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World Bank revises down global growth forecast

Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Daniel Richards - MENA Economist
Published Date: 08 June 2022


  • The World Bank cut its 2022 global growth forecast by 1.2 percentage points to 2.9%, citing the impact of the war in Ukraine as well as the recent lockdowns in China.  The Bank expects a “protracted period” of low growth and elevated inflation and noted that the danger of stagflation was “considerable”. However, the Middle East and North Africa was expected to benefit from faster growth (5.3%) and rising oil prices this year before seeing growth moderate in 2023.
  • Saudi Arabia’s economy grew 9.9% y/y in Q1 2022, faster than the flash estimate of 9.6%.  Increased oil and gas production was a key driver of growth in Q1. Non-oil sector growth was also solid at 4.2% y/y, but slower than the prior three quarters. Trade and hospitality GDP rose 2.5% q/q and 6.3% y/y, and transport, storage & communication, non-oil manufacturing and government services also contributed meaningfully to Q1 GDP growth.
  • The Reserve Bank of Australia raised its benchmark cash rate by 50bp to 0.85%, more than the market had been expecting.  The RBA indicated it would do “what is necessary” to curb inflationary pressures, suggesting further rate hikes are likely.  The market is aggressively pricing another nine 25bp rate hikes by the end of this year, which would take the cash rate to 3.1%.  Analysts are expecting a slower pace of tightening, forecasting a cash rate of around 2% by end-2022 according to Bloomberg.
  • Japan’s GDP contracted by -0.5% (seasonally adjusted annualized rate) in Q1 2022, smaller than the -0.3% median forecast. However, this was mainly due to a bigger than expected increase in inventories. The economy is expected to grow in Q2 as consumption recovers and Covid-related restrictions are eased.
  • German factory orders fell sharply in April as lockdowns in China and the war in Ukraine disrupted supply chains and increased uncertainty, which led to weaker demand. Factory orders declined -2.7% m/m and -6.2% y/y, down from March readings and below analysts’ consensus of 0.4% m/m and -4.1% y/y.
  • The US trade deficit narrowed by more than expected in April, shrinking to -USD 87.1bn from -USD107.7bn in March, suggesting that the drag on GDP growth is likely to be much smaller in the second quarter. The deterioration in the trade balance was one of the reasons US GDP shrank in Q1 on a q/q seasonally adjusted basis but this now looks less likely to recur in Q2.

Key economic data and events today

  • 08:30 India RBI repurchase rate forecast +40bp to 4.8%
  • 10:00 German industrial production (Apr) forecast 1.2% m/m
  • 12:30 UK construction PMI (May) forecast 56.6
  • 13:00 Eurozone GDP (Q1 final) forecast 5.1% y/y

Fixed Income

  • US Treasuries closed stronger overnight with a broad UST index adding 0.3%. Yields on the 2yr UST closed roughly flat at 2.7625% while the 10yr yield pulled lower by almost 7bps to 2.9736%. European bond markets also closed stronger with 10yr bund yields down 3bps to 1.287% while the 10yr gilt fell by more than 3bps to 2.212%.
  • Emerging market bonds generally closed weaker. The South African 10yr yield added 9bps to 10.413%. Indian bonds will be in focus today with the RBI setting policy.


  • A general move toward risk assets helped to sink the dollar yesterday. EURUSD added less than 0.1% to close at 1.0703, recovering from lows of less than 1.066 earlier in the day. GBPUSD also pulled higher, recovering sharply from lows of less than 1.2440 to almost 1.26 by the end of the day. USDJPY showed the opposite move, however, pushing higher by 0.5% to 132.59.
  • In commodity currencies CAD strengthened against the US dollar with USDCAD slipping by almost 0.4% to 1.2532 while AUDUSD added 0.5% to 0.7232. NZDUSD closed little changed at 0.649.


  • US stock markets saw gains for a second day yesterday as risk assets returned to favour ahead of the CPI print. All three major benchmark indices closed up, with the Dow Jones adding 0.8% and both the Dow Jones and the NASDAQ gaining 0.9%.  
  • It was a different story elsewhere earlier in the day. In Europe, the composite STOXX 600 lost -0.3%, with the FTSE 100 losing -0.1% and both the DAX and the CAC ending the day -0.7% lower.
  • Locally, the ADX lost -0.3%, the DFM -0.5% and the Tadawul -1.2%. In Egypt, the EGX 30 gained 0.6%.


  • Oil prices are holding on to their recently gained high levels with Brent adding 0.9% overnight to USD 120.57/b while WTI added 0.8% to USD 119.41/b. The EIA projects a sharp drop in Russian oil production over the next 18 months as the EU ban on imports of Russian oil takes effect. The agency estimates that output will drop to 9.3m b/d by the end of 2023 from more than 11m b/d at the start of this year.


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