Delta COVID-19 variant haunts outlook for global economic growth

Any optimism about global economic growth from Group of 20 finance chiefs this week is likely to be delivered with crossed fingers that a rapidly evolving virus can be kept at bay.

With the second half of 2021 now under way, the gathering in Venice provides a key moment for finance ministers and central bank governors to take stock of the global rebound, probably resulting in a more assured show of confidence than they offered in April. Back then, they observed only an “uneven” and “fragile” recovery taking hold.

But for all the progress that vaccines have brought, the worry of relapses in the pandemic remains ever-present. On Friday, European Central Bank President Christine Lagarde lamented the uncertainty posed by the more-transmissible so-called delta variant, a threat the European Commission may acknowledge in quarterly forecasts due this week.

Meanwhile in the US, Federal Reserve chief Jerome Powell has warned that new strains remain a risk to the economy. Health officials there reckon the delta variant may eclipse other mutations in the US within weeks.

Such concerns are lingering elsewhere in the G-20. In Australia, half of the population went into lockdown last week, while coronavirus cases in South Korea reached a six-month high — and India reached a grim tally of 400,000 deaths.

If officials crave a sign of hope amid such setbacks, the Venice event offers them comfort in the symbolism of improvement showcased by the meeting itself. Ministers will actually convene in person for the first time since February last year. Ever since then, the onset of the pandemic had forced all such gatherings to resort to video.

Elsewhere in the world economy, central bankers in Israel, Poland and Australia set rates and ECB and Fed publish minutes of their most recent monetary policy meetings.

Click here for what happened last week and below is our wrap of what is coming up in the global economy.

US and Canada

In the US, investors will be awaiting the minutes of the Fed’s meeting in June — due out on Wednesday — for more details on their debate over inflation, tapering and reducing support to the economy. Economic data in the spotlight during the holiday-shortened trading week include reports on job openings in May and services activity.

In Canada, June jobs data on Friday will show how employment is rebounding from a two-month slump as the nation emerges from a third-wave of COVID-19.


The Reserve Bank of Australia will decide on Tuesday whether to roll over its yield target to the November 2024 bond and whether to undertake a third round of bond buying, or a modified version, when the current tranche ends. A decision to hold off on extending either or both of those would be seen as setting the scene for an eventual tip toe away from the current crisis monetary settings.

Japan will release household spending figures that should shed more light on how consumption held up midway through emergency virus restrictions. Wage data out the same day will show if recovering pay can offer additional support to consumers and ensure the economy avoids a double-dip recession.
Malaysia sets interest rates on Thursday and China will release factory and consumer inflation data on Friday.

Europe, Middle East, Africa

Western Europe will be relatively quiet for economic news in coming days, aside from the European Commission forecasts and German industrial production, both due on Wednesday, and the G-20 meeting in Venice at the end of the week.

At an event associated with that gathering, Bank of England Governor Andrew Bailey will appear on a panel discussion with Lagarde about digitalization and intangibles.

A monthly reading of UK GDP on Friday is set to show the economy took another big step toward its pre-pandemic level in May after indoor hospitality and the recreation sector were opened in England.

Elsewhere in the region, several central banks are due to deliver interest-rate decisions, all of which may be scrutinized for signs of how such institutions are confronting rising global concerns on inflation.

Within Eastern Europe, monetary officials will meet deliver decisions in Romania on Wednesday, and in Poland and Serbia on Thursday. All are anticipated to keep borrowing costs unchanged.

The Bank of Israel is also expected to keep rates on hold on Monday at 0.1 percent, but may signal possible tightening in the future after a more upbeat outlook on the country’s economic recovery from Governor Amir Yaron.

Turkish inflation probably accelerated to almost 17 percent in June, figures on Monday are expected to show, a 20th straight month of double-digit price increases.

Data on Wednesday will likely show Mauritian inflation remained below the central bank’s forecast of 3 percent for 2021 in June. That may give policy makers room to keep the benchmark interest rate at an all-time low to support the private sector’s recovery from a second coronavirus lockdown.

On Wednesday, rising interest rates and a still-raging pandemic in Brazil may get the better of improved confidence and a new round of modest cash handouts to keep May’s retail sales figures just below April’s.

Central bankers in Brazil, Mexico and Chile began 2021 counseling restraint in the face of rising consumer prices. Six months later, above-target inflation has Brazil on an aggressive tightening cycle, Mexico last month wrong-footed observers by raising borrowing costs for the first time since 2018, and Chile has signaled it’s ready to starting hiking.

In June data posted Thursday, look for inflation to breach the ceiling of Chile’s target range and the readings in Brazil and Mexico to come in near current levels — both well over target.

Later Thursday, Banco de Mexico posts the minutes of its June decision followed by Peru’s monthly central bank meeting, here complicated by last month’s sharp jump in inflation.

Lastly, Argentina’s central bank posts its keenly anticipated monthly survey of economists and analysts on key economic indicators.

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