The Day at a Glance | Jun 8 2022

The Top

*The OECD cut its global growth estimates, expects higher inflation.

*Yellen assured that inflation will remain high; Biden`s administration will revise its inflationary estimate to 4.7% for the 2023 budget.

*World Bank warns of “stagflation” at a global level in the following years, after cutting worldwide growth estimates (2.9% 2022 vs 4.1% prev.).

*Labor productivity decreased (-) 0.5% q/q in Mexico in the 1Q22 (-5.1% annual).

*Ukraine negotiates a humanitarian corridor for food exports.

*The United Arab Emirates assured that crude oil prices have not reached a peak as demand in China is in full recovery.

*South Korea seeks free trade agreement with Mexico: Suh Jeong-in, Ambassador.

*Russia discussed a proposal to resume agricultural exports from Odessa with Turkey.

*Japan`s economic contraction during the 1Q22 was smaller than estimated (-0.5% annualized).

Economic environment

The OECD cut its global growth estimates. The Organization for Economic Cooperation and Development (OECD) cut its 2022 global growth estimates from 4.5% to 3% and doubled its inflationary forecast to 9% for its member countries. In 2023, growth is forecasted to slow down to 2.8%. The OECD highlighted a greater impact from the war in Ukraine as one of the main factors that would cause slower growth and greater inflation at a global level – along with shutdowns in China`s economy. Expected growth is lower for practically all economies as the worst impacts could be seen in Europe since it’s the most exposed region to energy imports from Russia and the flow of refugees because of the geopolitical conflict. Higher raw material prices will increase inflationary pressures and will reduce real income and consumption, limiting global growth even more. Regarding inflation, the OECD expects it to reach a higher peak and remain in place for longer than initially expected due to increased food and energy prices paired with a deterioration in production chains at a global level. These inflationary factors are not expected to become more moderate until 2023. For Mexico, the OECD cut its 2022 growth estimate to 1.9% and set its inflationary forecast at 6.7%. The OECD`s negative outlook was presented one day after the World Bank also cut its global growth estimate to 2.9% and warned that “stagflation” (slow growth, high inflation) could persist for several years even if a recession is avoided in the following months – unless important increases occur in production capacity and supply at a worldwide level.