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IMF Raises Global Forecast

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  • IMF Raises Global Forecast

The emergence of protectionist forces could undermine a modest brightening of the global growth outlook and is putting severe strain on the post-World War II economic order, the International Monetary Fund said.

The IMF raised its forecast for global growth to 3.5 percent this year, up 0.1 percentage point from January, the Washington-based fund said in the latest update to its World Economic Outlook. Expansion will pick up to 3.6 percent in 2018, unchanged from the projection three months ago. The upgrade offers a glimmer of optimism following a trend in recent years of the fund downgrading its growth forecasts.

The pickup is being fueled by “buoyant” financial markets and a long-awaited cyclical recovery in manufacturing and trade, the IMF said. Still, global growth remains subdued compared with past decades, and the risk of “trade warfare” is still hanging over the world economy, IMF chief economist Maurice Obstfeld warned.

“The global economy seems to be gaining momentum — we could be at a turning point,” Obstfeld said in a foreword to the outlook. However, “the post-World War II system of international economic relations is under severe strain despite the aggregate benefits it has delivered — and precisely because growth and the resulting economic adjustments have too often entailed unequal rewards,” he added.

The sunnier outlook will hearten finance ministers and central bankers from the IMF’s 189 member countries as they meet this week in Washington for the fund’s annual spring meetings. In an interview last week with Bloomberg Television, Christine Lagarde said “we see spring in the air of the global economy.”

Trade Talk

It will be the first spring meetings in Washington since the inauguration of U.S. President Donald Trump, who has promised to take an “America First” approach to foreign policy. After Trump declined last week to follow through on his campaign promise to brand China a currency manipulator, policy makers will be watching closely to see if his administration is backing down from its most hawkish trade threats, or merely picking its battles.

The IMF left its U.S. forecast unchanged for this year and next, at 2.3 percent and 2.5 percent respectively, after raising its projections in January on Trump’s plan to cut taxes and boost infrastructure spending.

The fund sees the U.K. economy expanding by 2 percent this year, up from a projection of 1.5 percent seen in January, before slowing to 1.5 percent in 2018. The British economy has performed stronger-than-expected since the 2016 Brexit referendum, indicating “a more gradual materialization than previously anticipated of the negative effects” from the decision.

The IMF bumped up its estimate for Japanese growth to 1.2 percent this year, an increase of 0.4 percentage point from three months ago. Japan’s growth is being driven by a jump in net exports that’s expected to continue in 2017, the IMF said.

Mild Bump

In the euro area, a mild boost from fiscal policy, easy financial conditions and a weaker currency are boosting growth, which is expected at 1.7 percent in 2017, up 0.1 percentage point from January, according to the fund.

The IMF also raised its growth forecasts for China to 6.6 percent this year and 6.2 percent in 2018.

The fund left unchanged its overall projections for growth in emerging markets and developing economies. Conditions for resource exporters are gradually expected to improve, supported by recovering prices for oil and other commodities, the IMF said.

Nevertheless, the fund downgraded its outlook for the Middle East and sub-Saharan Africa, two regions heavily dependent on natural resources.

The IMF was conceived during World War II to oversee the global monetary system and promote open markets after countries resolved to avoid the beggar-thy-neighbor policies that followed the Great Depression.

But Trump and other nationalist politicians have expressed doubt about the existing system and multilateral institutions such as the IMF. National Front leader Marine Le Pen, who wants to pull France out of the euro, is polling strongly ahead of this month’s presidential election, though she’s an underdog to win a runoff vote next month.

“A distinct set of threats comes from the growth in advanced economies of domestic political movements skeptical of international economic integration — no matter if integration is promoted through multilateral rules-based systems for the governance of trade, more ambitious regional arrangements such as the euro area and European Union, or globally agreed standards for financial regulation,” Obstfeld said in prepared remarks to be delivered Tuesday in Washington.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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