By Andrew Sentance, Senior Economic Adviser – Cambridge Econometrics & Former MPC Member
At the beginning of this year, there was a lot of optimism about prospects for the global economy. In January, the IMF was forecasting global growth of 4.4 percent, above its longer-term average of around 3.5 percent. The world’s major economies were bouncing back from the pandemic and the resulting lockdowns. Inflation was picking up but the rise was expected to be short-lived.
Over the past couple of months the outlook has darkened. Economic growth forecasts are being rapidly revised down and inflation projections are being pushed up. The forecasts announced by UK Chancellor Rishi Sunak in his recent Spring Statement show this very clearly. Projected 2022 economic growth has been revised down from 6 percent last autumn to 3.8 percent. The expected peak for inflation this year has doubled - ratcheting up from 4.4 percent to 8.7 percent.
Similar adjustments are taking place f...