World economy’s ‘great escape’ brings no comfort to the G-20

If the world economy is heading for a soft landing there’ll be plenty of anxiety along the way, with Iran’s missile attack on Israel putting an exclamation point on global jitters.

As the world’s financial elite gather in Washington for meetings of the International Monetary Fund, World Bank, and Group of 20, they’ll confront a mixture of slowing growth, stubborn inflation, high interest rates and debt levels, and market-rattling geopolitical risks from Kyiv to Tel Aviv.

Bloomberg Economics now sees global activity slowing this year to 2.9 percent — a 0.2 percentage point upgrade from December in what it terms a “great escape” — but still “way below” the pre-pandemic pace.

IMF chief Kristalina Georgieva has signaled that the fund will also slightly raise its forecast, to be released Tuesday, from the current 3.1 percent while warning that the world is heading for “a sluggish and disappointing decade.”

Against that backdrop, investors will closely watch key attendees at the meetings. Scheduled speakers include Federal Reserve Chairman Jerome Powell, US Treasury Secretary Janet Yellen, UK Chancellor of the Exchequer Jeremy Hunt, and the heads of the European Central Bank, Bank of Japan, and Bank of England.

The politics of the moment have hamstrung the G-20 at recent gatherings, and it will likely again be unable to address risks that split its members.

Russia’s war in Ukraine has dragged into its third year, with US military support in question and Kyiv’s ability to pay for bullets and bond coupons an increasing focus. The IsraelHamas war in Gaza, meanwhile, risks tipping the Middle East into a wider conflagration.

Iran on Saturday launched more than 200 ballistic and cruise missiles and attack drones against Israel in a dramatic escalation of tensions.

Both conflicts, swirling around some of the world’s biggest petroleum suppliers, are pushing energy prices higher, a worrisome sign for inflation fighters.

The IMF has sounded the alarm over the geopoliticallydriven fragmentation of the global economy. The divide is broadly between the United States and European Union on one side and China and Russia on the other — with the Global South the main battleground for business and influence.

“We have to buckle up for more to come, because it is a more diverse world,” Georgieva said when asked about geopolitical volatility. “And it is a world in which we have seen divergence, not just in economic fortunes but also divergence in objectives.” Also in focus in the coming week will be the deep debt distress among several emerging market nations, which gorged for nearly two decades on cheap money, mostly from China. Now poor countries are struggling to regain access to capital as creditors fight for their share of the action, a competition with profound implications for Beijing’s influence over global finance.

Elsewhere, Chinese economic data, UK inflation, and wage numbers, and Canada’s budget will be among the key highlights this week.

The US data calendar kicks off Monday with retail sales, and economists project a moderate advance as the first quarter drew to a close, underscoring a resilient yet cautious consumer. The figures don’t take into account the impact of inflation and mostly reflect spending on merchandise.

March data on inflation-adjusted purchases, including outlays for services, due later in the month will provide a more comprehensive view of household demand.

Among housing data in the coming week, a government report on Tuesday is seen showing that beginning home construction settled back in March after a solid February advance. Homebuilders have taken advantage of scant inventory in the resale market over the past year.