The Day at a Glance | February 15 2022

The Top

*The World Bank warns of possible debt defaults among emerging economies as global rates increase.

*Russia withdrew some troops from the border with Ukraine after military exercises came to an end, a sign of a possible de-escalation.

*Inflation for producers surprised to the upside in the United States during January (1% monthly vs 0.5%e.; 9.7% annual vs 9.1%e.).

*Europe`s GDP logged a 0.3% quarterly increase (4.6% annual); employment exceeded pre-pandemic levels.

*Banxico will probably follow the FED`s increasing rates starting in March; Jonathan Heath, Deputy Governor of the Central Bank of Mexico.

*WHO is still concerned about the high levels of COVID-19 infections in Russia and Eastern Europe.

Economic environment

The World Bank warns of excessive debt. In an interview with Reuters, Chief Economist for the World Bank, Carmen Reinhard, assured that it`s necessary for the FED to adjust its monetary stance soon and decisively in order to avoid inflation from becoming persistent; any delay could lengthen the problem and could become more costly than a fast adjustment in monetary conditions at this time. This poses a problems for emerging countries, who could suffer the consequences of an increase in the cost of funding at a global level. A recent report published by the World Bank assures that close to 46% of small and medium sized businesses in developing countries could start falling behind in paying off their debt in the next six months; figures could be higher for countries like South Africa, the Philippines and Kenya, where the forecasted figure is set at 65%. The World Bank`s concern doesn`t just come down to high levels of private debt in these countries, but it also reiterated its worries about credit in China and sovereign debt in countries like Turkey. Reinhart is concerned that extension policies and easing regulatory accounting requirements could be hiding a debt problem in the private sector (businesses and households), which is something that could come to light as normalcy returns. Reinhart suggests that greater measures of transparency should be implemented in the private debt sector – as well as administrating loans to businesses in difficulty more proactively and working on improving sovereign debt problems.