The global economy has lost momentum in the wake of Russia’s war of aggression in Ukraine

OECD Interim Economic Outlook warns of pervasive global economic slowdown

 

"The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine..."

The global economy has lost momentum in the wake of Russia’s war of aggression in Ukraine, which is dragging down growth and putting additional upward pressure on inflation worldwide, according to the OECD’s latest Interim Economic Outlook.

The Outlook projects global growth at a modest 3% this year before slowing further to just 2.2% in 2023.  This is well below the pace of economic growth projected prior to the war and represents around USD 2.8 trillion in foregone global output in 2023.

The war has further pushed up energy prices, especially in Europe, aggravating inflationary pressures at a time when the cost of living was already rising rapidly around the world due to lingering impacts of the Covid-19 pandemic.  With businesses across many economies passing through higher energy, transportation and labour costs, inflation is reaching levels not seen since the 1980s, forcing central banks to rapidly tighten monetary policy settings faster than anticipated.

The inflation and energy supply shock stemming from the war has led the OECD to revise its previous growth projections downward worldwide.  Annual GDP growth is projected to slow to around 1/2% in the United States in 2023, and 1/4% in the euro area, with risks of deeper declines in several European economies during the winter months.  Growth in China has also been hit and is expected to drop to a projected 3.2% in 2022.  Except the 2020 pandemic, this will be the lowest growth rate in China since the 1970s.

Inflation is projected to recede gradually through 2023 in most G20 countries as tighter monetary policy takes effect and global growth slows.  Headline inflation is projected to ease from 8.2% this year to 6.6% in 2023 in the G20 economies, and fall from 6.2% this year to 4% in 2023 in the G20 advanced economies.

“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine.  GDP growth has stalled in many economies and economic indicators point to an extended slowdown,” OECD Secretary-General Mathias Cormann said during a presentation of the Outlook.  “Inflationary pressures that were already present as the global economy emerged from the pandemic have been severely aggravated by the war.  This has further driven rising energy and food prices that now threaten living standards for people across the globe.”

The OECD points to substantial uncertainty about the economic outlook, with significant downside risks.  These include the possibility of further food and energy price spikes, which could push many people into poverty, as well as the possibility of gas shortages as winter progresses in the Northern hemisphere.  Reducing energy consumption and diversifying supply sources will be critical to avoid shortages, which would push global energy prices up, damage confidence, and likely worsen financial conditions and require a temporary period of enforced reduction of gas use by businesses.

Taken together, these shocks could reduce growth in the European economies by over 1¼ percentage points in 2023, relative to the Outlook’s central projection, and raise inflation by over 1½ percentage points.  This would push many countries into a full year recession in 2023, while GDP growth would also be weakened in 2024.

Other key risks are that the ongoing adjustments in Chinese property markets - combined with the high level of corporate debt in China and continuation of the country’s “zero-Covid” policy - could generate a more severe slowdown in the world’s second largest economy than projected.  This risk comes on top of continued costs from global supply chain pressures, and possible debt crises and financial contagion in many emerging-market and low-income economies.  

Further monetary policy tightening will be needed in most major economies to ensure that inflation pressures are reduced durably.  This will need to be calibrated carefully given uncertainty about the speed at which higher interest rates will take effect and spillovers from tightening in the rest of the world.

Fiscal support can help cushion the impact of high energy costs on households and companies, but should be concentrated on aiding the most vulnerable and preserve incentives to reduce energy consumption.  Fiscal actions to cushion living standards must avoid persistent stimulus at a time of high inflation.  Means-tested transfers to households broadly meet this criteria.

Managing the energy crisis requires renewed efforts to secure alternative supplies while ensuring all sectors of the economy are incentivised to reduce demand.  There is also an urgent need for governments to accelerate investment in energy security and invest in the green transition.

For the full report and more information, visit the Economic Outlook online. Media queries should be directed to the OECD Media Office (+33 1 4524 9700)

26/9/2022

Source

Making the WTO democratic

By Sir Ronald Sanders:


The World Trade Organization (WTO) held its fifth public forum in Geneva over three days beginning September 15. It has become a kind of international bazaar in which every conceivable idea on trade and development is discussed formally and informally by representatives of virtually every government in the world and more Non-Governmental Organizations (NGOs) than can be easily counted.

A great deal of talk takes place without too much follow-up action.

But, maybe that’s the point. People who talk to each other aren’t warring, so long may the talk continue.

That’s not to say that good ideas don’t emerge from this overcrowded market place. They do. But many perish shortly after they are unveiled, usually because representatives of a powerful government or group of governments regard them as a threat to their interest, and quickly kill them off.

I was in Geneva for a Writers’ Conference on a book on negotiations in the WTO for which I am contributing a chapter. All the writers are from what used to be called the “third world,” a description seldom used these days, not because we have miraculously graduated into some better world, but because other descriptions suit the agenda of those who dictate the form of discourse on the global economy. Far better, in their view, to describe poor countries as “emerging” or “developing” whether or not they are really emerging or developing.

The purpose of the book, which has been commissioned by a progressive organization called CUTS International, is to tell the story of the many aspects of WTO negotiations from the point of view of negotiators from developing countries.

When it is published, it should make fascinating reading. It will break new ground in presenting the personal knowledge and experiences of the writers who were either in the trenches of the negotiations or were marginalized from the “inner sanctum” in which only the rich and powerful nations enjoy belonger’s rights, and into which they invite only those they wish to suborn in order to stich-up deals.

Of the many features of the WTO which point to the need for reform, this insider trading - in what has come to be called ‘the green room’ - is among the worst. No democratically managed organization should continue a process which so blatantly excludes from decision-making the weak, poor, small, and vulnerable nations which – as it happens – make up the majority of world’s countries.

That it has continued so long is entirely the fault of the majority of governments who allow it to happen without tangible and meaningful protest, such as packing their bags and going home leaving the ‘green room’ insiders to deal only with themselves, and returning only when there is a table at which representatives of all parties sit as equals.

But, that would call for two things – courage and solidarity, two very scarce commodities among “third world” governments these days. National interests have changed, some argue, and in pursuing these interests following a “third world” strategy is not productive.

It is worth, noting, however, that a “developed countries” strategy has never altered. The world’s industrialized nations continue to cling to their councils and to exploit their advantages. For instance, the creation of the G20 (the industrialized nations and the larger and wealthier developed countries) has not overshadowed - let alone eliminated - the G7 (the industrialized nations alone) who continue to devise and coordinate their own global positions.

Against this background, I was surprised to hear Pascal Lamy, the Director-General of the WTO, say at the opening of this year’s Public Forum, almost boastfully, that while the G20 has signalled the requirement for institutional reform of some international organizations, “the WTO was not amongst them”.

Lamy went on to say: “That governance battle has already been fought in the trade sphere, and the outcome is a fairly democratic institution where the voice of the small cannot be ignored.”

I have no doubt that Lamy believes what he says, but his belief – however sincere and fervent – does not make his statement right. The governance of the WTO is still an open sore. Despite Lamy’s personal efforts, the organisation still reflects the preponderance of power by the industrialised nations and the marginalization of poor, small, and vulnerable countries.

“No board, no quotas. One member, one vote, is the background rule against which the WTO forges its consensus”, Lamy declared. Oh, were that to be entirely true, what a far better world would mankind inhabit than the one we endure today.

Sure, there is technically no board and no quotas, but every representative of a small or poor nation knows that decision making is still the preserve of a few nations whose economic power allows them to arrogate to themselves the right to dictate agendas and outcomes. The WTO is very far from the consensus decision-making body that it should be. It is still not yet even the “fairly democratic institution” that Lamy believes it to be.

Those who defend the ‘green room’ process do so on the basis that it is impossible to negotiate agreements with over 150 countries at the same table. There is truth in that. But it is equally true that representatives of like-minded groups of these countries can gather on sectorial issues that are important to them such as agriculture or services. This way their voices will be heard during the debate and account taken over their views.

Against this background, it is good for developing countries - and small and vulnerable countries in particular - that the Bahamas is now negotiating the terms of its accession to full membership of the WTO. No country can now afford to stay out of an organisation whose rules govern world trade, and every country should want a say in the rules of the game it has to play.

The Bahamas will strengthen the voice of small and vulnerable countries, who if they act with courage and in solidarity with themselves and other like-minded developing nations, can negotiate meaningful recognition and fair and flexible treatment for their people – in other words, try to make the WTO truly democratic.

September 17, 2010

caribbeannewsnow

Bahamas Blog International

The Bolivarian Alliance for the Peoples of Our America (ALBA) goes beyond cooperation, says Mexican economist

HAVANA, Cuba (ACN) -- The Bolivarian Alliance for the Peoples of Our America (ALBA) is an institution that goes beyond cooperation among its member countries as it includes monetary and financial integration, said Mexican economy expert.

Jaime Estay, with the Autonomous University of Puebla spoke about the topic on the third day of sessions of the 12th International Meeting on Globalization and Development Problems underway in Havana.

The academician said ALBA has found solutions to deal with the current world financial crisis generated by a global monetary disorder resulting from the weakness of the US dollar and by policies implemented by the International Monetary Fund (IMF).

Estay pointed out that Latin America is leading national and multilateral actions at regional level to mitigate the negative effects of the crisis on local economies.

The Mexican expert described as inadmissible that Group 20, constituted by industrialized and emerging nations, were entrusted with the responsibility of adopting the measures to overcome the world economic crisis.

G-20 undertook the roll without paying attention to the fact that the UN General Assembly, made up by 192 member countries, was summoned for a meeting to analyze the world situation deal and ended with plans of actions set up.

Estay said G-20 has not touched structural features of the global economy and mentioned as an example of such behavior the fact that the IMF has paradoxically grown stronger lately instead of having disappeared for being one of the leading originators of serious monetary and financial problems.

Likewise, attending Havana’s meeting, Manfred Brenefeld, with the University of Ottawa, Canada, warned that the crisis has driven the world to follow the path to social democracy or fascism in certain countries, politically speaking.

According to the Canadian expert, the most effective and plausible way would be social democracy, but as a prelude to new true socialism, which he said should be credible and possible for the peoples.

Our mission is to make that Socialism understandable, Brenefeld said.

With some 1,000 Cuban and foreign participants, the 12th Int’l Meeting on Globalization and Development Problems will run until next Friday, March 5 in Havana.

Thursday, March 4, 2010

caribbeannetnews

Bahamas Blog International

Local banks: Vital for the Caribbean's economic recovery strategy

By Dr Isaac Newton

The recapitalization of the banking industry in North America and Europe, which transferred massive wealth from the public sector, to a selected elite cadre of the private sector, is now showing some positive signs in this global recession.


But some economists warn that these early signs offer more hope to political leaders, than the somber reality of the market warrants. Overall, the global economy continues to forecast steady contraction, yet governments in the Caribbean owe their survivability to the generosity, stability and resilience of local banks.

Local banks are best positioned to foster hopeful contrasting scenarios for the Caribbean’s domestic economy, if governments take proactive steps and provide local banks with lighter regulations and fiscal incentives. There are several factors that account for these banks pivotal contribution to local economies.

First, indigenous banks have supported much of the governments’ social and infrastructural programs to the tune of hundreds of millions in loans and credit. But reduced credit lines and liquidity shortage--consequences of the global economy, from which locals banks must recover-- are having an adverse effect on the region’s long-term growth prospect.

Second, local banks are also forced to manage operational challenges, which have impinged on their capital scope. Yet, indigenous banks are part of the answer to point the Caribbean in the direction of economic improvement. By keeping internal customers employed, they continue to lesson the human cost of the impact of this market recession.

Third, typical of a Caribbean mindset that things foreign are superior, local banks are forced to function against a false but widespread belief, that simply because major regional and international conglomerations have failed, local banks are likely to go under. This is not true. What is true historically is that indigenous banks have offered much more support to local businesses than foreign owned competitors. And, they have accomplished this, by tailoring their programs to fit the nuances of the region’s cultural needs.

Fourth, local banks emphasize employment initiatives by keeping small business from going under. For example, in cases where customers are experiencing difficulties servicing their debts, local banks are more likely to help them consider lower payments or identify models that may lead to the early retirement of other current debt. In other instances, local banks help customers consider smaller loans requests to keep their businesses afloat.

Fifth, local banks have extended second life chances to governments in the region. Yet governments have not yet brought forth remedies to address the local financial circumstances by leveraging the resourced intelligence of local banks. Now more than ever, the need for local banks to help their customers get access to finances specific to their unique needs is urgent.

No one is sure how this changed economic landscape will turn out. The free market economy as we knew it has been altered by unethical behaviors of several prominent financial institutions and poor governmental regulations. This means that prudent financial decisions must be pursued by regional governments. If not, they will subject the people to worse forms of economic drag and stagnation than they are faced with today.

But regional governments can use this depressed economic climate as prime-time opportunity to partner with local banks. They could:

• Repay outstanding loans to local banks from funding received from various international agencies and institutions and from tax revenues. This will boost financing and help local banks resume more flexible lending practices. These practices are designed to match individualized needs,
  
  


• Provide innovative tax breaks to local banks so that they can reduce economic inactivity. Governments must be mindful that sound economic recovery will depend on the success of local banks.
  
  


• Inject local banks with confidence-building capital; local banks are likely to become drivers for growth that will facilitate steady economic upswing, ensuring future prosperity for the Caribbean,
  
  


• Reduce security risks to the business environment in general but pay special attention to the explicit security risks that local banks face.
  
  


• Draw on the skills of local banks to help them plan for a worst case option, should in case recovery plans fail. Local banks are equipped with the right personnel critical to help governments activate initiatives leading to long-term growth recovery and regional financial strength and,
  
  


• Remove adverse economic policy making barriers to the growth and profitability of local banks.

However, there is not sufficient clarity about the strategic aims of regional governments’ economic recovery plans. On the positive side, governments have at least identified broad recovery areas: lessening expenditure, borrowing from the IMF as a form of fiscal discipline en-route to downsizing the public sector, and intentions to preserve employment.

It is glaring nonetheless, that governments’ revitalization plans do not generally include a radical vision to expand special skills designed to put the right mix of talent in the right places, in order to take advantage of every opportunity for sustainable prosperity.

But with all the uncertainties that exist, another thorny issue irritating regional governments is how to take proactive actions to cut cost, while preserving portions of the social safety network that employment in the public sector represents for the masses.

Given the small, fragile nature of regional economies, local banks must be given the flexibility to support people and businesses without choking growth. I suspect that greater lending capacity by local banks can pull the economy back to satisfactory growth levels.

The Caribbean’s economy is expected to be dismal for the next five years. So whether in Antigua and Barbuda, St Lucia, Dominica, St Vincent, Barbados and St Kitts and Nevis or Trinidad, Jamaica and Guyana, governments will continue to face short, middle and long term challenges to their economies.

To confidently move forward, honest assessments must be undertaken. In retrospect, the region’s economic troubles were not exclusively caused by unbelievable greed and the irresponsible pursuit of power that occurred on Wall Street. Much of the problem is a sobering reminder of gross mismanagement of local economies. Expressions of this include:

• Failure to innovate tourism dependent, financial services and real estate industries
  
  


• Failure to capitalize on global financial trends through research and innovation
  
  


• Failure to explore new alternative energy, global sports and leisure markets
  
  


• Failure to adjust quickly to North America’s and Europe’s protracted economic depression
  
  


• Failure to be more fiscally disciplined while incentivizing productivity in the private sector and,
  
  


• Failure to tighten spending by reducing an already overburdened public sector and to increase credit rating

Regional governments should make sure that the economic climate is beneficial to local banks, especially if public/ private partnerships are going to be used as a credible means to finance important projects. Giving local banks the right mechanism so that they could become a credible alternative to cross-border financing, must be part of the region’s tough task, of pulling itself out of recession. 

November 9, 2009


caribbeannetnews

Bahamas Blog Bahamas

 

CARICOM seeks voice in G20

GEORGETOWN, Guyana -- The Caribbean Community (CARICOM) would like a voice in the Group of 20 (G20). This was one of the issues raised by the Community’s Foreign Ministers during a meeting with United States Secretary of State Hillary Clinton in New York, USA last Friday 25 September.

Assistant Secretary-General at the CARICOM Secretariat for Foreign and Community Relations Ambassador Colin Granderson said that Secretary Clinton was informed of the concern by CARICOM countries of not having a presence in the Group of 20 (G20) global policy arena where many of the issues on the global economy are discussed and decided. He added that the concern of the Region was ‘taken on board”.

“It is believed that the views of vulnerable states with peculiarities such as ours need to be heard,” Granderson emphasised.

The latest meeting provided yet another opportunity for follow-up discussions arising from the meeting between CARICOM Heads of Government and United States President Barack Obama at the 5th Summit of the Americas in Port of Spain, Trinidad and Tobago in April 2009 and a previous meeting between the Ministers and Secretary Clinton in Honduras in June during the Organisation of American States General Assembly.

Granderson revealed that discussions were dominated by the continuing global financial crisis and trade. With regards to the global financial crisis, the Region expressed continued concerns about accessing funds that developed countries had made available for developing countries to assist in offsetting some of the fall out from the financial crisis.

The Assistant Secretary-General said that it was stressed that the graduation of some CARICOM Member States to the level of middle income countries had made it quite challenging for them to access these much needed funds.

On the trade front, Granderson said the Region pressed home the point that it is anxious to meet with the US Trade Representative as there are several issues in this arena to be ironed out and on which the Region needed clarity.

The CARICOM Assistant Secretary-General also informed that developments on a planned Caribbean-US Regional Security Framework was also discussed. He informed that a Joint Working Group which was established earlier this year had already met and planned a second meeting in the coming weeks.

The Dominican Republic also participated in last week’s discussions.

October 1, 2009

caribbeannetnews

Bahamas Caribbean Blog International

G-20: One step behind

David Roberts:


So the Group of 20 is going to be the body "coordinating" the global economy from now on, the leaders of the world's most powerful developed and developing nations agreed Friday in Pittsburgh, Pennsylvania. The decision to remove that responsibility from the G-8, the world's richest industrialized nations, and encompass Latin America's Brazil, Argentina and Mexico as well as other major emerging economies like China, India, South Africa, Indonesia and South Korea is a positive step forward. The BRIC countries in particular are playing an increasingly important role in the global economy and giving them more say in managing its affairs would be a welcome move indeed.

But is that what's really going to happen by including developing nations on this global "board of directors"? Not likely, because as we've seen time and time again, whether it's the G-20, the G-8, the G-7 or the G-whatever, such loose talking shops will never have the authority - given the different national interests involved - to make hard decisions on specific matters, let alone manage the global economy. And that's exactly what we saw once again in Pittsburgh - lots of fudging, on issues from bankers' bonuses to trade and budget imbalances. Talking shops are important, world leaders need to get together every now and again to discuss big issues, but the idea that, as British Prime Minister Gordon Brown put it, the G-20 is now going to become the "premier economic organization for dealing with economic management around the world," is, eh, pie in the sky.

Even if the leaders of 19 such diverse nations (the 20th member is the EU, which complicates matters even more) could agree on the specifics of managing the globe's finances, they would inevitably be one step behind the curve, as the economy moves faster than regulators, managers, directors, finance ministers, central bank chairpersons or even presidents.

All that's not to say that there are no lessons to be learned from discussing these issues at the highest level, but more questions than answers will likely be the result. How can world leaders prevent another financial meltdown like the one we saw last year? Why didn't the "experts" see it coming, or did they? Looking at Latin America, and comparing the region to say China and India, one lesson to be learned is the need to develop the region's domestic economies and depend less on exports, whether in the form of commodities or, like Mexico, manufactured goods sold largely in the US. The Chinese and the Indians saw their export markets collapse but are emerging from the slump relatively unscathed thanks to their stronger domestic markets.

But at the end of the day, unless individual nations are prepared to cede a degree of sovereignty to international organizations, the "solutions" (read "delayed reactions") will continue to come in at a national or at best regional level, just as we saw during the financial crisis when the US, Europe and others all adopted very different approaches. Economic stimulus packages, nationalizing the banks or bailing them out, stricter capital requirements, slashing interest rates to encourage lending (when loose lending was what started it all off), quantitative easing, protectionism (buy American, buy Brazilian etc), caps on bonuses - you name it, someone's tried it. If the G-8 couldn't agree what to do, what chance does the G-20 have?

bnamericas

Bahamas Caribbean Blog International