The International Monetary Fund (IMF) said global economic prospects have been “severely set back” by Russia’s invasion of Ukraine and the resulting inflationary shock, together with the ongoing COVID pandemic.

In its quarterly World Economic Outlook, the Fund slashed its global growth forecast for 2022 to 3.6 per cent, 0.8 percentage points lower than the January projection and down from 6.1 per cent in 2021. The fund said prospects have “worsened significantly” with countries closest to the war likely to be hardest hit.

IMF chief economist Pierre-Olivier Gourinchas explained the war is adding to a series of supply shocks that have hit the global economy in recent years and, “like seismic waves, its effects will propagate far and wide”, impacting commodity markets, trade, and financial links.

Meanwhile, German annual producer price inflation, or PPI, reached an eye-watering 30.9 per cent in March, the country’s Federal Statistics Office said on Wednesday. This jump in the prices paid by producers, seen as a harbinger of consumer inflation, hit the highest level since the agency started publishing this data series in the aftermath of World War II.

The March data comes on the heels of a 25.9 per cent increase in PPI in February. Producer prices went up by 4.9 per cent compared to the previous month. The main culprit for the increase were energy costs, which went up by 83.8 per cent from March 2021, the statistics office said.

Natural gas prices were up by 144.8 per cent compared to the same month last year.

Finally, in the US, record high prices and surging mortgage rates led to a second straight monthly decline in existing home sales. A report by the National Association of Realtors (NAR) said that contract closings for previously owned homes dropped by 2.7 per cent in March to a seasonally adjusted, annualised rate of 5.77 million units. The figure was in line with estimates.

At the same time, the reading for February was substantially revised downward, from 6.02 million units to 5.93 million units.

“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” NAR’s chief economist Lawrence Yun said. “Still, homes are selling rapidly, and home price gains remain in the double-digits.”

This article was prepared by Bank of Valletta plc is for general information only.