Donald Trump’s victory in the 2024 election – and his threat to impose tariffs on all imports to the United States – highlights an important problem for the global economy.

The US is a technological powerhouse, spending more than any other country on research and development and winning more Nobel prizes in the last five years than every other country combined. Its inventions and economic successes are the envy of the globe. But the rest of the world needs to do everything in its power to avoid being too dependent on it.

And this situation would not have been much different had Harris won.

The “America first” approach of Donald Trump has actually been a bipartisan policy. At least since previous president Barack Obama’s policy of energy independence, the US has been on a mostly inward-looking quest of maintaining technological supremacy while ending the offshoring of industrial jobs.

One of the major choices Trump made in his first term was to accept higher prices for US consumers in order to protect national producers by slapping high tariffs on almost every trading partner.

For instance, Trump’s 2018 tariffs on washing machines from all over the world mean US consumers have been paying 12% more for these products.

President Joe Biden – in certainly a more polite way – then increased some of the Trump tariffs: up to 100% on electric vehicles, 50% on solar cells and 25% on batteries from China.

At a time of climate emergency, this was a clear choice to slow down the energy transition in order to protect US manufacturing.

While Biden signed a truce with Europe on tariffs, it started a perhaps even more damaging battle by launching a subsidy race.

The US Inflation Reduction Act for instance contains US$369 billion (£286 billion) of subsidies in areas such as electric vehicles or renewable energy. And the Chips Act committed US$52 billion to subsidise the production of semiconductors and computer chips.

China, Europe and the rest of the world

This US industrial policy might have been inward-looking, but it has clear consequences for the rest of the world. China, after decades of mostly export-based growth, must now deal with massive problems of industrial overcapacity.

The country is now trying to encourage more domestic consumption and to diversify its trading partners.

Europe, despite a very tight budget constraint, spends a lot of money in the subsidy race. Germany, a country facing sluggish growth and big doubts on its industrial model, is committed to matching US subsidies, offering for instance €900 million (£750 million) to Swedish battery makers Northvolt to continue producing in the country.

All those subsidies are hurting the world economy and could have easily financed urgent needs such as the electrification of the entire African continent with solar panels and batteries. Meanwhile, China has replaced the US and Europe as the largest investor in Africa, following its own interest for natural resources.

The incoming Trump mandate might be a chance to fix ideas.

One might, for instance, argue that the full-scale invasion of Ukraine, and the thousands of deaths and the energy crisis that followed, could have been avoided had the Biden administration been clearer to Russian president Vladimir Putin about the consequences of an invasion, and provided modern weapons to Kyiv before the war.

But the blame is mostly on Europe. Credit where it’s due, the strategic problem of becoming too dependent on Russian gas is something Trump had clearly warned Germany about during his first mandate.

There is a clear path forward: Europe could help China fix its overcapacity problems by negotiating an end to its own tariff war on Chinese technology such as solar panels and electric cars.

In exchange, Europe would regain some sovereignty by producing more of its own clean energy instead of importing record amounts of liquid gas from the US. It could also learn a few things from producing with Chinese companies, and China could use its immense leverage on Russia to end the invasion of Ukraine.

The European Union could also work harder on what it does best: signing trade deals, and using them as a way to reduce carbon emissions around the world.

This is not only about Europe and China. After decades of continuous improvement on all major dimensions of human life, the world is moving backwards.

The number of people facing hunger is increasing, taking us back to the levels of 2008-9. War is raging in Gaza, Sudan, Myanmar, Syria, and now Lebanon. The world had not seen as many civilian casualties since 2010.

For better or worse, it is unlikely that a Trump administration will reverse the path of lower US interventionism. It is also unlikely to lead any major initiative on peace, climate change or on the liberalisation of trade.

The world is alone, and America will not come to save it.

We do not know what will happen to the US. Maybe the return of Trump will mostly be a continuation of the last ten years. Maybe prohibitive tariffs or destroying the institutions that made the US such an economic powerhouse will make the US economy less relevant. But this is something Americans have chosen, and something the rest of the world simply has to live with.

In the meantime, the only thing the world can do is learn how to better work together, without becoming too dependent on each other.

(Author: Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University)

(Disclosure Statement: Renaud Foucart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment)

This article is republished from The Conversation under a Creative Commons license. Read the original article.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Rising tensions in the Middle East add new uncertainties for the global economy even as policymakers start to congratulate themselves on having steered it out of a bout of high inflation without triggering a recession.

Israel, which has been fighting with Hamas in Gaza for almost a year, has sent its troops into southern Lebanon after two weeks of intense airstrikes, escalating tensions in a conflict that risks drawing in the United States and Iran.

The following sketches what we know about how this could play out on the world economy in the weeks ahead.

WHAT IMPACT, IF ANY, HAS BEEN FELT SO FAR?

Very little beyond the immediate region, with the main effects limited to financial markets as investors hedge their portfolios with safe-haven assets. The US dollar has been a beneficiary since Iran’s ballistic missile attack on Israel: the dollar index, which measures the US currency against the euro, yen and four other top currencies, is trading around three-week peaks.

Oil prices rose around 2% on Thursday on concerns a wider conflict could disrupt crude oil flows from the region – for example if Israel chose to target Iranian oil infrastructure which in turn could trigger retaliation from Iran.

But it is not clear that this will translate into the kind of sustained, sharper rises that motorists start to notice at the fuel pump. Analysts point out that the United States has high levels of crude oil inventories while OPEC-producing nations have enough spare capacity to smooth out the impact of disruptions, at least in the short term.

HOW ARE ECONOMIC POLICYMAKERS REACTING?

As always, central bankers stress that their job is to look beyond unpredictable, one-off shocks to the economy and instead focus on the deeper, underlying trends. But they cannot afford to totally ignore geopolitical events either.

Bank of England Governor Andrew Bailey told The Guardian newspaper that the bank could move more aggressively to cut interest rates if inflation pressures continue to weaken – suggesting central bankers for now did not see the Middle East conflict as a major threat to their attempts to temper inflation. Bailey said there seemed to be a commitment to keep oil markets stable but he also said the conflict could yet push up oil prices if things keep escalating.

Sweden’s Riksbank Deputy Governor Per Jansson delivered a similar message, saying the effects of the Middle East conflict were not yet enough to warrant scratching economic forecasts.

The International Monetary Fund said on Thursday an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year. It was too early to predict specific impacts on the global economy, IMF spokesperson Julie Kozack said.

WHEN WILL ANY IMPACT BECOME MORE EVIDENT?

For context, Brent crude futures are currently around $75 a barrel, well below their $84 level at the time of Hamas’ Oct. 7 strike on Israel nearly a year ago and far off the $130 highs reached after Russia’s invasion of Ukraine in February 2023.

Europe would be exposed to rising oil prices because, unlike the United States, it has no major domestic oil production. But even there, policymakers estimate a durable 10% rise in prices would be needed to push up inflation by just 0.1 percentage point.

The economic impacts of an all-out war that led to wider attacks on energy infrastructure throughout the Middle East and Gulf regions plus further disruptions to trade routes through the Red Sea, would be more tangible.

Oxford Economics estimated such a scenario would spike oil prices up to $130 and knock 0.4 percentage points off global output growth next year, which the International Monetary Fund currently sees at around 3.3%.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

Companies worldwide are lowering full-year sales and profit guidance as higher interest rates and weakness in China’s economy hurt global consumer sentiment, taking the shine off earnings growth in the latest quarter.

A number of high-profile companies have underwhelmed investors, including McDonald’s, automakers Nissan and Tesla, and consumer giants Nestle and Diageo. With roughly 40% of U.S. and European companies reporting results, earnings have come in about as expected – but after the strong run by world equity markets, ‘about as expected’ seems like a disappointment.

“A very mixed season so far in terms of results,” said Brian Mulberry, client portfolio manager at Zacks Investment Management. “We’re starting to see the pressure that the higher-for-longer interest rate environment is putting on companies and their ability to continue to drive earnings and revenue growth.”

The earnings season will get a jolt this week from the globe’s tech giants, including Apple, Microsoft and Samsung Electronics, Japan’s Toyota Motor, oil titans Exxon Mobil and Shell and European retailers L’Oreal and Adidas .

Global companies have zeroed in on two issues hitting their bottom lines: higher interest rates that are pinching consumer spending, and underperformance in China’s economy, the second-largest in the world.

McDonald’s reported its first drop in sales worldwide in 13 quarters, citing weakness in China’s economy. Companies including Unilever, Visa and Aston Martin also noted weakness in China, and analysts have warned that demand in the Asian giant is unlikely to reverse while a protracted property downturn and job insecurity weigh on consumers.

“The Chinese… are not willing to spend because they are afraid about the future,” said Stefan-Guenter Bauknecht, portfolio manager at DWS. Until growth improves in China, the country will be “the weakest of the big regions, or at least the most far behind expectation,” he said.

Earnings per share have so far risen by nearly 12% in the United States from a year ago, the strongest quarter out of the last 10, according to LSEG data. Earnings are up 4% in Europe, according to Bank of America Securities, slightly ahead of market expectations and for Europe the first positive growth rate since 2022.

Consumer weakness is being flagged across industry sectors and guidance cuts have picked up, the brokerage said. U.S. companies have reduced third-quarter forecasts to 7.3% year-over-year growth as of Friday from 8.6% at the beginning of July, according to LSEG data.

“While Q2 results overall have been decent, the season has nonetheless spooked the market on signs of consumer stress,” Bank of America analysts said in an research note.

Nestle and Unilever both reported first-half sales growth below expectations. Companies in the euro zone’s two largest economies are growing more pessimistic, raising concerns over the bloc’s sluggish recovery.

“There is value-seeking behavior among consumers. There is pressure, especially at the low-income range,” Nestle CEO Mark Schneider said on a call with journalists.

Auto companies are facing difficulties in the United States, where high inventories and logistical issues hurt profits of Ford Motor, Stellantis and Nissan. EV leader Tesla disappointed investors with its results, and many still see the company as far overvalued with EV sales slowing.

EV battery firm LG Energy Solution, which supplies Tesla and Hyundai Motor, forecast revenue would fall more than 20% this year due to a sharper-than-expected slowdown in global EV demand. Its bigger rival, China’s CATL, reported a 13% drop in second-quarter revenue.

Cashing in chips

The earnings news has hardly been all bad. Google parent Alphabet’s growth in cloud computing revenue augurs well for other tech bellwethers later this week. Industrial conglomerate 3M’s results sent its shares to near a two-year high, while automaker General Motors and pharmaceutical giant Johnson & Johnson posted strong earnings, and banking giant JP Morgan said its profit hit a record.

Asian chipmakers have turned more bullish about demand outlook as they benefit from the global AI boom that has helped it weather the tapering off of pandemic-led electronics demand.

“AI is so hot; right now everybody, all my customers, want to put AI functionality into their devices,” TSMC Chairman and CEO C.C. Wei said at an earnings conference, adding AI demand now is more real than two or three years ago. Shares of TSMC have gained 56% so far in 2024.

Despite upbeat forecasts, shares of major Asian chipmakers are under pressure to keep up with rising expectations. That’s evident as well in the performance of AI leader Nvidia, whose value surged past $3 trillion earlier this year before pulling back in the summer.

“Investor expectations are so high they may be hard to meet, and in the short term, the stock price may not rise as much,” said analyst Lee Min-hee at BNK Investment & Securities.

The broad-market MSCI International index has gained 11% so far this year, peaking earlier this month before selling off, in part due to hopes that the U.S. Federal Reserve will begin cutting interest rates after similar moves from other central banks.

“To the extent that lower rates ahead remains the popular view, analysts are unlikely to be lowering overall earnings projections for next year,” Rick Meckler, partner at Cherry Lane Investments.

“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia,” the IMF said. Image for representation.
| Photo Credit: AP

The International Monetary Fund (IMF) held global growth expectations for 2024 steady in a report on July 16 even as it cut forecasts for the United States and Japan, while warning of inflation risks and trade tensions ahead.

The IMF expects the world economy to grow 3.2% this year, unchanged from its April forecast, according to its World Economic Outlook update.

“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia,” said the fund.

For 2025, it expects global growth of 3.3%.

But even as many countries saw better growth than anticipated early this year, the IMF flagged surprises in Japan and the United States.

The Washington-based lender also cautioned that risks to inflation have increased, with services prices holding up disinflation.

This increases the prospect of interest rates staying elevated for longer, “in the context of escalating trade tensions and increased policy uncertainty.”

Trade measures surged

“We see an explosion in the number of trade restrictive measures,” IMF chief economist Pierre-Olivier Gourinchas told a press briefing on July 16.

Over 3,000 such moves were implemented last year, up from an already-high level of 1,000 in 2019.

These take the form of export restrictions and industrial policies, leading to retaliation, he said.

“One concern we have is that going forward, this will weigh down on global activity,” he noted.

The IMF’s report warned that a resurgence of tariffs can trigger retaliation and a “costly race to the bottom.”

On whether risk assessments shifted after the attempted assassination of former U.S. president Donald Trump, the Republican Party’s nominee in November’s election, Mr. Gourinchas earlier told AFP the fund will consider its implications.

On July 16, he said 2024 is an election-heavy year, adding “there could be some increase in in trade measures” and distortions on industrial policy which could spill over to other countries.

EDITORIAL | Sobering assessment: On the IMF forecast, World Bank report

China concerns

While world growth appears stable, the IMF lowered projections for the United States and Japan.

U.S. growth in 2024 was downgraded to 2.6%, 0.1 percentage points below April’s forecast, due to a “slower-than-expected start to the year.”

Japan’s economy was seen expanding 0.2 percentage points less than expected, by 0.7% this year, mainly thanks to temporary supply disruptions and weak private investment in the first quarter.

The euro area meanwhile is showing signs of recovery with relatively strong services activity, Mr. Gourinchas said, although manufacturing shows weakness.

China and India are expected to power activity in Asia — with China’s 2024 forecast revised up to 5.0% on a private consumption rebound and strong exports.

But Mr. Gourinchas flagged risks to the world’s second biggest economy stemming from weak confidence and unresolved property sector problems.

Should domestic demand weaken, China would rely more on the external sector — a situation countries like the United States are pushing back against.

“An increase in the trade surplus might be small from (China’s) perspective. It could be big from the perspective of the rest of the world,” he said.

OPINION | The high cost of a global economic decoupling

Inflation risks

There also remain risks of sticky inflation amid renewed trade or geopolitical tensions, the IMF cautioned, even as it expects inflation to return to target by end-2025.

Wage growth, if accompanied by weak productivity, could make it tough for firms to ease price increases.

An escalation of trade tensions could also raise near-term inflation risks, by lifting costs of imported goods, IMF said.

Higher inflation could heighten the chances that interest rates stay elevated for longer, increasing financial risks.

The IMF called for careful monetary policy adjustments.

New Delhi:

A majority of the world’s leading economists believe the global economy will either strengthen or remain stable in 2024, according to the World Economic Forum (WEF). The latest edition of the Chief Economists Outlook presents a cautiously optimistic view of the global economy but also highlights significant geopolitical risks.

The report is based on policy development research and surveys with leading economists from both the public and private sectors. It aims to summarise the current economic environment and identify priorities for policymakers and business leaders. The latest survey was conducted in April 2024.

According to the report, over 80 per cent of chief economists surveyed expect the global economy to either strengthen or remain stable this year, a notable increase from the previous survey in January. This positive shift is attributed to advancements in technology, artificial intelligence, and the green energy transition.

However, 97 per cent of respondents foresee geopolitical tensions contributing to global economic volatility, and 83 per cent believe domestic political issues will also be a major source of instability in 2024, a year marked by significant global elections.

The survey indicates varying economic outlooks across different regions:

United States: Nearly all chief economists (97 per cent) predict moderate to strong growth, up significantly from 59 per cent in January.

Asia: Economies in South Asia and East Asia are expected to maintain at least moderate growth. In China, 75 per cent of respondents foresee moderate growth, with only 4 per cent anticipating strong growth.

Europe: The outlook remains pessimistic, with nearly 70 per cent of economists predicting weak growth for the remainder of the year.

Other regions: Moderate growth is generally expected, with some improvement noted since the last survey.

Geopolitical risks

According to the survey, 97 per cent of respondents anticipate that geopolitical tensions will contribute to global economic volatility in 2024. This concern is echoed by 83 per cent of economists who identify domestic political issues as another major source of instability, especially in a year marked by significant global elections.

Geopolitical risks are basically problems that come up because of how countries interact with each other. These problems can include things like wars between countries, arguments over land, trade disagreements, tense relationships between governments, and instability in politics. Geopolitical risks are significant because they can lead to economic disruptions, affect international trade and investment, and create uncertainty in financial markets.

Challenges for decision-makers

The report highlights the growing challenges businesses and policymakers face due to the complex relationship between political and economic issues.

According to 86 per cent of respondents, this interplay is becoming more difficult to manage. Important factors influencing business decisions include the overall health of the global economy, monetary policies, financial market conditions, labour market conditions and political factors.

Long-term prospects

Looking ahead, almost 70 per cent of chief economists are optimistic about achieving a return to 4 per cent global growth within the next five years, driven primarily by technological advancements and green initiatives in high-income countries. However, there is less consensus on the impact of these factors in low-income economies. Geopolitics, domestic politics, debt levels, climate change, and social polarisation are expected to be significant drags on growth.

Policy priorities

To promote growth, the report highlights the importance of innovation, infrastructure development, monetary policy, and education and skills. Low-income economies, in particular, could benefit from improvements in institutions, social services, and access to finance.

European Central Bank (ECB) headquarters in Frankfurt, Germany. File
| Photo Credit: Reuters

The euro has resisted falling to parity with the dollar for now, thanks to a rosier economic backdrop, to the relief of European Central Bank policymakers who could be struggling to detach themselves from the Federal Reserve’s monetary policy outlook.

Just a month ago, the euro’s fall to five-month lows prompted talk among analysts about a return to parity against the dollar as the fragility of the euro zone contrasted with a resilient U.S. economy that boosted the dollar and prompted investors to dial back Federal Reserve rate cut bets.

Lower euro area interest rates than those in the United States remain a headwind, but the euro seems on a stronger footing thanks in part to an improving macro backdrop.

Faster expansion

The most recent round of purchasing manager surveys, for example, showed business activity in the euro zone expanded at a faster clip than that in the United States in April for the first time in a year.

That has helped the euro recover roughly 1.7% from April’s lows to around $1.0708.

“We’re starting to see that divergence between economic performance close, offering some help to the euro,” said Fiona Cincotta, market strategist at City Index.

“That is also a cause for relief for the ECB and a reason for them to be more relaxed as well. It’s almost as if their ducks have lined up quite nicely so far.”

Citi’s economic surprise index for the euro zone has trended lower in recent weeks, but at 27, is comfortably in positive territory, as business activity and growth improve. In contrast, the U.S. index has fallen below zero for the first time since early 2023, as crucial data such as growth and employment have missed expectations.

Yuan weakness

On a trade-weighted basis, the euro is up 0.5% this year and not far from 2023’s record highs. A lot of this is down to weakness in the likes of the Chinese yuan and Japanese yen.

That offers a less negative picture on the euro than purely looking through the lens of the dollar in that it neutralises some imported inflation.

Gorilla in the room

Still, a sustained drop in the euro could boost import prices and rekindle inflation, thereby limiting the ECB’s scope to cut rates.

The euro has lost around 2.5% against the dollar this year and the ECB, which does not target an exchange rate, cannot easily ignore more weakness.

“To a certain extent, our data and decisions are naturally influenced by the Fed. We are not working in a vacuum. With the dollar, the Fed is, figuratively speaking, the gorilla in the room,” Austrian Central Bank Governor Robert Holzmann told Handelsblatt in an interview.

Geopolitical tensions

Other factors such as a spike in the oil price, or a deterioration in geopolitical tensions could undermine the euro area by again hurting the growth outlook and magnifying the inflationary effect of a weaker currency.

Right now, markets show traders believe the ECB will deliver three quarter-point cuts, bringing the benchmark rate to around 3.25% by year end. The Fed is expected to cut just twice, to a range of 4.75-5.25%, leaving the premium of U.S. rates over euro zone ones at 175 basis points.

Some analysts think three cuts from the ECB and no cuts from the Fed this year, bringing the gap to 213 bps, might tip the euro back to parity, which could sound alarm bells at the ECB if currency weakness threatens to fuel inflation. The euro last hit parity around August 2022, when the rate gap between the two central bank rates was 238 bps.

Pricing out Fed cuts

“If the market prices out Fed rate cuts for this year and pushes the cuts later into next year and the ECB pricing remains at the current levels, parity becomes a possibility and such a move would be enough to make the ECB delay its easing cycle,” said Athanasios Vamvakidis, global head of G10 forex research at BofA.

Neil Mehta, a portfolio manager at BlueBay Asset Management, said the currency market was where the divergence in interest rates would play out most clearly, with the dollar emerging as the likely winner, with parity for the euro, a possibility.

“It’s not the base case, but we certainly see the risks tilted in that direction. We think the first step is $1.05,” he said.

London:

UK Prime Minister Rishi Sunak on Monday cited India’s rise as an ‘economic superpower’ as he pledged to create a dynamic, innovative economy fuelled by technological progress.

Insisting that “more will change in the next five years than in the last 30”, Sunak, during his speech on security at the Policy Exchange think-tank, spoke on a “clear plan and bold ideas” to deliver a secure future for the Britons.

He also maintained that “new and fast-growing economic superpowers” like India, Indonesia, and Nigeria are significantly reshaping the global economy.

“We must be prepared strategically and economically, with robust plans and greater national resilience, to meet this time of instability with strength,” said the UK PM while elaborating on the current geopolitical situation.

The UK, which has had five Conservative Prime Ministers since 2010, is expected to go to the polls later this year.

Sunak was only spotlighting the resilience demonstrated by the Indian economy as it successfully mitigated the risks of global economic downturn over the recent years, including the Covid-19 aftermath.

“I see India as Asia’s Silicon Valley and the UK as Europe’s Silicon Valley, so there’s a lot we can work on together,” Jeremy Hunt, UK’s Chancellor of the Exchequer, had said following talks with Finance Minister Nirmala Sitharaman in Delhi last September.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

London:

UK Prime Minister Rishi Sunak on Monday cited India’s rise as an ‘economic superpower’ as he pledged to create a dynamic, innovative economy fuelled by technological progress.

Insisting that “more will change in the next five years than in the last 30”, Sunak, during his speech on security at the Policy Exchange think-tank, spoke on a “clear plan and bold ideas” to deliver a secure future for the Britons.

He also maintained that “new and fast-growing economic superpowers” like India, Indonesia, and Nigeria are significantly reshaping the global economy.

“We must be prepared strategically and economically, with robust plans and greater national resilience, to meet this time of instability with strength,” said the UK PM while elaborating on the current geopolitical situation.

The UK, which has had five Conservative Prime Ministers since 2010, is expected to go to the polls later this year.

Sunak was only spotlighting the resilience demonstrated by the Indian economy as it successfully mitigated the risks of global economic downturn over the recent years, including the Covid-19 aftermath.

“I see India as Asia’s Silicon Valley and the UK as Europe’s Silicon Valley, so there’s a lot we can work on together,” Jeremy Hunt, UK’s Chancellor of the Exchequer, had said following talks with Finance Minister Nirmala Sitharaman in Delhi last September.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

Russia’s state-owned reinsurer has given financial backing to three Russian insurance firms, allowing them to get Indian approval to provide marine insurance cover to tankers, two sources said, as Moscow seeks to facilitate trade with India amid Western sanctions.

A raft of sanctions by the U.S. and allies against Moscow over its Ukraine invasion, along with tighter scrutiny of Russian oil trade, has almost cut Russia off from the global network of service providers such as insurers and brokers.

Russian companies Sogaz Insurance, Alfastrakhovanie, and VSK Insurance, have joined Ingosstrakh as insurers approved by India for providing marine insurance cover, an order posted on Indian shipping regulator’s website showed.

India has approved the three new insurers after Russian National Reinsurance Company (RNRC) provided a financial guarantee, the two sources with direct knowledge of matter said.

This is the first time RNRC’s role in providing financial backing to the three Russian insurers to get accredited in India has been reported.

“With the backing of the Russian National Reinsurance Company, a wholly-owned entity of the Russian Government, these insurers boast robust financial support and stability,” one of the sources said.

Insurance is essential for maritime transport, particularly oil cargoes that require the highest safety standards due to the risk of spills.

Sogaz Insurance, Alfastrakhovanie and VSK Insurance representatives and an RNRC representative did not immediately respond to requests for comment.

RNRC, controlled by the Russian central bank, was sanctioned by the UK and European Union in 2023.

India’s Directorate General of Shipping did not respond to a Reuters email seeking comments.

“Ingosstrakh is not expanding its maritime insurance activities to India. Our relationship with India in the marine insurance industry has spanned over 57 years, dating back to 1967 when we opened our office in Mumbai,” an Ingosstrakh spokesperson said in an emailed statement.

The three Russian insurers, which specialise in protection and indemnity (P&I) insurance coverage, are not part of the Europe-based International Group, which is made up of twelve so-called P&I clubs.

The IG says it provides marine liability cover for approximately 90% of the world’s ocean-going shipping tonnage.

“A due procedure has been followed (by the Indian shipping regulator) for including these new entities in the list of non-IG companies that can provide insurance,” one of the two sources said.

Major Supplier

The Group of Seven (G7), the European Union and Australia have imposed a $60 per barrel price cap for Russian oil if Western services such as shipping and insurance are used.

The aim is to squeeze Russia’s oil revenues while keeping the supply to the market stable.

Russia has emerged as a major oil supplier to India, the world’s third biggest oil importer and consumer, as its oil is sold at a discount after Western nations halted purchases from Moscow.

The Indian government has said that the country abides by United Nations sanctions and does not follow those imposed by any other country.

A source from one of India’s refiners said banks are very strict in clearing payments for Russian oil to ensure that Russian crude is priced below the $60 per barrel cap.

The price cap mechanism bans Western companies from providing maritime services, including financing, insurance, and shipping for oil sold above the cap.

“Why would Russia like to forgo its revenue from insurance premiums and give it to the western insurers. It is not a small amount,” this source said.

“Even if Russia is legally allowed to use Western services they don’t want to use them,” he said.

“This also means they have to share details of their dealing with the (Western) service providers.”

Indian refiners buy Russian oil on delivered basis mostly from traders to avoid any liability arising due to sanctions before discharge of oil cargoes.

The accreditation of the three Russian entities is valid until Feb. 20 next year, but authorisation for Russia’s Ingosstrakh has been extended by five years to Feb. 20, 2029, an order posted on the website of India’s Directorate General of Shipping website showed.

The International Monetary Fund on January 30 edged its forecast for global economic growth higher, upgrading the outlook for both the United States and China — the world’s two largest economies — and citing faster-than-expected easing of inflation.

The IMF’s chief economist, Pierre-Olivier Gourinchas, said the global lender’s updated World Economic Outlook showed that a “soft landing” was in sight, but overall growth and global trade still remained lower than the historical average.

“The global economy continues to display remarkable resilience, with inflation declining steadily and growth holding up. The chance of a ‘soft landing’ has increased,” Mr. Gourinchas told reporters in Johannesburg, adding, “We are very far from a global recession scenario.”

But he cautioned that the base of expansion was slow and risks remained, including geopolitical tensions in the Middle East and attacks in the Red Sea that could disrupt commodity prices and supply chains.

Delays in announced fiscal consolidation in what Mr. Gourinchas called “the biggest global election year in history” could boost economic activity but might also spur inflation, he added.

The IMF said the improved outlook was supported by stronger private and public spending despite tight monetary conditions, as well as increased labour force participation, mended supply chains and cheaper energy and commodity prices.

The IMF forecast global growth of 3.1% in 2024, up two-tenths of a percentage point from its October forecast, and said it expected unchanged growth of 3.2% in 2025. The historical average for the 2000-2019 period was 3.8%.

Global trade was expected to expand by 3.3% in 2024 and 3.6% in 2025, well below the historical average of 4.9%, with gains weighed down by thousands of fresh trade restrictions.

The IMF stuck with its October forecast for headline inflation of 5.8% for 2024, but lowered the 2025 forecast to 4.4% from 4.6% in October. Excluding Argentina, which has seen inflation spike, global headline inflation would be lower, Mr. Gourinchas said.

Advanced economies should see average inflation of 2.6%, down four-tenths of a percentage point from the October forecast, with inflation set to reach central bank targets of 2% in 2025. By contrast, inflation would average 8.1% in emerging market and developing economies in 2024, before easing to 6% in 2025.

The IMF said average oil prices would drop 2.3% in 2024, versus the 0.7% decline it had predicted in October, and said prices were expected to drop 4.8% in 2025.

Red sea attacks

“Staying on the path to a soft landing will not be easy,” Mr. Gourinchas said, noting that new commodity price spikes from geopolitical shocks, including continued attacks on shipping in the Red Sea, could prolong tight monetary conditions.

Mr. Gourinchas told reporters the IMF was watching developments in the Middle East closely, but the broader economic impact appeared “relatively limited” as of now.

“It doesn’t seem to represent, as of now, a major source of potentially reigniting supply-side inflation,” he said.

The United States got one of the biggest upgrades in the January update of the IMF outlook, with its GDP now forecast to expand by 2.1% in 2024 versus the 1.5% forecast in October. Growth was expected to ease to 1.7% in 2025.

Mr. Gourinchas credited fiscal support and consumer spending for the upgrade, but said the IMF had warned Washington that some of its subsidies from domestic producers and other industrial policies could violate global trade rules.

The euro area got a downgrade, and was now expected to grow just 0.9% in 2024 and 1.7% in 2025, with the biggest European economy — Germany — expected to see minimal GDP growth of 0.5% in 2024 instead of the 0.9% forecast in October.

China’s GDP was expected to grow by 4.6% in 2024, an upward revision of four-tenths of a percentage point from October, and 4.1% in 2025. Mr. Gourinchas said the boost reflected significant fiscal support from the authorities, and a less-severe-than-expected slowdown stemming from the property sector.

The U.S. Federal Reserve, European Central Bank and Bank of England were expected to start lowering interest rates gradually in the second half of 2024, Mr. Gourinchas said, adding, “We are not quite there yet.”

The Bank of Japan was expected to maintain low interest rates, and that was “appropriate,” but the IMF had told it to be ready to raise rates if inflation spiked, he said.

Mr. Gourinchas added that markets had been “excessively optimistic” on the prospects for early interest rate cuts by major central banks, and a repricing could increase long-term interest rates and trigger more rapid fiscal consolidation that would weigh on growth prospects.

Emerging market and developing economies were expected to grow by 4.1% in 2024, with emerging and developing Europe getting an upgrade due to stronger-than-expected growth in Russia on the back of military spending for the war in Ukraine.

Russia’s GDP was expected to grow 2.6% in 2024, 1.5 percentage points more than expected in October, with growth seen easing to 1.1% in 2025. The IMF said there could be further revisions since the numbers were preliminary and there were questions about the extent of Russia’s fiscal stimulus.

Negative growth in Argentina depressed the forecast for the Latin America and Caribbean region, with growth seen dropping to 1.9% in 2024, four-tenths of a percentage point lower than in October. Growth should edge higher to 2.5% in 2025, the IMF said.

Mr. Gourinchas said the global outlook reflected more balanced upside and downside risks, with the risk of a wider conflict in the Middle East offset by the prospect that lower fuel prices could help inflation fall faster than expected.

“We see them as broadly balanced at this point,” he said, noting that a lot of the downside risks — especially with respect to disinflation — seen a year ago had not materialised.