The wobbling world economy

Greed and fear. Bulls vs bears. The global economy and its financial markets are always torn between the two.

But rarely have we seen such a dramatic swing from one to the other as we have since the start of the year.

Then, hopes of a powerful post-Covid recovery fuelled by cashed up savers dominated. Now, Russia’s war in Ukraine, China’s renewed virus lockdowns, and the Federal Reserve’s hawkish pivot to quash the fastest inflation in decades have fund managers the most bearish they have ever been.

Reflecting the rapid outlook shift, the World Bank lowered its estimate for global growth in 2022 to 3,2 percent from a January prediction of 4.1 percent. It’s planning to mobilise a funding package bigger than the Covid-19 response for nations to deal with various resulting and ongoing crises.

“What’s really clear is that the risks lay on the downside,” Carmen Reinhart, the World Bank’s chief economist, told Bloomberg Television’s “Daybreak: Australia” on Tuesday, citing an “array of disruptions.”

Such worries come ahead of the International Monetary Fund and World Bank spring meetings taking place this week in Washington, where food security, inflation, debt and the shock of Russia’s invasion of Ukraine are set to feature.

The IMF will release its own World Economic Outlook at 9 a.m. Eastern time on Tuesday. — Bloomberg