2023-10-10 14:14:10
At a time when the pressures facing the global economy are intensifying, the meetings of the World Bank Group and the International Monetary Fund are continuing in Marrakesh, Kingdom of Morocco, which will continue until the middle of this month.
In these meetings, the International Monetary Fund carries a “hopeful agenda,” according to the expression contained in an analysis published by the British newspaper “The Guardian,” which indicated that:
The turmoil witnessed in global bond markets last week is weighing on the minds of finance ministers and central bank governors at the Marrakesh meetings. After the triple shocks (the Corona pandemic, the war in Ukraine, and high inflation), the atmosphere may be less tense than it was a year ago… while few participants may believe that the crisis is over. The list of potential flashpoints is long, and includes: a recession as a result of the sharp increase in interest rates over the past two years, a financial collapse caused by shaking investor confidence, a debt crisis in developing countries, as well as catastrophic weather events, and an escalation of war (in Ukraine). IMF Executive Director Kristalina Georgieva wants to see inflation tamed without causing a recession. It also seeks to accelerate the green transition, replenish its corporate coffers, agree for rich countries to provide cash for interest-free loans to low-income countries, and make faster progress in reducing the debt burden.
The analysis describes the “hopeful agenda” that the Fund adopts during the meetings as a “wish list,” especially given the extent of the damage that the epidemic and its repercussions have inflicted on public finances in the developed West, and the tension – if not outright hostility – that exists between many of the largest economies. In the world.
Georgieva had mentioned in previous statements last week to The Guardian that the war in Ukraine “increased the feeling of fragmentation… The days in which globalization was viewed as an unstoppable force have ended, but the need for multilateral cooperation has become as urgent as ever.” ever.”
Widespread tensions
From Morocco, Professor of Economics, Dr. Salma Sedqi, says in exclusive statements to “Eqtisad Sky News Arabia” website, that the meetings of the World Bank Group and the International Monetary Fund come in the context of a global economy that is witnessing widespread tension and a group of crises, with the stage of emerging from the consequences of the Corona pandemic. Then the war in Ukraine brought many economies into a state of “stagflation.”
Therefore, “getting out of this crisis requires greater efforts by countries (major and developing)… and this hopeful agenda is indispensable, and in the context of adopting economic policies aimed at getting out of crises,” according to Sedqi, who explains that “things are somewhat difficult, Especially since there are some contradictory goals that the global economy aspires to.”
She explains this contradiction by saying: For example, “inflation requires austerity economic policies, while emerging from recession, on the other hand, requires more economic policies in terms of public expenditures, and more appropriate fiscal and monetary policies.”
She stresses that the IMF is looking for what is called a “mixed unity” between economic and monetary policies to balance the goals and get out of the crisis, which requires the necessity of making extensive efforts by countries.
The economics professor from Morocco concludes her interview with the “Eqtisad Sky News Arabia” website by noting that “emerging economies have a year to a year and a half to see in practice the repercussions of the current monetary policies aimed at curbing inflation on the ground (..).”
It is noteworthy that during the meetings of the International Monetary Fund and the World Bank in April, Georgieva stated that regarding 15 percent of low-income countries are already suffering from a debt crisis and “an additional 45 percent are close to that.”
On Tuesday, the International Monetary Fund maintained its global growth forecast at 3 percent for the current year 2023, while reducing it to 2.9 percent for the next year 2024. The Fund had raised its forecast for global economic growth in a July report. On Tuesday, it published – within the World Economic Outlook – its new updated estimates. The Fund attributed its aforementioned estimates to the slowdown in global economic activity, which is still lower than rates before the Corona pandemic, especially in emerging economies. It pointed to the impact of the war in Ukraine and geopolitical conflicts, as well as the extended effects of the pandemic. The Fund estimates that the US economy will grow by 2.1 percent in 2023 and 1.5 percent in 2024.
Georgieva had anticipated the release of the report by noting that “the new figures will show that the current pace of global growth is still very weak, much lower than the average of 3.8 percent in the two decades that preceded the pandemic.”
But at the same time, she indicated that there are increasing possibilities that central banks will be able to “tame inflation” without pushing the global economy into recession, and thus achieve a “soft landing.”
The Moroccan Central Bank does not intend to change its monetary policy until the end of 2023
Inflationary pressures
For his part, Dr. Ahmed Al-Ajmi, professor of economics and public finance at Pharos University, points out in exclusive statements to the “Eqtisad Sky News Arabia” website that the hopes that arouse the world for a decline in inflationary pressures differ in terms of their pace from one economy to another. As for the major economies, they have largely succeeded in going a long way in defeating inflation (and approaching to varying degrees the target rates), while the crisis still exists for developing economies that suffer from accumulated problems, especially with regard to debt rates, lack of liquidity, and the cost of imports from… Goods.
It is believed that the impact of the financial and monetary policies adopted and aimed at curbing inflation in these economies may not become fully apparent until following two years at the latest, unless new developments occur in the world that would ignite inflationary pressures, as we recently saw in the conflict between the Israelis and the Palestinians and its direct repercussions. on markets, including oil and gold.
As for the impact of the war in Ukraine, he points out that “the world has begun to deal with the war as a fait accompli and is arranging its affairs directly in light of those conditions… while the future depends on the extent to which any new developments occur that would add more challenges and difficulties.”
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The World Bank
Returning to the Guardian analysis, the British newspaper indicated that the World Bank has had a lower profile than the International Monetary Fund in recent years, but it will come into the spotlight this week when its new president, Ajay Banga, delivers his mission statement along with plans to increase its lending capacity.
Banga says the bank’s dual goal should be to eradicate poverty on a livable planet. But there is much more to do before either goal can be achieved. The bank itself said last week that Africa is facing a lost decade of weak growth and increasing instability, while United Nations estimates indicate that developing countries will need two trillion dollars annually until 2030 to deal with climate collapse. This will require stepped up aid to developed countries, increased concessional lending from the World Bank, and a massive increase in private investment.
Broad challenges
In turn, the World Bank’s advisor, Dr. Mahmoud Anbar, points out to the “Eqtisad Sky News Arabia” website the challenges that hinder the achievement of those desired goals, to support global growth, especially developing countries, most important of which is the “stagflationary stagnation” that the world is witnessing, which in turn is reflected in the prospects for… The global economy is pushing negative estimates in this context.
Anbar talks regarding the aforementioned triple shocks; Starting with the Corona pandemic and its ongoing repercussions, including its repercussions on China (as the Chinese economy is resisting to recover despite the end of Corona restrictions), then the war in Ukraine and the crisis between the Eastern camp and the Western camp, and its various repercussions, including the energy and food crises (grains) and food chains. Supply, in addition to the inflationary pressures witnessed globally, which prompted central banks to tighten monetary policies and raise interest rates since last year to curb inflation rates.
In this context, the International Monetary Fund advisor also highlights the problems associated with the decline in investments – in light of the state of uncertainty and uncertainty that the global economy is witnessing – as in the past year 2022, direct investment rates (at the global level) declined by 12 percent.
According to data from the United Nations Conference on Trade and Development (UNCTAD), total global foreign direct investment reached $1.3 trillion last year, affected by various global crises. The war in Ukraine, rising food and energy prices, and debt pressures.” The UNCTAD report expected that the downward pressure on foreign direct investment would continue in the current year 2023.
The Secretary-General of the United Nations Conference on Trade and Development, Rebecca Greenspan, said in previous statements, “Foreign direct investment flows to many smaller developing countries are stagnant, while flows to the least developed countries fell 16 percent from an already low basis.”
Last June, the World Bank’s “Global Economic Prospects” report stated that global growth had witnessed a sharp slowdown, and that the risks of financial pressures in emerging market and developing economies were becoming more severe amid rising global interest rates. It is expected – according to the same report – that global growth will slow from 3.1 percent in 2022 to 2.1 percent in 2023. With regard to emerging market economies and developing economies other than China, the report expected that their growth rate would slow to 2.9 percent this year following they recorded growth. By 4.1 percent last year. These forecasts reflect a widespread decline.
Global economic outlook
On Tuesday, the chief economist of the International Monetary Fund, Pierre-Olivier Gourincha, said: “We have a global economy that is still recovering from the pandemic and the war in Ukraine, and at the same time we have growth that remains weak compared to its previous levels. We are also recording growing differences.”
The Fund’s latest data shows that the situation is uneven, either among developed economies or among emerging countries, as some of them see a significant improvement in their expectations, while other countries, especially in Europe, suffer from slowdowns or witness a slight recession.
Experts believe that the reason for this is the continuing repercussions of some crises, especially the war in Ukraine, while the slowdown in inflation takes time, which prompts central banks to continue a strict monetary policy with high interest rates.
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