#mexico – Martin Wheatcroft

ICAEW chart of the week: IMF World Economic Outlook Update

My chart for ICAEW this week illustrates how countries rank in the IMF’s latest forecasts for economic growth over 2024 and 2025.

IMF World Economic Outlook Update
ICAEW chart of the week

(Horizontal bar chart)

Legend:

Emerging markets and developing economies (green)
World (purple)
Advanced economies (blue)
UK (red)

Projected annualised real GDP growth 2024 and 2025

Bars in green except where noted.

India: +6.5%
Philippines: +6.0%
Indonesia: +5.0%
Kazakhstan: +4.4%
China: +4.3%
Malaysia: +4.3%
Saudi Arabia: +4.3%
Egypt: +3.8%
Iran: +3.4%
Thailand: +3.2%
Türkiye: +3.1%
World Output: +3.1% (purple)
Nigeria: +3.0%
Poland: +3.0%
Pakistan: +2.7%
World Growth: +2.6% (purple)
South Korea: +2.3% (blue)
Mexico: +2.1%
United States: +1.9% (blue)
Canada: +1.8% (blue)
Russia: +1.8%
Brazil: +1.8%
Spain: +1.8% (blue)
Australia: +1.7% (blue)
France: +1.3% (blue)
South Africa: +1.1%
United Kingdom: +1.1% (red)
Germany: +1.0% (blue)
Argentina: +1.0%
Netherlands: +1.0% (blue)
Italy: +0.9% (blue)
Japan: +0.8% (blue)

8 Feb 2024.
Chart by Martin Wheatcroft FCA. Design by Sunday.
Source: IMF World Economic Outlook Update, 30 Jan 2024.

(c) ICAEW 2024

Each January, the International Money Fund (IMF) traditionally releases an update to its World Economic Outlook forecasts for the global economy. This year it says that it expects the global economy to grow by an average of 2.6% over the course of 2024 and 2025 at market exchange rates, or by 3.1% when using the economists-preferred method of converting currencies at purchasing power parity (PPP).

The chart shows how the 30 countries tracked by the IMF fit between emerging market and developing economies, most of which are growing faster than the global averages, and advanced economies, which tend to grow less quickly.

The biggest drivers of the global forecast are the US, China and the EU, with both the US and China expected by the IMF to grow less strongly on average over the next two years than in 2023. This contrasts with an improvement over 2023 (which involved a shrinking economy in Germany) by the advanced national economies in the EU over the next two years – apart from Spain, which is expected to fall back from a strong recovery in 2023.

Growth in emerging and developing countries is expected to average 4.1% over the two years, led by India (now the world’s fifth largest national economy after the US, China, Germany and Japan), followed by the Philippines, Indonesia, Kazakhstan growing faster than China, followed by Malaysia, Saudi Arabia, Egypt, Iran, Thailand and Türkiye.

Nigeria, Poland and Pakistan are expected to grow slightly less than world economic output, followed by Mexico.

Russia, Brazil and South Africa are expected to grow less strongly, while Argentina is expected to grow the least, with a forecast contraction in 2024 expected to be followed by a strong recovery in 2025.

The strongest-growing of the advanced economies in the IMF analysis continues to be South Korea, followed by the US, Canada, Spain, Australia, France, the UK, Germany, the Netherlands and Italy, with Japan expected to have the lowest average growth. Overall, the advanced economies are expected to grow by an average of 1.6% over the next two years.

For the UK, forecast average growth of 1.0% over the next two years is expected to be faster than the 0.5% estimated for 2023, but at 0.6% in 2024 and 1.6% in 2025 we may not feel that much better off in the current year.

Of course, forecasts are forecasts, which means they are almost certainly wrong. However, they do provide some insight into the state of the world economy and how it appears to be recovering the pandemic.

For further information, read the IMF World Economic Outlook Update.

More data

Not shown in the chart are the estimate for 2023 and the breakdown in 2024 and 2025, so for those who are interested, the forecast percentage growth numbers are as follows:

Emerging market and developing countries:

Country	Average over 2024 and 2025	2023 Estimate	2024 Forecast	2025 Forecast
India	6.5%	6.7%	6.5%	6.5%
Philippines	6.0%	5.3%	6.0%	6.1%
Indonesia	5.0%	5.0%	5.0%	5.0%
Kazakhstan	4.4%	4.8%	3.1%	5.7%
China	4.3%	5.2%	4.6%	4.1%
Malaysia	4.3%	4.0%	4.3%	4.4%
Saudi Arabia	4.1%	-1.1%	2.7%	5.5%
Egypt	3.8%	3.8%	3.0%	4.7%
Iran	3.4%	5.4%	3.7%	3.2%
Thailand	3.2%	2.5%	4.4%	2.0%
Türkiye	3.1%	4.0%	3.1%	3.2%
Nigeria	3.0%	2.8%	3.0%	3.1%
Poland	3.0%	0.6%	2.8%	3.2%
Pakistan	2.7%	-0.2%	2.0%	3.5%
Mexico	2.1%	3.4%	2.7%	1.5%
Russia	1.8%	3.0%	2.6%	1.1%
Brazil	1.8%	3.0%	2.6%	1.1%
South Africa	1.1%	0.6%	1.0%	1.3%
Argentina	1.0%	-1.1%	-2.8%	5.0%

Advanced economies (including the UK):

Country	Average over 2024 and 2025	2023 Estimate	2024 Forecast	2025 Forecast
South Korea	2.3%	1.4%	2.3%	2.3%
USA	1.9%	2.5%	2.1%	1.7%
Canada	1.8%	1.1%	1.4%	2.3%
Spain	1.8%	1.1%	1.4%	2.3%
Australia	1.7%	1.8%	1.4%	2.1%
France	1.3%	0.8%	1.0%	1.7%
UK	1.1%	0.5%	0.6%	1.6%
Germany	1.0%	-0.3%	0.5%	1.6%
Netherlands	1.0%	0.2%	0.7%	1.3%
Italy	0.9%	0.7%	0.7%	1.1%
Japan	0.8%	1.9%	0.9%	0.8%

This chart was originally published by ICAEW.

ICAEW chart of the week: BRICS+

The ICAEW chart of the week returns from its summer holidays to look at the planned expansion of BRICS from five to 11 countries.

Venn diagram showing the G20, G7, BRICS, and BRICS+:

G20 in green, encompassing G7 in teal with USA, Japan, Canada and UK plus in blue with dotted line around Germany, France, Italy and the European Union (the EU members of the G7).

Then five countries in G20, but not in the G7, BRICS or BRICS+, being Korea, Australia, Mexico, Indonesia and Türkiye.

Tne BRICS+ in purple with Argentina and Saudi Arabia followed by BRICS in orange with Brazil, Russia, India, China and South Africa. Still in the BRICS+ purple, but outside the G20 green are Ethiopia, Iran, Egypt and UAE.

Sources: G20, G7, BRICS.

Footnote gives share of global GDP: G20 86%. G7 52% (USA 26%, EU 17%), KAMIT 7%, BRICS 25%, BRICS+ 28%.

“The BRICs” was originally coined by Jim O’Neill in 2001 as an abbreviation for Brazil, Russia, India and China, four fast-growing economies that he predicted would come to dominate the world economy.

This investment shorthand evolved into something more substantive in 2006 when ministers from the four countries got together on the sidelines of a meeting at the UN. Leader summits started in 2009, followed by the addition of South Africa in 2011, which resulted in the capitalisation of the final ‘s’ to form BRICS.

BRICS has developed over time to become a counterweight to the G7, providing an alternative forum for leaders of these five major nations to discuss common concerns such as economic development, currency stability, climate change, and tackling drug trafficking and organised crime. BRICS has been increasingly important to Russia since its ejection from the G7 (then the G8) following its invasion of Crimea in 2014 and to China as relations with the G7 have deteriorated over the last decade.

The most recent summit (the 15th) was on 22-24 August 2023, at which it was announced that six additional countries would be joining on 1 January 2024 to bring the number of members to 11.

Our chart this week takes the form a Venn diagram to illustrate how BRICS, and the expanded “BRICS+” grouping (pending a new official name), fit with two other major intergovernmental organisations where leaders meet on a regular basis – the G7 and the G20.

It starts with the G20, a grouping of 19 nations and the European Union that together represent 86% of the global economy. Within this sit the eight members of the G7 group of advanced economies, representing 52% of the global economy: the USA (26%), Japan (4%), the UK (3%), Canada (2%), Germany (4%), France (3%), Italy (2%) and the European Union (17% including Germany, France and Italy). The five BRICS nations represent 25% of the global economy comprising: Brazil (2%), Russia (1.7%), India (4%), China (17%) and South Africa (0.4%).

The diagram is complicated by the expanded BRICS+ as although invitees Argentina (0.6%) and Saudi Arabia (1.0%) are also members of the G20, the other four new members – Ethiopia (0.2%), Iran (0.3%), Egypt (0.3%) and the United Arab Emirates (0.5%) – are outside the G20. These new members together represent 3% of the global economy, taking the expanded BRICS+ to 28%.

Squeezed between the G7 and BRICS+ are five G20 members that together make up around 7% of the global economy that are not in either grouping, being (South) Korea (1.6%), Australia (1.6%), Mexico (1.8%), Indonesia (1.4%) and Türkiye (0.8%). As yet there is no sign of an intergovernmental organisation for these “KAMIT” nations to complement the G7 and BRICS, although in practice they are often invited as guests to G7 summits in addition to their participation in meetings of the G20.

The attraction of intergovernmental forums such as the G7, BRICS and the G20 is that they enable national leaders to engage directly with their counterparts on a wide range of topics, in contrast to the often narrower focus and more formal diplomatic structures of treaty-based international organisations such as the Organisation for Economic and Co-operation Development (OECD), the World Bank or the Organisation of American States (OAS) for example.

Their informal nature gives national leaders more flexibility to (for example) change their memberships without lengthy treaty negotiations or to work together on pressing issues of mutual concern. However, that informality also makes it difficult to create binding resolutions, which is perhaps why the global alternative reserve currency proposed at the first BRICS summit in 2009 had still not been implemented by the time of the 15th summit this August.

ICAEW chart of the week: Inflation around the world

This week we look at how inflation is racing upwards across the world, with the UK reporting in April one of the highest rates of increase among developed countries.

Bar chart showing inflation rates by G20 country: Russia 17.8%, Nigeria 16.8%, Poland 12.4%, Brazil 12.1%, Netherlands 9.6%, UK 9.0%, Spain 8.3%, USA 8.3%, India 7.8%, Mexico 7.7%, German 7.4%, Canada 6.8%, Italy 6.0%, South Africa 5.9%, France 4.8%, South Korea 4.8%, Indonesia 3.5%, Switzerland 2.5%, Japan 2.4%, Saudia Arabia 2.3%, China 2.1%.

Inflation has increased rapidly over the last year as the world has emerged from the pandemic. A recovery in demand combined with constraints in supply and transportation has driven prices, with myriad factors at play. These include the effects of lockdowns in China (the world’s largest supplier of goods), the devastation caused by the Russian invasion in Ukraine (a major food exporter to Europe, the Middle East and Africa), and the economic sanctions imposed on Russia (one of the world’s largest suppliers of oil and gas).

As the chart shows, the UK currently has – at 9% – the highest reported rate of consumer price inflation in the G7, as measured by the annual change in the consumer prices index (CPI) between April 2021 and April 2022. This compares with 8.3% in the USA, 7.4% in Germany, 6.8% in Canada, 6.0% in Italy, 4.8% in France and 2.4% in Japan.

The UK’s relatively higher rate partly reflects the big jump in energy prices in April from the rise in the domestic energy price cap, which contrasts with France, for example, where domestic energy price rises have been much lower (thanks in part to state subsidies). The UK inflation rate also hasn’t been helped by falls in the value of sterling, making imported goods and food more expensive.

Other countries shown in the chart include Russia at 17.8%, Nigeria at 16.8%, Poland at 12.4%, Brazil at 12.1%, Netherlands at 9.6%, Spain at 8.3%, India at 7.8%, Mexico at 7.7%, South Africa 5.9%, South Korea at 4.8%, Indonesia at 3.5%, Switzerland at 2.5%, Saudi Arabia at 2.3% and China at 2.1%. For most countries, the rate of inflation is substantially higher than it has been for many years, reflecting just how major a change there has been in a global economy that had become accustomed to relatively stable prices in recent years.

This is not the case for every country, and the chart excludes three hyperinflationary countries that already had problems with inflation even before the pandemic, led by Venezuela with an inflation rate of 222.3% in April, Turkey with a rate of 70%, and Argentina at 58%.

Policymakers have been alarmed at the prospect of an inflationary cycle as higher prices start to drive higher wages, which in turn will drive even higher prices. For central banks that has meant increasing interest rates to try and dampen demand, while finance ministries have been looking to see how they can protect households from the effect of rising prices, particular on energy, whether that be by intervention to constrain prices, through temporary tax cuts, or through direct or indirect financial support to struggling households.

Here in the UK, both the Bank of England and HM Treasury have been calling for restraint in wage settlements as they seek to head off a further ramp-up in inflation. They hope that inflation will start to moderate later in the year as price rises in the last six months start to drop out of the year-on-year comparison and supply constraints start to ease, for example as oil and gas production is ramped up in the USA, the Middle East and elsewhere to replace Russia as an energy supplier, and as China emerges from its lockdowns.

Despite that, prices are likely to rise further, especially in October when the energy price cap is expected to increase by 40%, following a 54% rise in April. This is likely to force many to make difficult choices as household budgets come under increasing strain.

After all, inflation is much more than the rate of change in an arbitrary index; it has an impact in the real world of diminishing spending power and in eroding the value of savings.

This chart was originally published by ICAEW.

ICAEW chart of the week: Government borrowing rates

Our first chart of 2022 highlights how the cost of government borrowing remains extremely low for most of the 21 largest economies in the world, despite the huge expansion in public debt driven by the pandemic.

Government 10-year bond yields: Germany -0.13%, Switzerland -0.07%, Netherlands 0.00%, Japan 0.09%, France 0.23%, Spain 0.60%, UK 1.08%, Italy 1.23%, Canada 1.59%, USA 1.65%, Australia 1.79%, South Korea 2.38%, China 2.82%, Poland 3.87%, Indonesia 6.38%, India 6.51%, Mexico 8.03%, Russia 8.38%, Brazil 10.73%, Turkey 24.21%.

Our chart of the week illustrates how borrowing costs are still at historically low rates for most of the 21 largest national economies in the world, with negative yields on 10-year government bonds on 5 January 2022 for Germany (-0.13%) and Switzerland (-0.07%), approximately zero for the Netherlands, and yields of sub-2.5% for Japan (0.09%), France (0.23%), Spain (0.60%), the UK (1.08%), Italy (1.23%), Canada (1.59%), the USA (1.65%), Australia (1.79%) and South Korea (2.38%).

This is despite the trillions added to public debt burdens across the world over the past couple of years as a consequence of the pandemic, including the $5trn added to US government debt since March 2020 (up from $17.6trn to $22.6trn owed to external parties) and the more than £500bn borrowed by the UK government (public sector net debt up from £1.8trn to £2.3trn) for example.

Yields in developing economies are higher, although China (2.82%) and Poland (3.87%) can borrow at much lower rates than Indonesia (6.38%), India (6.51%), Mexico (8.03%), Russia (8.37%) and Brazil (10.73%). The outlier is Turkey (24.21%), which is experiencing some difficult economic conditions at the moment. Data was not available for Saudi Arabia, the 19th or 20th largest economy in the world, which has net cash reserves.

With inflation higher than it has been for several years, real borrowing rates are negative for most developed countries, meaning that in theory it would make sense for most countries to continue to borrow as much as they can while funding is so cheap. However, in practice fiscal discipline appears to be reasserting itself, with Germany, for example, planning on returning to a fully balanced budget by the start of next year and the UK targeting a current budget surplus within three years.

For many policymakers, the concern is not so much about how easy it is to borrow today, but the prospect of higher interest rates multiplied by much higher levels of debt eating into spending budgets just as they are looking to invest to grow their economies over the rest of the decade. Despite that, with the pandemic still raging and an emerging cost of living crisis, there may well be a temptation to borrow ‘just one more time’ to support struggling households over what is likely to be a difficult start to 2022.

This chart was originally published by ICAEW.

ICAEW chart of the week: CP Trans-Pacific Partnership

12 February 2021: The UK wrote to New Zealand at the start of this month formally requesting permission to apply for membership of the Comprehensive and Progressive Trans-Pacific Partnership. What is the CPTPP and what opportunities would joining provide to the UK?

The #icaewchartoftheweek is on the UK’s application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a group of eleven countries on the other side of the world. This trade organisation was established to improve trade links between countries surrounding the Pacific, reducing trade barriers between the countries involved and aligning regulations in areas such as intellectual property.

It is sometimes described as the third largest free-trade area in the world, after the US-Mexico-Canada Free Trade Agreement (USMCA, formerly NAFTA) and the EU-EEA-Switzerland Common Market, but it is important to understand that it is much less integrated than a customs union (with shared tariffs), a common market (with fuller regulatory alignment) or an economic union (such as the highly integrated EU Single Market with unified standards and regulations).

According to IMF forecasts for 2021, Japan is the largest economy in the CPTPP with GDP of £3,815bn, while Brunei is the smallest with GDP of £9bn. The other members are Canada (£1,335bn), Australia (£1,125bn), Mexico (£890bn), Malaysia (£280bn), Vietnam (£275bn), Singapore (£270bn), Chile (£220bn), New Zealand (£165bn) and Peru (£150bn). This compares with a forecast of £2,180bn for UK GDP in 2021.

Membership is not exclusive, with CPTPP members involved in a number of other multilateral free trade agreements. Canada and Mexico are also members of USMCA. Malaysia, Singapore, Vietnam and Brunei are members of the 10-nation Association of South East Asian Nations (ASEAN), which in turn has free trade agreements with Japan, Australia and New Zealand, China, India and South Korea. Mexico, Peru and Chile are members of the four-nation Pacific Alliance with Columbia. In addition, China is leading the formation of the Regional Comprehensive Economic Partnership which includes all of the non-Americas members of the CPTPP in addition to China, South Korea and the other members of ASEAN.

The CPTPP replaced the original proposal for a Trans-Pacific Partnership (TPP) that would have included the US, but the remaining nations decided that it was still worthwhile pursuing a revised trade arrangement even after the US withdrew its application four years ago. A new administration could see the USA change its mind and seek to join the CPTPP after all.

Why does the UK want to join a trade pact on the other side of the world? The immediate trade benefits are likely to be relatively modest given the distances involved and which are likely to be secured through bilateral trade agreements already under discussion.

One reason is likely to be geo-political, as membership would strengthen relationships with allies in the Pacific, advancing the UK Government’s ‘global Britain’ agenda. There may also be an advantage in being directly involved in the development of international trade policy in the Pacific region which contains the two largest individual economies in the world (the US and China), potentially influencing trade policy across the planet.

Of course, part of the motivation might be less about trade in the Pacific and more about trade across the Atlantic. After all, if the US were to join the CPTPP, the UK’s membership might provide a base from which to eventually develop a more comprehensive bilateral free trade agreement. This could fulfil a key strategic objective of improving trade ties with the USA by going around the world, albeit in a lot more than 80 days!

This chart was originally published by ICAEW.