The latest updates on world economy, in 5 charts | Mint

The latest updates on world economy, in 5 charts

Growth slowdown in China has been a cause of worry for the world, and with the country now also experiencing deflation, has added more to it. (Image: Pixabay)
Growth slowdown in China has been a cause of worry for the world, and with the country now also experiencing deflation, has added more to it. (Image: Pixabay)


  • Several central banks will announce their monetary policy decisions in December, while deflation in China is raising questions about its growth prospects

Every month, Mint’s Plain Facts section brings out an update on key global economic data to thread together the biggest developments in the world that are worth paying attention to. The accompanying analysis and charts attempt to explain how each story is creating ripples on the global stage, where it is headed in the coming weeks, and whether it can impact India. This time, we explain incoming central bank decisions in various countries, and the deflation in China that’s raising questions about its growth prospects.

1. Monetary policies

Nearly four years ago, central banks around the world cut policy interest rates to all-time lows and kept them there for months. Then they raised them back quickly to tame the resulting inflation. Now the discourse has moved to holding policy rates in a balancing act. In December, central banks of the US, the UK, European Union, India and Japan will announce their monetary policy decisions. All these central banks, barring Japan’s, have already hiked interest rates sharply from the pandemic lows, and with the inflation not as intense as it was a year ago, they are likely to hold rates once again, in what has been described as higher-for-longer interest rate regime. That’s because inflation, even though softening, is yet to settle down at the targets set by central banks. Japan, on the other hand, has kept its ‘super’ accommodative stance so far but could make the first move early next year as inflation is continuously printing above its target.

2. Troubles ahead?

Growth slowdown in China has been a cause of worry for the world, and with the country now also experiencing deflation, has added more to it. China experienced deflation in October, the second such instance in four months, which has led to concerns that the world’s second largest economy may be experiencing what Japan faced in the 1990s. Since inflation is considered a signal about the performance of the economy, the second year-on-year decline, and the sixth month-on-month decline, in prices could be a sign of low demand. While much of the world is struggling with high inflation, deflation in China is at odds with the trend. The accommodative monetary policy in the country has also led to widening of the gap between interest rates of China and the US, which may have fuelled capital outflow. In the September-ended quarter China reported negative foreign direct investment (FDI) flows for the first time in 25 years, signalling weak investor sentiments.

3. Climate commitment

As climate change increasingly becomes a global issue, impacting agricultural output and food prices, the Conference of the Parties (COP), the annual international climate summit convened by the United Nations, will be held between 30 November and 12 December in Dubai. Despite the widespread impact of climate change, the annual negotiations have been divisive, with poorer countries seemingly bearing the brunt of pollution caused by historical development in western countries. Moreover, the venue of this year’s COP is also mired in controversy since the United Arab Emirates is a major oil producer. While countries have committed funds to finance steps to tackle climate change, many fall short. According to the Global Funds Update, climate finance deposited by industrialized countries still falls short by $5 billion of what they had pledged, as of December 2022. The US, the UK and Germany are among the countries that have the biggest gap (in absolute terms) between pledged and deposited amounts.

4. Argentina’s woes

While high inflation is currently a global headache, the problems are nowhere close to what Argentina has been facing: a triple-digit rise in prices on a year-on-year basis in each of the months between February and October. The result is the victory of right-wing libertarian Javier Milei, who has vowed to “exterminate" inflation in the country, last week. The president-elect has promised to replace the country’s currency peso with the US dollar (known as dollarization) to fight inflation, which seemed to have worked for the voters struggling with high cost of living. Several Latin American countries such as Ecuador and El Salvador have already adopted the dollar as their currency to bring in economic stability. However, given Argentina’s size, dollarization may be an uphill task, with some experts saying it would strip the country off of its sovereignty. For now, the International Monetary Fund has projected Argentina’s inflation to moderate to 32.5% by 2028.

5. Tides turning?

For the past two years, the global smartphone market has been under pressure due to shortage of components and low demand due to the slowdown in economic growth. Global smartphone shipments had declined 0.7% in July-September quarter year-on-year, 9% in April-June and 14.2% in January-March, according to the quarterly data released by Counterpoint Research. While the shipments are significantly lower than the levels seen in 2021, the pace of contraction has narrowed with each quarter. Moreover, the latest preliminary numbers from Counterpoint Research’s monthly tracker show the global monthly smartphone sell-through volumes actually grew 5% year-on-year in October, breaking the streak of 27 consecutive months of declines due to the recovery in emerging markets, including festivities-related optimism in India. The expansion is expected to continue in the October-December quarter, marking an era of gradual recovery for the global smartphone market.

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