(AGENPARL) – ven 22 luglio 2022 The latest IMF analysis of global economics, finance, development and policy issues shaping the world. []
[IMF Weekend Read]
Dear Colleague,
In today’s edition, we discuss the impact of a complete cutoff in Russian gas supplies on Europe’s economies, Germany’s economic outlook, how consumers think about inflation, global food security, central bank digital currencies, carbon pricing, women in fintech, and much more.
Europe’s Economies
Why Countries Must Cooperate on Carbon Prices
(IMAGE: MIKEMAREEN/ISTOCK BY GETTY IMAGES)
“Our work shows that in some of the most-affected countries in Central and Eastern Europe—Hungary, the Slovak Republic and the Czech Republic—there is a risk of shortages of as much as 40 percent of gas consumption and of gross domestic product shrinking by up to 6 percent.”
–Infrastructure Bottlenecks: The authors say a reduction of up to 70 percent in Russian gas could be managed in the short term, but bottlenecks could reduce the ability to re-route gas within Europe because of insufficient import capacity or transmission constraints.
“These factors could lead to shortages of 15 percent to 40 percent of annual consumption in some countries in Central and Eastern Europe.”
They call on governments to secure supplies from global LNG markets and alternative sources, alleviate infrastructure bottlenecks to import and distribute gas, plan to share supplies across the European Union, encourage energy savings while protecting vulnerable households, and prepare smart gas rationing programs.
“This is a moment for Europe to build upon the decisive action and solidarity displayed during the pandemic to address the challenging moment it faces today.”
Germany
(IMAGE: IMF)
At the start of the year, Germany’s economy was showing signs of overcoming the problems that had capped growth in 2021. Supply disruptions that had hampered manufacturing were easing and services opening up again as the country emerged from a severe winter wave of the Delta variant. It all changed with Russia’s invasion of Ukraine on February 24.
About three-fifths of inflation so far has come from energy prices, but price pressures have spread to other goods and to services. The authors say an upward spiral between wages and prices does not seem likely at this stage and inflation should slow in 2023 as energy prices stabilize.
Facing these rising economic risks, the Germany team says fiscal policy needs to be flexible and ready to provide more support to vulnerable households if the situation deteriorates. In a severe downside scenario, it may be necessary to postpone the return to the debt brake rule so the government can take on additional borrowing to support the economy.
(IMAGE: ISTOCK/FRANCESCOCH)
Pizzinelli outlines the results of a new survey that measures people’s beliefs about the effects of economic shocks on unemployment and inflation. He describes how people’s predictions for the economy often differ from those of experts, and how households and experts see shocks working in different ways.
Are these results bad news for central bankers? asks Pizzinelli, who says that “a deeper understanding of how consumers think about the economy would help policymakers control inflation.”
Recent contributors include Tharman Shanmugaratnum, Pierre-Olivier Gourinchas, Eswar Prasad, Raj Chetty, Barry Eichengreen, Patricia Clavin, and many others.
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WEEKLY ROUND-UP
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Nick Owen
Editor
IMF Weekend Read
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