Transcription
What is the economic impact of what's happening right now in the Gulf? That's one of the things that people are trying to tease out at the moment. We've heard from the OECD. Now, we've got the International Monetary Fund's latest update on the state of the global economy. And the short answer is it's bad.
And it's bad because, you know, when they look at the state of the global economy, they kind of the the title here, war is bad. I I know that seems like a statement of the blindingly obvious, but it's really bad for the economy as well as obviously uh for humanity because when you see um more in the way of destruction, when you see it's harder to get hold of the things you need, whether it's energy from places like the Gulf, that pushes down economic growth. And what the fund is basically doing here is they're saying when things get bad, you have weaker economic growth in the following quarters. Uh when you have further disruptions, when you have further military conflict, you have higher inflation. And you put those two things together. So weaker growth, higher inflation, that's a recipe for what economists call stagflation, which is basically this nasty cocktail of weak growth, higher inflation, and everyone getting worse off. And they worry that that may now be the world that we are living in.
But here's the striking thing. So that's your kind of stylized picture of what happens in the event of a war. This is showing you what they actually think will happen to economic growth in the next year. This is the forecast for 2026 for major G7 economies before the impact of Iran. And now and and indeed what's happening in the Gulf. Now look at the impact. So look at those bars. The higher they are, the stronger all these countries are growing. Now, look at what their latest forecasts show for 2026, and you can see they basically all been downgraded, but there's quite big differences. So, the US and Canada only get a little bit of a downgrade, and we'll come on to why that is in just a second, but the UK has downgraded more than any other major economy, 0.5 percentage points. So, basically half a percentage uh full percentage points going down in the UK um to 0.8% growth. Uh and it's a similar story as well by the way when you look at inflation. So this is showing you the inflation forecast uh for the UK and for other countries and the UK basically has one of the highest rates of inflation.
So if we're talking about this stagflationary world, this quite scary world where on top of having war you also have the economic implications, there's this kind of lingering question mark, isn't there? Why is it that the UK is fairing worse it seems than pretty much every other economy out there? It's a big question and it's not just the IMF that's saying this as well. Well, the OECD, another big organization, basically said a similar thing recently. Well, part of the reason comes back to energy, and this is showing you what the IMF expected to happen to energy prices last time it kind of looked and made a forecast about where it thought energy prices were going to go. You know, you've got the post Ukraine period there. They were going to come down and they thought basically, look, this is great. Energy prices are going to be quite flat. Here is what they now think. It's a very different picture, isn't it? Energy prices going up very sharply, potentially coming back. But bear in mind, this is based on the assumption that this doesn't last that long, and who knows what's going to happen in the coming uh months and years, but that is indeed where they expect things to go.
Um, and the upshot of higher energy uh prices is that there is this big kind of dichotomy in terms of who gets affected. You remember a moment ago, we were looking at the US and showing that the US didn't get much of a downgrade uh here. Well, energy exporters, what this is basically showing is how much of a downgrade or an upgrade to their economic growth is caused by what's happening in the Gulf right now. Energy exporters, most of them actually they do kind of okay. Energy importers on the other hand face downgrades. Downgrades for emerging economies, downgrades for advanced, downgrades for for even uh less well-off countries. And it most of all affected this is as you might have expected is Gulf economies because you know although they are big energy exporters they can't actually get the energy out of the Gulf and so they're in trouble.
But why is it that the UK above you know among all of these energy importers because you know we don't import all of our energy. Why are we so badly affected? Well part of it comes back uh to the fact that on various different measures we're not really doing that well at the moment. We look quite vulnerable. One of them is showing you how much we're having to pay on interest for our government debts uh in the UK. That's just showing you the G7, so other countries around the world, what their interest rates are basically, and how they've changed over time from 2021 through to where we are now. I'm going to bring on the UK so you can see where we are. And for a long time, we were kind of middle of the pack. You know, people, we weren't being charged higher interest rates than everyone else by people out there in the markets. But partly, you know, after what happened in 2022 with the mini budget, but partly as a result of gradual pressure over the years, look at where we are now. We're an outlier. So, we've got higher levels of interest rates than other countries around the world.
Similar story when you look at inflation. This is showing you the average inflation rate across the G7 just in recent years. Now, look at where the UK is. And obviously, inflation just the rate at which prices are rising each year. Look at where the UK is. Just it's the key thing is compare where that red line is compared with the other uh area. We're an outlier again higher inflation for a long period than the rest of the G7. So we're coming into this crisis with higher debt levels or at least higher debt interest rates with higher inflation and that on top of the fact that we're quite dependent uh on imports of energy.
This is showing you just the biggest importers of diesel over the course of the past year uh or so. Look that Australia at the top, but look where the UK is really quite high up. So highly exposed to imports of diesel. And it's diesel that's particularly affected by what's going on because there's a lot of the refineries that produce diesel, particularly in the Middle East and those that get oil from the Middle East. They're affected by this, which is part of the reason why diesel prices have gone up so much uh in the UK. Look at this. This is showing you diesel prices, petrol prices. We're not quite at that level yet where uh in 2022 there was the invasion of Ukraine, but we're quite quite close to it now. And that's causing concern obviously, you know, amongst many people about, you know, are people going to kind of be able to get hold of the diesel at the pumps.
This is a really striking chart and it's worth just kind of dwelling on for a moment because this is showing you typically how much diesel there is in all of those petrol forecourts around the country uh and where we are this year. So the red line is showing you this year and what's striking is before the uh attacks began uh in the Gulf you can see that actually the red line the amount of diesel there was in petrol forecourts around the country was actually quite high. The red line was pretty high versus where it normally is and then obviously things started and a lot of people went and got diesel and we're now running you know kind of at the lower level. So there's still diesel out there but it is kind of slightly less than you'd normally expect at this time of year and that obviously only goes 29th of March. We we don't know kind of where it's gone since and unfortunately we you know we don't get these numbers released by the government all that frequently so we can't kind of tell you exactly where it is right now but it it's showing it's kind of relatively low.
Um, but the one reassuring thing I think is that if you look at the sales in petrol stations, and all this is showing you is each week of the year just how much is being sold at petrol stations, how many people are going in there and buying petrol. You you'll remember these two moments here. September 2021, there's this big panic and people got very worried and they went out and bought got lots of petrol and there was a shortage as a result. 2022, Russia invades Ukraine. Where we are now, 2026 February, people aren't panicking, they're not ftting, they're not going out there and kind of p filling up just because they're worried about things at the moment uh that hasn't happened in this case uh and so that's of some reassurance.
But what's more worrying is just the broader economic impact of what's happening in Iran uh at the moment which is profound, profound around the world and particularly profound for the UK. Hi.