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The Graphic Truth: Rich countries feel inflation pinch
Japan’s inflation rate hit 4% last month. Sounds low, right? Compared to many Western countries, it is. But for Japanese consumers, it’s the highest spike in prices since 1981. As a result, the Bank of Japan is under increasing pressure to raise its key interest rate from -0.1%, where it’s been since 2016. Japan’s central bankers are far from alone. In fact, on Wednesday, the Bank of Canada again boosted its benchmark interest rate, this time to 4.5%, but also became the first major central bank to announce it plans to hold off on further rate hikes for now. Most wealthy countries have felt the price crunch due to high energy costs, COVID supply chain issues, and the war in Ukraine. We compare inflation numbers for the past year across all G-7 countries.
3 reasons risk of global recession in 2023 has increased
A global recession is looming in 2023. But why?
Speaking to Ian Bremmer on GZERO World, IMF Managing Director Kristalina Georgieva offers three reasons.
First, all the big economies — the US, China, and the Eurozone — are slowing down at the same time.
Second, inflation shows no signs of abating.
Third, the world is becoming more fragmented, which Georgieva says makes it harder to find solutions to common problems.
Watch the GZERO World episode: Can the world avoid a global recession?
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Focus on Africa: hunger, energy, climate - and the path to growth
Sub-Saharan Africa was on the brink of economic recovery last year. Now, the World Bank expects its growth to slow in 2023. With global inflation on the rise, rising food and fuel costs “actually put lives at risk in a way few other shocks can," says International Monetary Fund (IMF) senior economist Andrew Tiffin.
And sub-Saharan Africa is particularly vulnerable: 123 million people there are currently food-insecure, while the region accounts for 6% of the global energy demand. With climate change exponentially leading to those numbers rising, Tiffin says: “Any globally viable discussion has to take into account Africa’s concerns and needs. Because without that, there is simply no solution.”
The IMF’s latest analysis and growth projections for sub-Saharan Africa were released in a new report, available here: https://imf.org/AfricaREO-Oct22
Tiffin spoke in a Global Stage interview with Shari Friedman, Eurasia Group's managing director for Climate and Sustainability, at the World Bank/IMF fall meetings in Washington, DC.
Podcast: Making sense of global inflation, looming recession, & economists who disagree
Listen: Did US inflation come from supply, or did it come from demand? On the GZERO World podcast, Ian Bremmer speaks with economist and University of Chicago professor Austan Goolsbee about the causes of the current high levels of inflation in the US and around the world. If inflation is being driven by too much stimulus, as economists like Larry Summers believe, Goolsbee believes the Federal Reserve is doing the right thing by raising interest rates to cool demand. But if inflation is mostly due to the war in Ukraine or supply chain disruptions, rate hikes might result in stagflation.
Goolsbee, who served as an adviser under President Obama, also shares his thoughts on why some economic trends from the last two years - like making more products domestically and remote work - may be short-lived "pandemic blips," whether the Biden administration gave out too much stimulus for the recovery, and why Americans feel glum about the economy - yet still have cash in their pockets.
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The Graphic Truth: Rich countries feel inflation pinch
The international media have been intently focused on the dire inflationary trend in the United States, where inflation recently hit 8.6% — a 40-year high. Indeed, this swing prompted the Federal Reserve to step in this week and implement its largest interest rate hike since 1994. But the US is just one of many advanced economies feeling the burn of sluggish growth and inflation. In fact, several large economies have experienced even bigger rises in inflation over the past year. We compare these numbers for all G7 countries: the US, Germany, France, Italy, Japan, the UK, and Canada.
This comes to you from the Signal newsletter team of GZERO Media. Subscribe for your free daily Signal today.
Wads of British Pound Sterling banknotes.
Hard Numbers: British inflation soars, Spain adopts menstrual leave, COVID stimulus gambler fesses up, Schröder to be evicted
9: Inflation in the UK has risen to 9%, a four-decade high, as Britons grapple with the worst cost-of-living crisis in half a century. Energy bills for the average household rose by almost £700 ($865) a year in April, and the Bank of England warns that the surge will likely worsen this fall.
1: Spain’s cabinet on Tuesday approved legislation granting paid leave to women experiencing severe menstrual pain, making it the first European country to advance such a bill. It is part of a broader women-focused legislative package that includes reforms to abortion laws, whereby 16-year-olds will no longer require parental consent to get an abortion.
357,400: A Japanese man who spent 46.3 million yen ($357,400) of state-supplied COVID relief funds says he is “sorry” for splurging and that he will slowly pay back authorities. The money was supposed to be divided between 463 low-income people in a town in western Japan but was mistakenly sent as a lump sum to one individual, who gambled it away on casino sites.
407,000: Germany’s governing coalition is planning to strip former Chancellor Gerhard Schröder of his sprawling office complex in Berlin that costs German tax payers around €407,000 ($427,552) annually. Schröder, who is buddies with Vladimir Putin and has refused to condemn Russia’s onslaught in Ukraine, will reportedly still keep his monthly ex-chancellor’s stipend of €8,300 ($8,717).A woman displays her electricity bill during a protest against high energy prices in Ankara.
Hard Numbers: Turkish inflation soars, Nicaraguan NGO crackdown, Taiwan rejects pricy US choppers
70: Turkey's monthly inflation rate skyrocketed to almost 70% in April, a two-decade high. Critics blame President Recep Tayyip Erdoğan, who continues to baffle economists by lowering interest rates to combat rising prices.
50: Nicaragua's parliament shut down 50 NGOs for failing to comply with government regulations like submitting financial statements. The NGOs say they tried to turn in the documents, but authorities refused to take them. The organizations were likely up to things strongman President Daniel Ortega didn’t like, such as defending human rights.
12: Taiwan won't buy 12 anti-submarine helicopters from the US because they're … too expensive. Unless the Taiwanese are trying to haggle, this doesn't bode well for broader US plans to help the self-governing island defend itself against China.
Is global economic inequality getting worse?
Yes, said the majority of respondents in a recent GZERO poll.
What's happening in Ukraine has undone much of the momentum for narrowing the equality gap created during the pandemic, said Ian Bremmer, president of Eurasia Group and GZERO Media, during a Global Stage livestream conversation hosted by GZERO in partnership with Microsoft. The event was held on site at the headquarters of the World Bank in Washington, DC , and was moderated by Jeanna Smialek, Federal Reserve reporter at The New York Times. The war has aggravated pre-existing problems like high inflation and supply chain disruptions. A cease-fire would help end all this, but don't count on it.
This week the World Bank and the International Monetary Fund are holding their annual spring meetings. The conflict is top and center on the agenda, as is financial assistance to first help Ukraine keep the lights on and someday rebuild when the Russians leave.
"We're working on that," World Bank President David Malpass said upon joining the discussion just minutes after meeting Ukrainian officials. Beyond the conflict itself, Malpass is now more broadly concerned about the global economic slowdown and whether central banks have the tools for a soft landing after raising interest rates to fight inflation.
One country that's successfully stood up to the Russian threat is Lithuania, whose Finance Minister Gintarė Skaistė talked about her country's long-term energy independence strategy. Lithuania recently became the first EU member state to completely wean itself off Russian fossil fuels.
And what about the ripple effects from the conflict in other parts of the world, like food security? This is a big deal in countries in the Middle East and North Africa that rely heavily on Russian and Ukrainian wheat imports like Egypt.
Rania Al-Mashat, Egyptian minister for international cooperation, explained how her country diversified its food imports to soften the impact of such disruptions.
Later this year, Egypt is hosting the COP27 climate summit. But even more importantly, right before that meeting there will be a G20 summit in Indonesia — and Russia's invited.
What'll happen? Will the US and its allies walk out of rooms when the Russians show up? The G20 consensus has been fragmented, said Indonesian Finance Minister Sri Mulyani Indrawati. Indeed it has, added Bremmer, who believes the war in Ukraine is "ripping up the fabric of geopolitics" for years to come.
Finally, Vickie Robinson, head of Microsoft's Airband Initiative to expand broadband access throughout the developing world, shared her perspective about how getting more people online will help achieve global equality.
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