IMF signals upgrade to forecasts as optimism spreads at Davos

IMF signals upgrade to forecasts as optimism spreads at Davos

Updated: 14 days, 4 hours, 39 minutes, 28 seconds ago

The country’s first LNG terminal to handle overseas shipments of fuel was also opened last month and is expected to provide 6 per cent of the country’s needs, easing pressure on the energy system.

Christian Lindner, Germany’s finance minister, said plunging gas prices suggested the government would spend tens of billions of euros less than initially anticipated to help struggling families deal with rising energy bills.

Daniel Pinto, head of JPMorgan’s investment bank, highlighted the global economy’s resilience. “We have come through a period with a war, a pandemic and the biggest normalisation of monetary policy in history,” he said. “Considering all the things that have happened, the world is a lot better than you would have expected.”

While the economic downturn in advanced economies no longer appears as bad as feared, Chinese growth has slowed, with Beijing posting a disappointing rate of 3 per cent for 2022.

Ms Gopinath warned that 2023 would nevertheless be a “tough year”. With inflation still too high, central banks should “stay the course” with interest rates rising until inflation fell sustainably, she said.

However, financial markets have rallied on the back of lower energy prices, fewer supply chain difficulties and the end of China’s zero COVID policy.

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Liu He, Beijing’s top economic official, told the forum China’s economy would bounce back. “If we work hard enough, we are confident that growth will most likely return to its normal trend,” he said. “The Chinese economy will see a significant improvement in 2023.”

Alan Jope, Unilever chief executive, said China’s rapid reopening was unexpected. “We’re gearing up for revenge spending,” he said, referring to the phenomenon of consumer shopping sprees once restrictions are eased.

Frustration over regulation

US business leaders hailed the Joe Biden administration’s Inflation Reduction Act – a $US369 billion ($527.6 billion) bid to stimulate green investments in America’s economy.

Mark Hutchinson, chief executive of Fortescue Future Industries, said the tax incentives were “huge ... you’d put every investment dollar you possibly could in there”, he said.

Borje Ekholm, CEO of Swedish mobile phone maker Ericsson, voiced frustration at Europe’s regulation-led approach, which he said was stifling technology companies, calling instead for a more “pro-growth” attitude.

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But European Commission boss Ursula von der Leyen told the forum that Brussels would temporarily water down state aid regulations and pump cash into strategic climate-friendly businesses, as it sought to counter Joe Biden’s green subsidy package.

“There is a need to be competitive with offers and incentives that are currently available outside the EU,” she said.

She added that the region had brought energy prices down “quicker than anyone expected”.

European wholesale natural gas prices hit an intraday low of under €52 a megawatt hour on Tuesday, the lowest since September 2021. Although prices remain more than double the average price before Russia’s invasion of Ukraine, they have fallen 85 per cent since peaking in August.

Fatih Birol, head of the International Energy Agency, praised Europe’s progress, but cautioned gas prices would not have fallen as far had the weather not been so clement.

Financial Times

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