Global economy January 2023-

Written by  //  January 10, 2023  //  Global economy  //  No comments

Five trends to watch in 2023 as the global economy tries a dangerous reboot
By Josh Lipsky
(Atlantic Council) If you’ve listened closely to financial leaders over the past few months, one theme comes across clearly: They just want to get back to where they were before the pandemic.
If we could just get back to 2 percent inflation, if we could rewind the clock to before Russian President Vladimir Putin invaded Ukraine, if we could only get China to open up and manufacture for the world, then things would be fine.
This desire for normalcy is misguided. Europe’s over-reliance on Russian energy was a vulnerability waiting to be exploited. Low inflation vexed the US Federal Reserve in 2019 because it signaled weakness in the labor market. As for China, if you think things were running smoothly in 2019, you probably forgot about the trade war.
As we enter 2023, here are five underappreciated trends to watch in geoeconomics. With each trend, policymakers can focus on a return to the status quo or build something different, and better, this year.
What Comes After Globalization? A Conversation With Rana Foroohar
“all the things that made conventional neoliberal globalization possible—cheap capital, cheap energy, cheap labor—all those things are breaking apart.” (Foreign Affairs 29 December 2022)

World Bank walking tightrope as it mulls increased lending to poorest
Phillip Inman
Campaigners say bank should rush to rescue countries facing recession – but can it do so without resulting in mass debt write-offs?
(The Guardian) Ahead of its annual meeting in April, held with the International Monetary Fund, the World Bank is seeking support for proposals that include a deeper pool of capital to draw on and new lending tools.
This “evolution roadmap” is designed to give the bank more flexibility to meet a series of overlapping crises that the New York university economist Nouriel Roubini*, among others, has argued is the new normal.
Wars, famines and the climate emergency will continue to trigger food shortages and energy price spikes that fuel inflation. Interest rates, for so long at near zero, will remain above long-term trends, they say.
The Bank president, David Malpass, hopes to prevent countries that have made huge strides in the last 30 years towards food security and stable public debts from going backwards.
One of the biggest headwinds faced by developing world governments is the increase in debt costs. When most debts are denominated in dollars or euros, the aggressive rate rises by the US Federal Reserve and the European Central Bank matter.
*Nouriel Roubini: The Age of Megathreats
For four decades after World War II, climate change and job-displacing artificial intelligence were not on anyone’s mind, and terms like “deglobalization” and “trade war” had no purchase. But now we are entering a new era that will more closely resemble the tumultuous and dark decades between 1914 and 1945. (4 November 2022)

5 January
The Economist: One of our cover stories this week is about how China’s great reopening will shake the world. For nearly three years China has been closed: hardly anyone has entered or left it. From January 8th it will reopen its borders, thus scrapping the last remnant of Xi Jinping’s zero-covid policy. Because the government has failed to prepare properly by vaccinating the elderly, the coming months will see widespread infection and death within China. But eventually something resembling normality will return. The revival of commercial, intellectual and cultural contact with China should be welcomed. But its post-covid economic recovery will be hugely disruptive for the global economy, pushing up the price of oil, gas and other commodities, stoking inflation and forcing central banks to keep monetary policy tighter for longer.

4 January
The G20 and G Minor
To confront the looming global crisis, G20 countries must, first and foremost, coordinate macroeconomic policies.
Kaushik Basu
(Project Syndicate) Amid rising geopolitical tensions and economic uncertainty, the G20 can play a central role in preventing a much worse crisis by facilitating the coordination of fiscal and monetary policies. It could also advance a more inclusive international order by allowing smaller countries to make their voices heard.
In December, India began its year-long G20 presidency, taking over from Indonesia amid rising geopolitical tensions and economic uncertainty. Surging inflation has raised the specter of a global recession. Supply chains, made more efficient but also more vulnerable by globalization and the digital revolution, are crumbling under the weight of COVID-related disruptions and the war in Ukraine, both of which have revealed and deepened the fault lines of the international order.
… emerging and developing economies, particularly in Africa and the Pacific, often find themselves at the mercy of major powers, their prosperity contingent upon election outcomes in developed countries. This year, the G20 could take a giant step forward by enabling several smaller countries to participate in its deliberations and make their voices heard. We could call this proposed group G Minor. While the G20 represents the world’s largest economies, the G Minor would represent the needs of emerging and developing countries that lack the diplomatic and military clout required to protect their interests on their own. Forming such a group would be an admirable gesture of inclusion, enabling India to make its mark on the G20 and achieve a more just international order.

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