Global economic recovery continues, though the momentum has slowed down, underscoring
downside risks to the near-term growth outlook, mainly stemming from the supply shock
caused by the war in Ukraine and the reimposition of mobility restrictions in several cities of
China under the country’s strict zero-Covid policy. Nevertheless, focusing more on restoring
price stability against a backdrop of persistently high inflation and rapidly tightening labor
markets, most of the major central banks have pivoted towards policy normalization earlier
and/or more rapidly than expected only a few months ago, amid concerns about second
round effects on wages and de-anchoring of inflation expectations.
Macro Picture
USA: Q1-2022 real GDP fell by 1.4% on Covid-19
resurgence and decrease of government support
EA: Economic activity enters Q2 on a firm footing,
but downside risks loom
UK: Growth likely to slow from Q2 onwards amid
a significant drag in households’ real incomes
EM: The continuing war and China’s unabated
zero-Covid policy pose growth risks to the downside
CESEE: Protracted war, soaring inflation and bottlenecks in supply chains prove Q2’s headwinds
Policy Outlook
USA: Fed attacks inflation more aggressively, on
the back of strong growth momentum
EA: Despite growth risks, ECB rhetoric has turned
marginally hawkish as inflation is broadening
UK: In spite of looming recession risks, BoE likely
to tighten policy further to tame high inflation
CESEE: Central Banks tighten further to tame
persistent inflationary pressures…
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