Tag Archives: economy

World Bank outlook for 3 years

World Bank outlook for 3 years

From Wiki:

The World Bank (WB) is an association of two specialized United Nations (UN) organizations that provide financial and technical assistance to developing countries to reduce poverty and improve living conditions around the world.

Already more than two years ago WB warned that the number of people in poverty could increase by as much as 11 million.
It was supposed the financial shock caused by the pandemic will also have serious effects on poverty, which is defined as an income of less than $ 5.5  per day. The World Bank initially expected the region to lift almost 35 million people out of poverty this year, including more than 25 million in China. 
Five years ago in 2017 there was much more optimism, the overall economical growth was supposed 2,9%. In june 2020 the optimism was away: " World Bank announced: World economy down 5.2% this year due to coronavirus"

In April 2022 the World Bank, based in Washington, has lowered its global growth forecast for 2022 from 4.1% to 3.2%. He points to several problems that have a negative impact on the global economic situation. In addition to the aforementioned inflation and war in Ukraine, the World Bank also sees problems in the progressive isolation of the Chinese market from global trade and the creation of the "Eastern Economic Pact" between China and Russia.

The International Monetary Fund (IMF), part of the World Bank, has cut the UK's economic growth outlook from 4.7% to 3.7%. The global growth forecast was also reduced from 6.1% to 3.6%. The IMF sees the main problem as an inefficient approach to raising interest rates, which on the one hand may slow inflation, but on the other hand will slow down economic growth even more.

The war in Ukraine will cause high food and energy prices, which will last three years, the World Bank warned on Tuesday last week. Her statement raises fears that the situation will return during the oil crisis in the mid-1970s, when economic growth was weak and inflation was high at the same time.
According to the World Bank's dark outlook, persistently high commodity prices lasting until the end of 2024 could lead to so-called stagflation, a dangerous combination of high inflation coupled with meager economic growth.

This year, the bank expects energy prices to rise by 50 percent, with the price of North Sea Brent crude being around $ 100 a barrel, the highest since 2013. Compared to 2021, it has risen by 40 percent. In 2023, Brent oil prices are expected to fall to $ 92 a barrel, but that is still more than the five-year average of $ 60.

According to the World Bank, the price of gas will double this year compared to 2021, and the price of coal will be 80 percent higher.

The price of wheat will rise by more than 40 percent this year, which will have a severe impact on developing countries that are dependent on grain exports from Ukraine and Russia.
The World Bank's economic outlook for commodities shows that energy prices have risen the most in the last two years since the oil crisis erupted in 1973. Fertilizer prices have risen the most since 2008. Although the bank says energy and other commodity prices will fall from current highs, they are expected to remain above the current average. They will be above average until the end of 2024, including the previous two years, ie a total of five years.

The question remains to what extent these predictions are reliable. Many experts are more pessimistic and the development of some prices in the first months of this year is alarming.

We can only hope that there will be no significant deterioration and that we will recover from this situation strengthened.

                         Thanks for reading


Tim Moseley

Inflation in European Union

Inflation in European Union

The annual inflation rate in the European Union (comparing same month of the year 2021 to this year) rose to a record 7.8 percent in March from 6.2 percent in February. This was announced by the European statistical office Eurostat. The Czech Republic had the third highest inflation in the EU, at 11.9 percent.
Inflation in the euro area is now well above the European Central Bank's 2% target. Upward it is pushed especially by the rising energy. In March, energy prices in the euro area increased by 44.4 percent year-on-year.

The highest inflation in the EU was recorded in Lithuania, where consumer prices increased by 15.6 percent year-on-year. Second place went to Estonia with inflation of 14.8 percent. Czechia takes third place.

In an interview with the BBC,   the president of the World Bank, David Malpass said that war in Ukraine will make food more expensive by up to 37 percent, and the looming food crisis will cause human catastrophe in many poorer countries. Hundreds of millions of people are at risk of poverty and malnutrition if the crisis is not stopped.
The head of the World Bank warned that there is enough food for everyone in the world, and according to comparisons with the situation in the past, there are also high food stocks. But there is a need to change the way food is distributed to get where it is needed.

Here some examples of prices how it is influencing Czech Republic:
prices gasoline and diesel January 2022 were at petrol stations in the Czech Republic for an average of CZK 36.20,(approx 1,68 USD/liter) . But beginning of April gasoline was approx 2,27 USD/liter which means 38 % more  – this influences of course also the prices of public transport and transport of goods  – 22% up.
Foods – flour 63% more expensive than a year ago which has of course big influence on prices of bakery products. Butter and milk very similar. Bread – some economists say that in the second half of this year 1kg of bread can be even 70 CZK/3,10 USD – that might be increse by 40-50% in comparison with the price now.

This price development is supported by the fact that Czech government is inactive and does not want to do anything against this development arguing it is against rules of Europen Union – while for instance Polish government  decreased the VAT on foods.

This graf shows average prices of electricity in capital Praha – New year 2021 compared to New year 2022 = growth 48,49 %

The complicated situation applies also on enterprises
More than half of domestic enterprises expect their energy inputs to become more expensive by 50 percent or more. At the same time, the vast majority of companies will increase the prices of other cost items, such as input materials. This follows from the survey of the Chamber of Commerce. The most acute situation is in the manufacturing industry and construction.

A few days ago was published that inflation in Czech republic now is near to 13% – and if government will not do anything against it will still grow most probably.

But not every state in Europe has the same aproach – for instance Hungary  – The Hungarian government since 1. February  reduced prices for wheat flour, sugar, sunflower oil, milk, pork  and chicken breasts.

Evidently member states of European Union have different approach to the inflation, some politicians have more courage and the development this year might be still quite wild.

                            Thank you for reading



Tim Moseley