World Bank warns of 2008-level crisis

 

Earlier this week, the World Bank published its latest global economics report and it makes for harrowing reading. The Washington-based organisation uses conservative estimates to measure the risks to the world economy as a result of rising economic nationalism, and warns of ‘severe consequences’ for world trade and economic growth. Interestingly, the report details how the bank believes that a broad-based increase in the use of import tariffs around the world would cause a decline in global trade amounting to 9%.

The Trump administration’s recent decision to impose trade tariffs on steel and aluminium imports from the EU, Canada and Mexico could lead to retaliatory measures and, ultimately, undermine the general consensus that free trade is of great benefit to the global economy. It remains to be seen whether the World Bank’s fears are realised, but it is certainly something we should all be watching intently. Once one domino topples, the rest tend to follow suit; one wonders what the EU, Canada and Mexico will do and how the US will respond.

Somewhat fittingly, the main release from yesterday was the US’s balance of trade report for April. It showed that America’s trade deficit narrowed to $46.2 billion in April which was way below market expectations of a $49 billion gap. It is the lowest trade deficit in seven months, with exports hitting a record high. Still, the dollar weakened once more against the euro and sterling, with the pound falling back against the euro. This was likely down to some positive purchasing managers’ index data from the eurozone which might encourage investors that the recent raft of disappointing economic data is merely a blip.

The main release today is the third estimate of the eurozone’s GDP growth rate for the first quarter of 2018. If the figures come in different from these predictions, we could see some further euro movements. There’s still time to get your hands on a copy of our currency forecasts and given that they’re free and have proved hugely popular, there’s really no reason not to.

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