Morning Brief – Downgrade 

Morning Brief – Downgrade 

Thu 21 Apr 2022



This week is set to be the week of the growth forecast with several sets of statistics already having had profound impacts on markets. As we noted yesterday, the price of oil and the market’s interest rate expectations have been shifted by the forecasts presented by the IMF on Tuesday. Warnings on growth, supply chain disruptions and inflation pressures have all contributed to defensive price action. The World Bank also weighed in on the global economy and together really drove home the stag in stagflation. Here’s what these institutions observed:


The IMF followed the ECB’s previous meeting in stressing the impact of the invasion of Ukraine as a severe headache to growth and inflation. Naturally those closest geographically and most integrated economically were forecasted to be hit the hardest from their pre-invasion trajectories. The IMF had for a long time earmarked 2022 as the year the global economy could soar and unwind the lost years of the pandemic. Accordingly global growth forecasts for this year now sit at 3.6% at the International Monetary Fund.


That may sound respectable by western growth standards but this is meagre to below-average at best by historical global standards. The IMF had held 2022 expectations at 4.4% as recently as January and three months’ prior at a far more impressive 4.9%. The World Bank’s forecasts were similarly bleak: 3.2% for 2022 down from an estimated 4.1% in January.


The UK has been one of if not the fastest growing G7 economy recently. Thanks to a rapid unwinding of pandemic restrictions and building consumer and investor confidence, the UK had performed well. The IMF sees the risk presented to the UK by the invasion of Ukraine as high, downgrading growth by 1% versus expectations published in January. By 2023, the Fund predicted the UK to fall to the slowest growing G7 economy. This pessimistic outlook continued to push GBP lower to test 1.30 on cable once again before a limited recovery yesterday.




Discussion and Analysis by Charles Porter

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