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Global economy recovering from depths of COVID-19 crisis, but may be losing momentum: IMF – The Globe and Mail

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IMF Managing Director Kristalina Georgieva speaks at a press briefing in Washington, on March 4, 2020.

NICHOLAS KAMM/AFP/Getty Images

The global economy is recovering from the depths of the coronavirus crisis, but there are signs of slowing momentum in countries with resurging infection rates, the International Monetary Fund said in a new report for G20 major economies.

The report, released ahead of this week’s virtual meetings of finance officials and leaders from the Group of 20 countries, underscored the uneven nature of the global recovery and warned the crisis would likely leave deep, unequal scars.

In a separate blog post, IMF Managing Director Kristalina Georgieva hailed what she called significant progress in the development of vaccines to vanquish a virus that has claimed more than a million lives around the globe and resulted in tens of millions of job losses.

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But she cautioned that the economic path ahead remains “difficult and prone to setbacks.”

The IMF last month forecast a 2020 global contraction of 4.4 per cent, with the global economy expected to rebound to growth of 5.2 per cent in 2021, but said the outlook for many emerging markets had worsened.

Georgieva said data received since that forecast confirmed a continuing recovery, with the United States and other advanced economies reporting stronger-than-expected economic activity in the third quarter.

But she said the most recent data for contact-intensive service industries pointed to a slowing momentum in economies where the pandemic was resurging.

While fiscal spending of nearly $12-trillion and monetary policies had averted even worse outcomes, poverty and inequality were increasing, and more support was needed, the IMF said.

New outbreaks and more stringent mobility restrictions, and delays in vaccine development and distribution could reduce growth, increase public debt and worsen economic scarring.

Georgieva urged G20 countries to act swiftly and in a united manner to provide continued support and ensure enough vaccines were available around the world, warning that no recovery could be sustained unless the pandemic was defeated everywhere.

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The head of the World Health Organization (WHO) on Monday said G20 leaders had an opportunity to commit financially and politically to the COVAX global facility, set up to provide COVID-19 vaccines to poorer countries.

The United States, under outgoing President Donald Trump, has threatened to pull out of the WHO, and has refused to join the COVAX facility, but experts say his successor, Democrat Joe Biden, could change course after he takes office on Jan. 20.

Georgieva also called on G20 leaders to commit to increased investment in green technologies and increases in carbon prices, estimating that doing so could boost global gross domestic product and create about 12 million jobs over a decade.

Biden has also pledged to rejoin the 2015 Paris climate change agreement that Trump quit.

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Economy

Canadian retail sales slide in April, May as COVID-19 shutdown bites

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december retail sales

Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Economy

Canadian dollar notches a 6-day high

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Canadian dollar

The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Economy

Toronto Stock Exchange higher at open as energy stocks gain

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Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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