a role and help explain the rapid increase early in the year.

A Future with High Public Debt: Low-for-Long Is Not Low Forever

By Aminu MusaPosted on April 20, 2021Posted in Africa & World EconomyTagged COVID-19, Fiscal Policy, Interest Rate, Monetary Policy, Public DebtNo Comments

Many countries are experiencing a combination of high public debt and low interest rates. This was already the case in advanced economies even prior to the pandemic but has become even starker in its aftermath. A growing number of emerging market and developing economies are likewise enjoying a period of negative real rates—the interest rate minus inflation—on government debt. The IMF has called on countries to spend as much as they can to protect the vulnerable and limit long-lasting damage to economies, stressing the need for spending to be well targeted. This is especially critical in emerging market and developing economies, which face tighter constraints and associated fiscal risks, where greater prioritization of spending is of the essence.

Managing Divergent Recoveries

By Sheriffdeen AdeotiPosted on April 6, 2021Posted in Africa & World EconomyTagged COVID-19, Fiscal Stimulus, IMF, Outlook, Pandemic, Recovery, WEONo Comments

It is one year into the COVID-19 pandemic and the global community still confronts extreme social and economic strain as the human toll rises and millions remain unemployed. Yet, even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible. Thanks to the ingenuity of the scientific community hundreds of millions of people are being vaccinated and this is expected to power recoveries in many countries later this year. Economies also continue to adapt to new ways of working despite reduced mobility, leading to a stronger than anticipated rebound across regions. Additional fiscal support in large economies, particularly the United States, has further improved the outlook.

In our latest World Economic Outlook, We are now projecting a stronger recovery for the global economy compared with our January forecast, with growth projected to be 6 percent in 2021 (0.5 percentage point upgrade) and 4.4 percent in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3 percent in 2020.

How Rising Interest Rates Could Affect Emerging Markets

By Aminu MusaPosted on April 5, 2021Posted in Africa & World EconomyTagged Advanced Economies, COVID-19, developing economies, Emerging Markets, Fiscal Stimulus, Interest Rate, Vaccine developmentNo Comments

Emerging and developing economies are viewing rising interest rates with trepidation. Most of them are facing a slower economic recovery than advanced economies because of longer waits for vaccines and limited space for their own fiscal stimulus. Now, capital inflows to emerging markets have shown signs of drying up. The fear is of a repeat of the “taper tantrum” episode of 2013, when indications of an earlier-than-expected tapering of US bond purchases caused a rush of capital outflows from emerging markets.

Slow-Healing Scars: The Pandemic’s Legacy

By Adebisi SamuelPosted on March 31, 2021Posted in Africa & World EconomyTagged Business, COVID-19, Lockdown, Pandemic, RecessionNo Comments

Recessions wreak havoc and the damage is often long-lived. Businesses shut down, investment spending is cut, and people out of work can lose skills and motivation as the months stretch on. But the recession brought on by the COVID-19 pandemic is no ordinary recession. Compared to previous global crises, the contraction was sudden and deep—using quarterly data, global output declined about three times as much as in the global financial crisis, in half the time.

The Great Divergence: A Fork in the Road for the Global Economy

By Joshua OlorunsaiyePosted on February 25, 2021Posted in Africa & World Economy, AgenciesTagged Emerging developing countries, G20 economies, Per capita income, VaccinesNo Comments

As our note to the G20 meeting points out, there is a major risk that as advanced economies and a few emerging markets recover faster, most developing countries will languish for years to come. This would not only worsen the human tragedy of the pandemic, but also the economic suffering of the most vulnerable.

Structural Factors and Central Bank Credibility Limit Inflation Risks

By Joshua OlorunsaiyePosted on February 20, 2021Posted in Africa & World Economy, AgenciesTagged Globalization, Inflation, Structural Factor, VaccineNo Comments

After ending last year with unexpectedly strong vaccine success and hope that the pandemic and economic distress it caused would recede, we woke up to the reality of new virus variants and the unpredictable, winding road that it can lead the world down.

When it Comes to Services vs. Manufacturing, Words Matter

By Joshua OlorunsaiyePosted on February 17, 2021Posted in Africa & World Economy, AgenciesTagged Industrial sector, Manufacturing Sector, ServicesNo Comments

Efforts to revive national manufacturing sectors get a lot of airtime. After all, the sector propelled many East and South-East Asian economies—the so-called “East Asia Miracle”—and was a gateway to the middle class for millions of workers. However, for all the obsession with manufacturing, economists for their part seem to be more preoccupied with services.

Is It Time To Tax Stock Trading?

By Joshua OlorunsaiyePosted on February 10, 2021Posted in Africa & World Economy, AgenciesTagged Financial transaction tax, Stock, Stock Market, taxNo Comments

In the economist’s utopian vision of the stock market, clearheaded investors diligently evaluate companies and invest only in the ones they expect to grow and thrive. In the process, investors direct resources where they’ll be most productive, benefiting the overall economy.

A Race Between Vaccines and the Virus as Recoveries Diverge

By Joshua OlorunsaiyePosted on January 28, 2021Posted in Africa & World Economy, AgenciesTagged COVAX, COVID-19, Pre-COVID, RECOVERIES, Uncertainty, Vaccines, VirusNo Comments

In just three months since we released our last forecast in October, recorded COVID-19 deaths have doubled to over 2 million, as new waves have lifted infections past previous peaks in many countries. In these same three months, multiple vaccines have seen unexpectedly strong success and some countries have started ambitious vaccination drives. Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens. There remains tremendous uncertainty and prospects vary greatly across countries.