The global economic recovery is losing momentum as the resurgence of the coronavirus and widespread supply chain disruptions threaten to be a drag on a world economy that is trying to find its footing, the International Monetary Fund said on Tuesday.
The I.M.F. lowered its 2021 global growth forecast to 5.9 percent in its latest World Economic Outlook report. The worsening of the public health crisis because of the Delta variant of the virus darkened the outlook for developing countries, while shortages are weighing on consumption and manufacturing in advanced economies.
The weaker forecast, down from the 6 percent growth that was projected in July, reflects the stubborn hold that the pandemic has on the world even as vaccines and treatments are being deployed.
“Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries,” Gita Gopinath, the I.M.F.’s chief economist, wrote in an introduction to the report. “Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.”
The I.M.F. said that the biggest threat to the recovery is the spread of more aggressive variants and that speeding up vaccinations is the top priority for accelerating the rebound.
According to the report, 60 percent of the eligible populations in advanced economies are now vaccinated while just 4 percent of those populations in low-income countries have been vaccinated.
The fund has warned that disparities in vaccine distribution have created a two-track recovery, with struggles in the developing world to access and deliver vaccines threatening to prolong the health crisis and economic malaise.
However, in recent months, turbulence in rich countries has begun to weigh on the economic outlook. The economic growth forecast for the United States was pared back to 6 percent from 7 percent because of softening consumption and large declines in inventory caused by supply chain bottlenecks. In Germany, manufacturing output has taken a hit because key commodities are hard to find. And lockdown measures over the summer have dampened growth in Japan.
Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world. Ms. Gopinath called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus. She also urged vaccine manufacturers to support the expansion of vaccine production in developing countries.
“Recent developments have made it abundantly clear that we are all in this together and the pandemic is not over anywhere until it is over everywhere,” she wrote.
Global growth is expected to slow to 4.9 percent in 2022 and then moderate to about 3.3 percent in the medium term, the I.M.F. said.
WASHINGTON — The International Monetary Fund’s executive board on Monday expressed confidence in the leadership of Kristalina Georgieva, its managing director, following allegations that she had manipulated data to placate China when she was a senior World Bank official.
The decision came less than a month after an independent inquiry commissioned by the World Bank concluded that she played a central role in meddling with its 2018 Doing Business survey. The findings raised questions about her judgment and ability to continue leading the I.M.F. But ultimately its executive board decided that the investigation into Ms. Georgieva’s actions “did not conclusively demonstrate” that she had acted improperly.
“Having looked at all the evidence presented, the executive board reaffirms its full confidence in the managing director’s leadership and ability to continue to effectively carry out her duties,” the I.M.F.’s executive board said in a statement. “The board trusts in the managing director’s commitment to maintaining the highest standards of governance and integrity in the I.M.F.”
Ms. Georgieva, a Bulgarian economist, maintained strong support from many of the I.M.F.’s shareholders, including France, which had lobbied hard for her to get the job in 2019. The United States, which is the fund’s largest shareholder, declined to express public support for her following the allegations but ultimately did not call for her removal.
Treasury Secretary Janet L. Yellen spoke with Ms. Georgieva on Monday and told her that the World Bank investigation into her actions “raised legitimate issues and concerns,” the Treasury Department said. Ms. Yellen said, however, that absent “further direct evidence” regarding Ms. Georgieva’s role in data manipulation at the World Bank, there was no basis for a change in leadership at the fund, according to a readout of the call.
The outcome could lead to political blowback for the Biden administration. Republicans and Democrats in Congress had urged Ms. Yellen to insist on “full accountability” after it emerged that Ms. Georgieva had instructed staff to find a way to ensure that China’s ranking did not fall in its annual report on national business climates.
The Biden administration and lawmakers from both parties have been concerned about China’s growing economic clout and influence in multilateral institutions.
Treasury Department officials debated the gravity of the revelations for weeks, insisting publicly that the process of reviewing Ms. Georgieva’s actions at the World Bank should be allowed to play out.
The World Bank’s Doing Business report assessed the business climate in countries around the world. Developing countries, in particular, cared deeply about their rankings, which they used to lure foreign investment.
At the time of the reported manipulation, World Bank officials were concerned about negotiations with members over a capital increase and were under pressure not to anger China, which was ranked 78th on the list of countries in 2017 and was set to decline in the 2018 report.
According to the investigation, the staff of Jim Yong Kim, then the bank’s president, held meetings to find ways to improve China’s ranking. Ms. Georgieva also got involved, working with a top aide to develop a way to make China look better without affecting the rankings of other countries.
The investigation found that Ms. Georgieva was “directly involved” in efforts to improve China’s ranking and at one point chastised the bank’s China director for mismanaging the bank’s relationship with the country.
Last week, the I.M.F.’s executive board spent hours interviewing officials from the law firm of WilmerHale, which conducted the World Bank’s investigation. They also interviewed Ms. Georgieva, who criticized the process of that investigation and insisted that she had acted appropriately.
“The WilmerHale Report does not accurately characterize my actions with respect to Doing Business 2018, nor does it accurately portray my character or the way that I have conducted myself over a long professional career,” Ms. Georgieva said in a statement to the board; it was obtained by The New York Times.
Ms. Georgieva was a longtime World Bank employee who rose through the ranks to become its chief executive. She previously served on the European Commission — the European Union’s executive body — and she has a Ph.D. in economics from the University of National and World Economy in Sofia, Bulgaria, where she also taught.
Ms. Georgieva said in a statement on Monday night that the episode had been difficult for her personally and that she was grateful the I.M.F. board had expressed confidence in her leadership.
“I am pleased that after a comprehensive, impartial review of the facts, the I.M.F. board agrees that the allegations were unfounded,” Ms. Georgieva said. “Trust and integrity are the cornerstones of the multinational organizations that I have faithfully served for more than four decades.”
Prince Harry and Meghan, the Duchess of Sussex, are getting into the investment business. They are joining Ethic, a fintech asset manager in the fast-growing environmental, social and governance space, as “impact partners” and investors. Ethic has $1.3 billion under management and creates separately managed accounts to invest in social responsibility themes.
The couple could attract more attention to sustainable investing, the DealBook newsletter reports. Harry and Meghan can make E.S.G. investing part of pop culture in a way that, say, BlackRock’s Larry Fink cannot. “From the world I come from, you don’t talk about investing, right?” Meghan told DealBook in a joint interview with Harry. “You don’t have the luxury to invest. That sounds so fancy.”
“My husband has been saying for years, ‘Gosh, don’t you wish there was a place where if your values were aligned like this, you could put your money to that same sort of thing?’” Meghan said. They were introduced to Ethic by friends, she said.
Harry and Meghan said they hoped that their involvement would help democratize investing, making people — especially younger people — more deliberate in their choices and conscious of investing in sustainable companies. “You already have the younger generation voting with their dollars and their pounds, you know, all over the world when it comes to brands they select and choose from,” Harry said, suggesting it was a natural extension to do the same with investments.
Ethic was founded in 2015 and has tripled assets under management in the past year, Doug Scott, a founder of the company, said. Ethic runs screens on companies and sectors based on social responsibility criteria, including racial justice, climate and labor issues. Its user interface has more in common with the likes of Robinhood than traditional financial sites, and it has developed a new platform, “Sustainability for Everyone,” which scores a person’s portfolio along different dimensions.
The move is the couple’s latest corporate partnership since relocating to the United States. Harry and Meghan moved to Los Angeles last year and later gave up official royal family duties. Seeking financial independence, they have signed production deals with Netflix and Spotify. Harry also recently produced a documentary series about mental health for Apple TV+ in connection with Oprah Winfrey and is writing a memoir.
The leader of Samsung, Lee Jae-yong, pleaded guilty in Seoul on Tuesday to the illegal use of an anesthetic, the latest chapter in the legal saga of the heir to South Korea’s largest conglomerate.
Samsung is South Korea’s most important company, with its electronics unit making up almost 20 percent of the country’s exports, and the nearly five-year soap opera of scandal surrounding Mr. Lee has riveted the nation, giving it a peek into both the seedy intersections of industry and politics and the inner life of one of the country’s ultra rich.
For industry watchers, it has raised concerns about Mr. Lee’s ability to manage the enormous conglomerate — with business interests ranging from smartphones to life insurance — while under a seemingly unrelenting legal cloud.
Addressing the Seoul Central District Court, Mr. Lee said that he had used the surgical anesthetic propofol as part of a skin treatment over five years starting in 2015. A hospital in Gangnam, one of the city’s wealthiest neighborhoods, had issued him dozens of prescriptions for the drug, he said.
South Korean prosecutors had indicted Mr. Lee in June on charges of using a narcotic for nonmedical purposes. They have demanded that he pay more than $72,000 in fines. The court is expected to make a final ruling in the case in two weeks.
Employees of the clinic that prescribed the drug have been charged and are facing a separate trial.
Mr. Lee, 53, is vice chairman of Samsung, and has been running the sprawling business since a heart attack incapacitated his father, Lee Kun-hee, Samsung’s chairman, in 2014. His father died last year, and Mr. Lee is his only son.
In 2017, Mr. Lee was arrested on bribery charges after being accused of paying $36 million to Choi Soon-sil, a central figure in the nationwide political scandal of the Park Geun-hye administration. He was later convicted, and served about a year in prison.
He went to prison for a second time this January for bribing a former South Korean president. Mr. Lee was sentenced to two and a half years in prison by the Seoul High Court, but was released in August on parole.
Mr. Lee also faces separate charges over unfair trading and stock manipulation. He has said he is innocent of those charges.
“I am sorry for causing such a concern over my personal matters,” he said in his closing statements at court on Tuesday.
The Delta variant of the coronavirus has hurt hiring and made policymakers’ lives more difficult. But investors are taking it in stride, because it appears to have had little effect on corporate profits.
Executives, having closed the books on the third quarter, may not be as buoyant as they were earlier in the year, with growing worries about supply chain issues and inflation slowing future profit growth.
Year-over-year growth in S&P 500 earnings per share
Companies start reporting their third-quarter earnings this week, beginning with JPMorgan Chase and Delta Air Lines on Wednesday.
Bottom lines are expected to have risen substantially. Analysts predict that earnings for companies in the S&P 500 rose nearly 28 percent in the third quarter, compared with a year ago, which would be the third-highest increase since 2010. But that’s not necessarily a positive sign for the overall economy.
The sectors showing the biggest jumps in earnings are the few that benefit the most from inflation. Companies in the energy and materials sectors — like Exxon and Dow — are expected to report huge profit jumps for the third quarter. By contrast, companies that are reluctant to pass higher costs onto consumers, like Amazon and General Motors, are expected to have a disappointing quarter. Banks are in the middle, with trading businesses expected to fall short of last year’s windfall but consumer divisions picking up as the economy reopens.
Shortages and supply chain problems loom large. On the most recent earnings calls at S&P 500 companies, some 70 percent warned that supply chain issues would hamper sales and profits. “If we had the capacity to meet all of the demand,” Sean Connolly of the packaged food group Conagra told investors last week, “our numbers would likely have been even more impressive.” Expect to hear more of this on third-quarter calls, perhaps unseating inflation as the topic du jour. (Vaccine mandates are also likely to come up.)
Optimism is also in shorter supply. FactSet reports that 56 companies in the S&P 500 have issued third-quarter guidance above what analysts expected, which is higher than average but down from 67 in the previous quarter. The number of companies issuing negative guidance rose to 47 from 37 the quarter before. Is this a problem? Analysts expect the S&P 500 index to rise by 15 percent over the coming year.
The largest ports in the United States are running out of places to put things. At the Port of Savannah in Georgia, nearly 80,000 shipping containers are stacked in various configurations — 50 percent more than usual. “We’ve never had the yard as full as this,” said Griff Lynch, the executive director of the Georgia Ports Authority.
As major ports contend with a staggering pileup of cargo, what once seemed like a temporary phenomenon — a traffic jam that would eventually dissipate — is increasingly viewed as a new reality that could require a substantial refashioning of the world’s shipping infrastructure, Peter S. Goodman reports for The New York Times.
The Savannah port is trying to work through the backlog, but Mr. Lynch has reluctantly forced ships to wait at sea for more than nine days. On a recent afternoon, more than 20 ships were stuck in the queue, anchored up to 17 miles off the coast in the Atlantic.
The situation there attests to a more complicated and insidious series of overlapping problems. It is not merely that goods are scarce. It is that products are stuck in the wrong places, and separated from where they are supposed to be by stubborn and constantly shifting barriers.
Netflix recently suspended three employees, including a transgender employee who posted a Twitter thread last week criticizing a new Dave Chappelle stand-up special on the streaming service as being transphobic.
The employees were suspended after they attended a virtual business meeting among top executives at the company that they had not been invited to, a person familiar with the decision said on Monday, speaking on the condition of anonymity to discuss a personnel matter. Netflix said in a statement that the transgender employee, Terra Field, was not suspended because of the tweets critical of Mr. Chappelle’s show.
“It is absolutely untrue to say that we have suspended any employees for tweeting about this show,” a Netflix spokesperson said in a statement. “Our employees are encouraged to disagree openly, and we support their right to do so.”
Mr. Chappelle’s comedy special, “The Closer,” debuted on Netflix on Tuesday, and was quickly criticized by several organizations, including GLAAD, for “ridiculing trans people.” Jaclyn Moore, an executive producer for the Netflix series “Dear White People,” said last week that she would not work with Netflix “as long as they continue to put out and profit from blatantly and dangerously transphobic content.”
Ms. Field, who is a software engineer at Netflix, tweeted last week that the special “attacks the trans community, and the very validity of transness.”
On Monday, after news of her suspension went public following a report by The Verge, she tweeted: “I just want to say I appreciate everyone’s support. You’re all the best, especially when things are difficult.”
As criticism of Mr. Chappelle’s special began last week, Netflix’s co-chief executive Ted Sarandos sent a memo to employees defending the comedian.
“Several of you have also asked where we draw the line on hate,” Mr. Sarandos wrote in the memo. “We don’t allow titles on Netflix that are designed to incite hate or violence, and we don’t believe ‘The Closer’ crosses that line. I recognize, however, that distinguishing between commentary and harm is hard, especially with stand-up comedy which exists to push boundaries. Some people find the art of stand-up to be meanspirited, but our members enjoy it, and it’s an important part of our content offering.”
Mr. Sarandos also cited Netflix’s “longstanding deal” with Mr. Chappelle and said the comedian’s 2019 special, “Sticks & Stones,” was also “controversial” and was “our most watched, stickiest and most award-winning stand-up special to date.”
In 2019, Netflix was criticized when it blocked an episode of Hasan Minhaj’s topical show, “Patriot Act With Hasan Minhaj,” in Saudi Arabia after the kingdom’s government made a request for it to do so. In the episode, Mr. Minaj criticized the Saudi Arabian government and questioned the role of Crown Prince Mohammed bin Salman in the murder of the journalist Jamal Khashoggi.
“We’re not in the news business,” Netflix’s co-chief executive Reed Hastings said in 2019, explaining the decision. “We’re not trying to do ‘truth to power.’ We’re trying to entertain.”
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American Airlines said it expected to report a net profit for the third quarter, with revenue in line with earlier forecasts. Ignoring one-off benefits like federal pandemic aid, the airline expects a net loss of more than $600 million. American, which plans to report its official results later this month, said it was optimistic about holiday travel and expected to fly slightly more people in the final three months of the year than over the summer.
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Amazon told employees on Monday that it was loosening its plans to force workers to return to their offices, further retreating from a more rigid approach it had taken earlier this year.
“Instead of specifying that people work a baseline of three days a week in the office, we’re going to leave this decision up to individual teams,” Andy Jassy, the company’s chief executive, told employees in a message that the company also posted online. The director of each team will decide when and how frequently employees would need to be in the office, if at all. READ MORE →
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Southwest Airlines canceled several hundred flights on Monday as it worked to resolve the problems that led it to strike more than a quarter of its scheduled flights over the weekend.
More than 1,800 Southwest flights were canceled on Saturday and Sunday, accounting for more than 28 percent of its weekend schedule, according to FlightAware, a tracking service. By late afternoon on Monday, Southwest had canceled about 10 percent of the flights scheduled for the day, just over 360 flights. About a third of its flights were delayed 15 minutes or more.
Southwest blamed the cancellations on several causes, including problems with the weather and air traffic control on Friday and an inability to get flight crews and planes to where they were needed.
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