The IMF managing director Kristalina Georgieva has now openly admitted that the year 2023 will witness the slowing down of the world economy to a point where as much as one-third of it will see an actual contraction in gross domestic product. This is because all the three major economic powers in the world, the US, the European Union, and China, will witness slowdowns, the last of these because of the renewed Covid upsurge. Of the three, Georgieva believes, the US will perform relatively better than the other two because of the resilience of its labour market; indeed the greater resilience of the US labour market provides some hope for the world economy as a whole.
There are two ironical elements in Georgieva’s remarks. The first is that the best prospects for the world economy today, even the IMF concedes if only implicitly, lie in workers’ incomes in the US not falling greatly. For an institution that has systematically advocated cuts in wages, whether in the form of remunerations or of social wages, as an essential part of its stabilisation-cum-structural adjustment policies, this is a surprising, though welcome, admission. Of course Georgieva, many would argue, is seeing US labour market resilience only as the result of US’s economic performance and not as its cause. But her considering it a “blessing” (though not an unmixed one for reasons we shall soon see) leaves one in no doubt that the demand-sustaining role of workers’ incomes is also being recognised by her.
The world is sliding into a recession due to multiple overlapping crises, the head of the WTO said on Tuesday.
Speaking at the opening of the WTO’s annual public forum in Geneva, Ngozi Okonjo-Iweala noted that the World Bank and the International Monetary Fund (IMF) have both downgraded their global growth forecasts, and that trade indicators are “not looking too good.”
Colliding crises such as surging food prices, the soaring cost of living, and the energy crunch, first triggered by the Covid-19 pandemic and then aggravated by the Russia-Ukraine conflict, have created the conditions for a global recession.
The G7 governments have a problem. The war in Ukraine against Russia is not won. It looks set to be a long grinding conflict, possibly with no end. And yet the world and particularly Europe depends on Russian energy supplies. The G7 has agreed to stop buying Russian oil, as part of its programme of using economics sanctions as a war weapon. But up to now, energy imports from Russia have not been stopped because it would mean a catastrophe for the EU countries, particularly Germany. And Russia is still selling huge volumes—globally – albeit at a discount from the world price—to India, China and other energy-thirsty economies.
It’s been a big week for the major central banks. First, the European Central Bank (ECB) called an emergency meeting because government bond yields were rising sharply in the more indebted Eurozone economies like Italy and Spain. That threatens to deliver a new sovereign debt crisis as happened after the Great Recession from 2010-2014, leading to the Greek nightmare.
Australia has done well on the public health front during the COVID-19 pandemic, thanks to decisive action by the National Cabinet in March. Australia has done better than most countries on the economic front, too, thanks to the federal government’s large fiscal measures.
But we are at a crossroads.
By September, we may well have largely dealt with the public health aspects of the pandemic. But the economic recovery will only just be starting. The danger is that misunderstanding the nature of this economic crisis will lead the government to bungle that recovery.Read More »
The coronavirus pandemic sweeping the world will turn global economic growth “sharply negative” in 2020, triggering the worst fallout since the 1930s Great Depression, with only a partial recovery seen in 2021, the International Monetary Fund (IMF) Managing Director Kristalina Georgieva said.
Georgieva painted a far bleaker picture of the social and economic impact of the new coronavirus than even a few weeks ago, noting governments had already undertaken fiscal stimulus measures of $8 trillion, but more would likely be needed.
There is “tremendous uncertainty around the outlook” and the duration of the pandemic, Georgieva said.Read More »
Is the prospect of looming global recession merely an economic matter, to be discussed within the framework of the Great Financial Crisis of 2008 – which is to say, whether or not, the Central Bankers have wasted their available tools to manage it? Or, is there a wider pattern of geo-political markers that may be deduced ahead of its arrival?
Economic forecasting is a bit of a mug’s game. Mature capitalist economies tend to plod along, growing at modest rates, until they don’t. Despite extensive efforts, nobody has discovered a reliable way to predict when that moment will arrive and, subsequently, a recession will begin. Sometimes there are warning signs, such as asset-market bubbles developing, inflation picking up, the Fed raising interest rates, and trade deficits soaring. But, even if some of these signs are flashing amber, as they were in the late nineteen-nineties and the period between 2005 and 2007, it’s hard to know when they are going to turn red. The lesson of recent U.S. history is that expansions tend to last longer than many people expect.
The U.K. is facing the highest risk of a recession since the financial crisis and needs urgent plans to combat the next downturn, according to an alarming assessment of the U.K.’s economic health.
The National Institute of Economic and Social Research, one of the UK’s leading economic forecasters, said last week that the UK would only “narrowly avoid a technical recession”, with growth of 0.2% in the third quarter following a decline of 0.1% in the second quarter.
A technical recession occurs with two consecutive quarters in which the economy shrinks.Read More »