(Bloomberg) — Two months after its dire predictions of the steepest recession in almost a century, the International Monetary Fund will release new global economic forecasts this week that will probably look even worse.
Officials at the Washington-based Fund have warned that a revised outlook due on Wednesday may feature a more pessimistic view than in April. Back then, they said the “Great Lockdown” caused by the coronavirus would force a global contraction of 3% this year.
A gloomier forecast might reflect their assessment of the severity of damage caused by the widespread shutdown in activity. The U.K. economy, for example, instantly shrank by a fifth in April alone.
Any glimmers of hope the IMF can impart may channel optimism that the worst of the outbreak has passed in some countries, allowing them to ease restrictions. That would chime with purchasing manager indexes from Japan to Europe to the U.S., due on Tuesday, all of which are expected to show further improvement in sentiment and activity from historic lows.
What Bloomberg’s Economists Say…
“Rapidfire forecast updates reflect the shifting trajectory for the virus. Some countries — including China and Germany — have successfully bent the curve. Others have not. Add up that messy reality and — despite green shoots of recovery in May and June — the outlook continues to deteriorate”
— Tom Orlik, chief economist
However, most countries still face a long path back to normality from a downturn that is remarkably synchronized. IMF Chief Economist Gita Gopinath, who is compiling the forecasts, noted last week that both advanced and emerging market economies will endure a recession this year — the first time both have suffered in tandem since the Great Depression of the 1930s.
Click here for what happened last week and below is our wrap of what else is coming up in the world economy.
Europe, Middle East and Africa
June was the most open month in most of Europe after the lockdown, and a slew of activity indicators will give investors and policy makers a glimpse of how the economies are coping.
A key figure would be the purchasing managers’ index for the services industry, which was hit the hardest by the restrictions. Confidence data will be watched closely in Sweden amid an ongoing debate over its relatively lax approach to the Covid 19 pandemic.
The European Central Bank will also publish the accounts of its June meeting, which saw policy makers decide to expand the pandemic bond-buying program beyond market expectations. Look out for any meaningful dissenting voices among richer nations wary of extending unjustifiable support to the eurozone’s most vulnerable economies.
Elsewhere, Hungarian and Czech policy makers are expected to hold interest rates, while Turkey’s central bank is forecast to reduce its benchmark interest rate by another 25 basis points to 8% on Thursday, after a cumulative 1,575 basis points in cuts over the previous nine meetings.
South African Finance Minister Tito Mboweni will table an adjustment budget on Wednesday to redirect 130 billion rand ($7.5 billion) to a stimulus package, while, in Kenya, the central bank may ease after holding rates steady a month ago.
For more, read Bloomberg Economics’ full Week Ahead for EMEA
U.S.
In the U.S., investors will be watching several reports, including May new-home sales, durable goods orders and personal spending, to help them fine-tune their second-quarter GDP estimates.
The government will also issue its third estimate of first quarter GDP on Thursday, along with the closely watched jobless claims report. Meanwhile, Federal Reserve officials including James Bullard and Charles Evans, are due discuss the economy.
For more, read Bloomberg Economics’ full Week Ahead for the U.S.
Asia
New Zealand’s central bank has a policy announcement on Wednesday after data showed the economy is in its first recession since 2010. Thailand’s central bank meets later that day, with economists not expecting additional moves, according to early survey responses.
In the Philippines, a rate reduction is seen as possible on Thursday. South Korean trade data for the first 20 days of June will be scrutinized Monday for a pulse check on global commerce.
For more, read Bloomberg Economics’ full Week Ahead for Asia
Latin America
Latin America’s big economies are in the spotlight this week. On Tuesday in Brazil, the minutes of last week’s central bank meeting — policy makers cut the key rate to a record-low 2.25% — may clear up questions on forward guidance raised by the post-decision statement. Later in the day, Argentina’s first-quarter gross domestic product report will capture the early phase of what’s expected to be one the region’s deepest recessions of 2020.
On Thursday, the Brazilian central bank’s comprehensive quarterly inflation report updates forecasts for a wide range of scenarios, providing critical insight about the considerations informing monetary policy. Meanwhile, Mexico’s central bank, which lags behind regional peers in responding to the pandemic’s demand shock, will stick to gradual easing with a half-point cut to take the key rate to a still-restrictive 5%.
For more, read Bloomberg Economics’ full Week Ahead for Latin America
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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
