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Global Sovereign Debt Will Reach New High; Italy lowers its growth forecast — Macro Snapshot

RIYADH (Reuters) – Global public debt is expected to rise 9.5% this year to a record $71.6 trillion, driven by the United States, Japan and China, the management company said on Wednesday. of assets Janus Henderson in a report.

Governments around the world have increased borrowing since the COVID-19 pandemic erupted two years ago as they tried to shield their economies from the fallout.

That took global public debt to a record $65.4 trillion in 2021 from $52.2 trillion in January 2020, Janus Henderson said.

China’s debt has grown the fastest and the most in terms of cash, up one-fifth or $650 billion from last year, he added.

Among the major developed economies, Germany saw the largest increase in percentage terms, with its debt increasing by 15%, nearly double the average global rate.

Italy lowers its growth forecast and confirms its deficit target for 2022 at 5.6% of GDP

Italy has lowered its growth estimates for this year and next and confirmed a previous budget deficit target of 5.6% of national output for 2022, according to a draft government document seen by Reuters .

The Treasury’s annual economic and financial document forecasts gross domestic product to grow 3.1% in 2022, up from a 4.7% projection made last fall, according to the draft.

For 2023, the government expects GDP to grow by 2.4%, down from the previous target of 2.8% set in September.

The deficit is targeted at 3.9% of GDP in 2023, unchanged from the previous target.

The new forecasts are expected to be approved by Prime Minister Mario Draghi’s government later on Wednesday and will form the preliminary framework for the 2023 budget.

Financial situation of British households at worst since second quarter of 2020

The financial situation of British households is now the most precarious since the depths of the COVID-19 pandemic in the second quarter of 2020, due to a spike in the cost of living, according to a survey published on Wednesday, according to Reuters.

Pension society Scottish Widows, part of Lloyds Banking Group, said 60% of households had been unable to save more during the pandemic and households that had savings were now depleting them at the rate the fastest in nine years.

“Over 70% of households will need to dip into their savings over the next 12 months to meet their growing expenses,” said Emma Watkins, chief executive of Scottish Widows.

UK consumer price inflation hit a 30-year high of 6.2% in February and the government’s fiscal watchdog forecasts it will hit a 40-year high of 8.7% towards the end this year, due to soaring energy costs and broader price increases.

The budget watchdog also said the fall in real incomes would be the biggest since records began in 1956 as wages failed to keep pace with prices.

Polling firm Ipsos MORI polled 4,500 people aged 18 to 64 between January 27 and March 8 for Scottish widows.

UK construction growth sustained in March despite inflationary pressure

British construction output maintained strong growth last month, but builders feared that rapidly rising inflation could reduce customer demand and squeeze their own profit margins, a survey showed on Wednesday, according to Reuters.

The S&P Global/CIPS Construction Purchasing Managers’ Index was unchanged in March at 59.1, its highest reading since June 2021 and topping economists’ average forecast in a Reuters poll for a fall to 57.8.

The broader all-sector PMI, which includes previously released services and manufacturing data, rose to its highest level since June 2021 at 60.7, from 59.8 in February.

Quick action by the ECB to contain inflation could bring down the economy

Growth rates in the euro zone could dip into negative territory this year and the European Central Bank’s policy tightening to bring down high inflation in the short term risks dragging the economy down, said Fabio Panetta, a member of the ECB’s Administrative Council.

With Eurozone inflation at a record high of 7.5%, the ECB is under increasing pressure to tighten policy, even though most of the rapid price growth is due to high oil prices. energy, which are largely beyond the control of the bank.

Instead, Panetta said European governments should help the most vulnerable households and jointly fund what is likely to be a costly transition away from Russian power.

“Quarterly growth rates will be very low this year,” Panetta said in a speech. “The negative impact of war may well push them into negative territory and produce more lasting effects.

The euro zone’s financial system is holding up well against the war in Ukraine

The euro zone’s financial system is doing well with the war in Ukraine and associated Western sanctions against Russia, ECB Vice President Luis de Guindos said on Wednesday.

“For the eurozone, the impact of the war on financial stability has so far been relatively contained,” de Guindos told a conference. “Markets have generally worked well.”

“While banks and non-banks were affected – particularly the few with significant direct exposures to Russia and Ukraine – the economic fallout did not have a noticeable impact on systems. banks or financiers of the EU as a whole”, he added.

Sweden’s economy shrank 0.8% in February from January

Sweden’s economy shrank 0.8% in February from the previous month on a seasonally adjusted basis, preliminary data from the Statistics Office showed on Wednesday.

Economic activity was 2.5% higher in February than in the same month in 2021.

China’s service sector activity squeezed by omicron push

Activity in China’s service sector contracted at the fastest pace in two years in March as the local surge in coronavirus cases restricted mobility and weighed on customer demand, a survey by the private sector.

The Caixin services PMI dipped to 42.0 in March from 50.2 in February, falling below the 50 point mark that separates growth from contraction on a monthly basis. The reading indicates the largest drop in activity since the pandemic initially began in February 2020.

The survey, which focuses more on small businesses in coastal regions, matched the gauge of an official survey, which also showed the deterioration of the service sector.

The Caixin PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.

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