International Monetary Fund chief economist Gita Gopinath said on Tuesday that the IMF was increasingly concerned about sustained inflation. “Central banks should be prepared to act swiftly,” said Gopinath, quoted by the Reuters Agency.
At the same time, Gopinath warned against comparisons to the stagflation of the 1970s – in her opinion, demand is strong and the problems mainly concern supply chains. Stagflation is a phenomenon where there is a simultaneous occurrence of significant inflation and economic stagnation.
Global manufacturing activity has been disrupted by supply problems – including about semiconductors, clogged ports and lack of containers, and problems in the labor market. Performance-optimized global supply chains are being rebuilt after the downtime caused by last year’s pandemic, Reuters reported.
Inflation in Poland
In the forecast from the latest version of the cyclical World Economic Outlook report, IMF experts predict that in 2021 the average annual inflation in Poland will be 4.4%, and in 2022 it will drop to 3.3%, with the unemployment rate being respectively 3.5 percent. and 3.2 percent in 2021 and 2022. At the end of 2022, inflation in Poland is expected to amount to 2.6 percent.
The quick, preliminary estimate prepared by the Central Statistical Office shows that inflation in September 2021 in Poland it was 5.8 percent year on year. Analysts predict that “in October we will be six in the front”.
Interest rate increases
The Monetary Policy Council at its one-day meeting on October 6 raised interest rates for the first time in 9 years. – Our decision was aimed at limiting the risk of inflation persistence above our inflation target in the medium term. This risk has increased recently due to the occurrence of further supply shocks. They shifted the scale of inflation expectations upwards, clearly this whole path moved upwards. They lengthened and raised the path of expected inflation. She will be raised higher and longer. We know this before the publication of the November projection. That is why we decided to react now – President of the National Bank of Poland, Adam Glapiński, emphasized on Thursday.
He made a reservation that the MPC decision would not have immediate effects. – Our decision will not lower the current inflation, because it is impossible – said Glapiński.
Earlier, in the second half of September, the National Bank of Hungary raised interest rates for the fourth time – with the first increase taking place in June. The reference rate increased by 15 basis points to 1.65%.
At the end of September, the decision on interest rates was announced by the Czech National Bank, which also decided to raise the main interest rate, the two-week repo rate, by 75 basis points to 1.5%. The market expected a 50 bp rate hike. It was also another hike recently.
GDP in Poland and in the world – IMF forecasts
According to the estimates contained in the IMF report, in the years 2021-2022 the Polish economy will grow at a rate of 5.1 percent. annually. Thus, the IMF raised its GDP growth forecast for this year from 4.6 percent. forecasted in July to 5.1%, and for the next year it lowered the forecast from 5.2%. up to 5.1%
The fund predicts that the global economy will cope with the downturn caused by the coronavirus pandemic this year slightly worse than predicted by the IMF report in June. He also believes that “the stratification of economic prospects remains a source of serious concern,” which will be much better for wealthy countries and give them a chance to recover faster after the crisis.
The economic downturn in poor countries, due to the spread of the Delta virus variant, will pose a “serious risk” to worsening living conditions.
The eurozone economy is expected to grow by 5%; previously it was expected to be 4.6 percent. Better forecasts for the countries of the monetary union are a derivative of faster economic growth in France and Italy, the IMF informed.
In China, economic growth will amount to 8% this year. – by 0.1 percentage point less than the IMF predicted in June; UK GDP growth will also be weaker – it is to amount to 6.8%, by 0.1 percentage point. less than the previous forecast indicated.
In the euro area, Germany will do worse than expected – 3.1% (0.5 percentage point less), but the prognosis for France is better – GDP growth is expected to reach 6.3% there. (0.5 percentage points more than in the June forecast) and Italy – 5.8%. (+0.9 percentage points).
The IMF expects other developed economies to return to pre-pandemic economic growth in mid-2022.
The World Economic Outlook is the IMF’s flagship report, published twice a year – in spring and autumn (usually in April and October), ahead of the Spring and Annual Meetings of the Governors of the International Monetary Fund and the World Bank. In addition to detailed macroeconomic forecasts, each WEO edition also includes analyzes of the most important current problems of the global economy. In the currently published edition, particular attention is paid to the issues of rising inflation and the role of basic research in the development of innovation and strengthening economic growth in the long term.
Reuters, PAP, TVN24 Biznes
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