Research and Analytics
Research and Analytics
In the second part of two articles, Abdulmajid discusses the global effects of aggressive monetary policy, in Africa, the EU, and the United States. In addition, He highlights a few analyst recommendations and the potential repercussions of those recommendations.
The Federal Reserve Bank of the United States of America, also referred to as “The Federal Reserve” or “The Fed” or “The U.S. Fed,” has an almost monopolistic influence on the functioning and operation of global economies. Due to the U.S. dollar’s status as the World Reserve Currency (WRC) and the currency of choice (or circumstance) for international trade and commerce. The Federal Reserve, which is the apex bank of the world’s largest economy, serves almost as the de facto central bank for the rest of the world, and as such, decisions made within its walls ripple through the halls of other central banks and international/continental financial institutions.
In the first of two pieces on this subject, I will make an effort to present a clear and short explanation of what monetary policy is, how the Federal Reserve has worked to rein in inflation in a manner that is consistent with the objectives that it has articulated, and how inflation is proving to be structural in the economies of the United States and the rest of the world.
Nigeria’s large infrastructure gap has made it difficult to improve the production and distribution of LPG locally. Therefore, the country resorted to importing LPG of about 65%, while 35% of consumers’ demand is locally supplied. Even though the LPG is precluded from Value Added Tax (VAT) according to section 38 of the Value Added Tax Act, the imported LPG is not free from the 7.5% VAT charges.
Asia alone has roughly two billion internet users, with considerable room to grow. Asia’s advanced and emerging market economies have several locally headquartered tech giants—including Alibaba, JD.com, Tencent, Rakuten—and host foreign tech giants such as Facebook. A new set of agreed global tax reforms will change where these tech giants and other global giants pay taxes.
2020 was a year of extremes. Travel all but ceased for a period. Oil prices wildly fluctuated. Trade in medical products reached new heights. Household spending shifted to consumer goods rather than services and savings ballooned as people stayed home amid a global shutdown.
In our latest External Sector Report we found that the global reaction to the pandemic further widened global current account balances—the sum of absolute deficits and surpluses among all countries—from 2.8 percent of world GDP in 2019 to 3.2 percent of GDP in 2020. Those balances are set to widen further as the pandemic continues to rage in much of the world.
The growth of infections in sub-Saharan Africa is now the fastest in the world, with an explosive trajectory that is outpacing the record set in the second wave. At this pace, this new wave will likely surpass previous peaks in a matter of days—and in some countries, infections are already more than double, or even triple, their January peaks. The latest (delta) variant—reportedly 60 percent more transmissible than earlier variants—has been detected in 14 countries.
Rising world food prices for producers are making headlines and causing concerns among the public. The most recent data show a moderation in consumer food price inflation globally, but as we explain below, that could change in the coming months. This would only add to the high prices that consumers in many countries already lived through last year.
Many countries have stepped up in the global fight against the pandemic, as have institutions such as the World Health Organization, the World Bank, Gavi (the Global Alliance for Vaccines and Immunization), the African Union, and others.
Yet, more than a year into the COVID-19 crisis, new cases worldwide are higher than ever. Urgent action is needed to arrest the rising human toll and economic strain.
Imagine you’re a policymaker in sub-Saharan Africa. You’ve been charged with lifting your country out of the worst health crisis in living memory, and nobody around you knows when it will end—the second wave that gripped the region earlier in the year has eased, but many countries are nonetheless bracing for further waves as winter approaches.
One piece of good news is that a global recovery is well underway. Key economies are rebounding sharply, global trade has improved, commodity prices are higher, and investment flows have resumed.
The bad news is that, for sub-Saharan Africa, at least, near-term growth prospects are somewhat more subdued. And as long as widespread vaccination remains out of reach, you will face the unenviable task of trying to boost your economy while simultaneously dealing with repeated COVID-19 outbreaks as they arise.
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.
