27 July 2022
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IMF downgrades global growth forecasts again

By Daniel Richards

  • The IMF downgraded its global growth forecast to 3.2% from 4.4% this year, with growth expected to slow further to 2.9% in 2023 (from 3.6% previously) on tighter monetary policy. The Fund noted that risks remain skewed to the downside in the event of a further energy supply shock or a deterioration in China’s property sector. The IMF has revised up its global inflation forecast to 6.6% in advanced economies and 9.5% in emerging and developing economies on higher food and energy prices, disrupted supply chains and tight labour markets. For the Middle East and Central Asia, the Fund has revised up its 2022 growth forecast to 4.8% from 4.6% previously, but revised the 2023 forecast lower to 3.5% from 3.7% in the April outlook. Global trade growth is expected to slow further on weaker demand, supply chain issues and a stronger USD.  
  • In the US, the Conference Board’s consumer confidence index declined by more than forecast to 95.7 in July, from a downwardly revised 98.4 in June, the lowest reading since February 2021. The main deterioration was in the present situation index, which fell -5.9 points, while the expectations index declined 0.5 points to 65.3, the weakest outlook since March 2013.  High inflation means that consumers are cutting back on discretionary spending and are more pessimistic about their financial prospects over the next six months.  Respondents also reported a softer labour market in July, with fewer people saying jobs were plentiful and more indicating jobs were hard to get.
  • Separately, new home sales slowed by more than forecast in June, with the May reading revised sharply lower as well, indicating further softening in the sector on the back of higher mortgage rates. New home sales fell -8.1% m/m in June to 590k, against a median forecast of a -5.9% m/m decline.
  • Lebanon’s CPI inflation rate stood at 210.1% y/y in June, a modest deceleration from the 211.4% seen in May but still punishingly high for a country dealing with a multitude of crises. Price growth has been consistently in triple figures since July 2020 as it began to accelerate in the wake of the March 2020 debt default which has seen the currency collapse to a fraction of its previous value. Inflation has averaged 216.4% y/y over the first half of this year and while moderating energy prices should help stem further rises, a persistent political failure to implement crucial reforms needed to ensure multilateral assistance will continue to impede any meaningful economic recovery. The Lebanese parliament did yesterday pass a banking secrecy law aimed at combatting financial crimes, but critics say that the legislation has been watered down from the IMF’s original recommendations.
  • Tunisian President Kais Saied has appeared in front of supporters in anticipation that the referendum on a new constitution has passed in his favour – exit polls indicated it carried with over 90% of the vote, although many parties boycotted it and turnout was at less than 30%. Saied argues that the greater powers the new constitution grants the presidency will enable him to move forward with the economic reforms required to secure renewed IMF support and put Tunisia on a surer economic footing.
  • In a report evaluating Egypt’s IMF programmes over the last two years, the Fund noted that while the objectives of the programmes had been broadly achieved, Egypt needed to make further progress on deeper structrual reforms to boost private sector activity, improve governance and reduce the role of the state.  The IMF also noted that greater exchange rate variability may have helped to "avoid a buildup of external imbalances and facilitate adjustment to shocks” under the review period.   

Today’s Economic Data and Events

  • 16:30 US durable goods (Jun) forecast -0.4%
  • 18:00 US pending home sales (Jun) forecast -1.0%
  • 22:00 FOMC rate decision (upper band) forecast +75bp to 2.5%

Fixed Income

  • US Treasuries had a near 10bps round trip from bottom to top overnight as markets await the outcome of the FOMC later this evening. Yields on the 2yr UST closed up a bit less than 4bps at 3.0528% while the 10yr yield added 1bps to 2.8068%. Relatively soft CPI data from Australia out earlier today is helping to keep a lid on yields until the outcome of the FOMC tonight.
  • European bonds were generally stronger with the 10yr bund yield down 9bps at 0.919%, its first close below 1% since the end of May. Yields on the 10yr gilt closed down 2bps at 1.912%.  


  • The dollar managed to snap several days of losses. Gains were widespread with EURUSD down more than 1% at 1.0117 overnight while USDJPY added 0.16% to 136.91. GBPUSD held up relatively better but still edged lower by 0.1% to 1.2028. The outcome of the FOMC tonight will set the next major trajectory for currency markets, particularly the tone of message that comes out from Fed Chair Jerome Powell.
  • Commodity currencies also slipped against the dollar with USDCAD closing up 0.3% to 1.2887 while AUDUSD fell by 0.2% to 0.6939 and NZDUSD fell by almost 0.5% to 0.6234.


  • There were losses across the board on the major US equity indices yesterday, as the Dow Jones, the S&P 500 and the NASDAQ dropped -0.7%, -1.2% and -1.9% respectively, although NASDAQ futures indicate a stronger day today after some positive earnings results from some of the tech majors.
  • In Europe, the FTSE 100 closed flat but both the CAC (-0.4%) and the DAX (-0.9%) closed lower. The composite STOXX 600 closed flat.
  • Locally, the ADX fell -0.% but the DFM gained 0.4%. The Tadawul added 0.8%.


  • Oil prices turned lower again overnight with Brent futures down 0.7% at USD 104.0/b and WTI down by 1.8% to USD 94.98/b. Data from the API showed a draw of more than 4m bbl from commercial stockpiles last week with official numbers out from the EIA later this evening.
  • Gold prices have been wavering ahead of the Fed, falling the last two days in a row to USD 1,717/troy oz. An unequivocally hawkish Fed could open up more downside risk for gold prices while a more accommodative stance could put a limit on market expectations of Fed hikes and potentially allow for prices to rally.

Click here for charts and tables





Written By

Daniel Richards Senior Economist

Edward Bell Head of Market Economics

Khatija Haque Head of Research & Chief Economist

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