Global economy January-October 2023

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Peterson Institute for International Economics (PIIE)

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.
3 January
Trends That Will Define the Coming Years
They include deglobalization, stagflation and the bursting of the tech bubble.
By Antonia Colibasanu
(Geopolitical Futures) In addition to the global economic slowdown, for the first time since the 1970s the world is simultaneously facing high inflation. The drivers of this bout of inflation include excessively loose monetary and fiscal policies that were kept in place for too long, the restructuring of global trade caused by the pandemic, and the sharp spike in the cost of energy, industrial metals, fertilizers and food as a result of Russia’s invasion of Ukraine. Angered by the unequal distribution of the gains of globalization, voters demanded more government support for workers and those left behind. However well-intentioned, such policies risk an inflationary spiral as wages and prices struggle to keep pace with one another. Rising protectionism also restricts trade and impedes the movement of capital, limiting improvements on the supply side.
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)
Bretton Woods 2.0 Project
The Bretton Woods 2.0 Project examines the deep challenges facing the Bretton Woods Institutions and works to reimagine the governance of international finance for the modern global economy.

26 October
The Five Main Drivers of Global Economic Uncertainty
Mohamed A. El-Erian
The ongoing conflict in the Middle East is just one of several economic and geopolitical trends darkening the outlook for global growth. But while the immediate future seems bleak and could get bleaker, the good news is that we have the capacity to turn today’s vicious cycles into virtuous ones.
(Project Syndicate) Businesses, governments, and investors were already navigating a foggy global landscape before the tragic events unfolding in the Middle East. But the horrible conflict between Hamas and Israel…has introduced a new layer of uncertainty for the global economy, the subject of this commentary. Even in the highly unlikely event that the geopolitical situation improves rapidly in the region and beyond, a deep sense of uncertainty will remain, driven by five economic and financial factors.
First, the global economy’s major growth engines are currently under strain …
Second, the journey toward this uncertain future is fraught with peril. The most immediate risk is the recent spike in global borrowing costs as markets adapt to the likelihood that the US Federal Reserve and other major central banks…will maintain elevated rates for an extended period.
Third, the persistence of this interest-rate outlook increases the risk of recessions and financial-market turbulence.
Fourth, the global economy and key financial markets like the one for benchmark US government bonds now lack key top-down anchors such as growth momentum, confidence in policymaking signals, and stabilizing financial flows.
…the fifth driver of global uncertainty: the inadequate response to long-term crises like climate change and widening economic inequality. The longer we wait to tackle these problems, the greater the eventual costs will be.

22 October
Billionaires Are Next Up in Crosshairs of Global Tax Architects
A 2% wealth levy could raise $250 billion a year, study shows
Economist Stiglitz says tax disparity undermines democracy
Taxing Billionaire Wealth Would Boost State Coffers
(Bloomberg) Applying a 2% tax rate to the wealth of the world’s 2,750 billionaires could raise some $250 billion a year, according to a study published by the independent network of academics based at the Paris School of Economics. “Glaring tax disparity undermines the proper functioning of our democracy; it deepens inequality, weakens trust in our institutions, and erodes the social contract,” economist Joseph Stiglitz said in a forward to the report.

18 October
IMF/World Bank Annual Meetings Outline Principles for Global Cooperation
The Annual Meetings focused on building economic resilience, securing transformational reforms, and reinvigorating global cooperation.
(IISD) Members of the World Bank Development Committee endorsed the World Bank’s new mission, vision, and playbook to create a world free of poverty on a livable planet.
Partners issued a set of four Marrakech Principles for Global Cooperation to build resilience and expand opportunities for a better future.
The 2023 Annual Meetings of the World Bank and the International Monetary Fund (IMF) discussed ways to strengthen collaboration to “harness the power of multilateralism to the benefit of all.” During the event, members of the Development Committee endorsed the World Bank’s new vision to create a world free of poverty on a livable planet.

13 October
Remarks by World Bank Group President Ajay Banga at the 2023 Annual Meetings Plenary
(IISD) In his plenary speech, World Bank Group President Ajay Banga drew attention to the World Bank’s new mission and playbook to “drive impactful development and lead to a better quality of life – access to clean air, clean water, education and decent health care.” He emphasized that the Bank’s mission is: inclusive of everyone, including women and young people; resilient to shocks, including climate and biodiversity crises, pandemics, and fragility; and sustainable, through growth and job creation, human development, and fiscal and debt management, as well as food security and access to clean air, water, and affordable energy. “[I]t sets us on a journey that will require reimagined partnerships, a new way of working and thinking, an innovative plan to scale and replicate, additional resources, and optimism for what could be possible,” Banga said.
11 October
Marrakech Principles for Global Cooperation
Statement by World Bank President Ajay Banga, IMF Managing Director Kristalina Georgieva, Morocco’s Minister of Economy and Finance Nadia Fettah, and Bank Al‑Maghrib Governor Abdellatif Jouahri on the Marrakech Principles for Global Cooperation
“These 4 Marrakech Principles for Global Cooperation provide a broad framework to help harness the power of multilateralism to the benefit of all.
1. Reinvigorating Inclusive and Sustainable Growth
2. Building Resilience
3. Supporting Transformational Reforms
4. Strengthening and Modernizing Global Cooperation

12 October
IMF expects real GDP growth in the G7
(GZERONorth) Canada and the US are set to lead economic growth among the G7 – which also includes the UK, Germany, France, Italy, and Japan – in 2024. The only hitch? The margin of error for success is razor-thin.
The title of the IMF’s new World Economic Outlook says it all: “Navigating Global Divergences.” The organization expects Canada’s real GDP to grow by 1.6% next year, followed by the US at 1.5%. Both countries are ahead of the expected Euro area average of 1.2% and the advanced economy average of 1.4%. Meanwhile, the United Kingdom is expected to manage a paltry 0.6%, up from 0.5 in 2023, as it faces pandemic fallout and the lingering effects of Brexit.
Developing states, meanwhile, are expected to post higher growth than their advanced economy counterparts, with China looking at 4.2% and India at 6.3%. The developing and emerging economies group is looking at 4% growth in 2024, consistent with its numbers from the last two years.
The takeaway? The IMF is projecting low and slow growth throughout much of the world and “little margin for policy error.” That’s going to have politicians and civil servants on edge, particularly as geopolitical crises intensify. That’s the bad news. The good news is that these numbers suggest the odds of a soft landing are up, and slow growth is better than a recession.
Global recovery remains slow, with growing regional divergences and little margin for policy error
Navigating Global Divergences
Global recovery remains slow, with growing regional divergences and little margin for policy error
(IMF) The baseline forecast is for global growth to slow from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024, well below the historical (2000–19) average of 3.8 percent. Advanced economies are expected to slow from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024 as policy tightening starts to bite. Emerging market and developing economies are projected to have a modest decline in growth from 4.1 percent in 2022 to 4.0 percent in both 2023 and 2024. Global inflation is forecast to decline steadily, from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024, due to tighter monetary policy aided by lower international commodity prices. Core inflation is generally projected to decline more gradually, and inflation is not expected to return to target until 2025 in most cases.
Monetary policy actions and frameworks are key at the current juncture to keep inflation expectations anchored. Chapter 2 documents recent trends in inflation expectations at near- and medium-term horizons and across agents. It emphasizes the complementary role of monetary policy frameworks, including communication strategies, in helping achieve disinflation at a lower cost to output through managing agents’ inflation expectations. Given increasing concerns about geoeconomic fragmentation, Chapter 3 assesses how disruptions to global trade in commodities can affect commodity prices, economic activity, and the green energy transition.

IMF ANNUAL Meetings Updates
OCTOBER 11, 2023
In the third daily recap on the Annual Meetings in Marrakech…we spotlight the challenges of containing global warming while keeping public debt in check, the disproportionate impact of shocks on the world’s poorest nations, the IMF’s continued support for Ukraine, and much more.
Watch the highlights of the third day (YouTube)
On this episode, we speak to:
Bo Li, Deputy Managing Director, IMF
Marlene Malahoo Forte, Minister of Legal and Constitutional Affairs, Jamaica
Mark Carney, U.N. Special Envoy for Climate Action and Finance
IMF ANNUAL Meetings Update
OCTOBER 10, 2023
In our second daily recap of the Annual Meetings in Marrakech, we spotlight the growing divergence between country groups in the world economy’s slow recovery, financial risks from the higher-for-longer interest rate environment, the IMF’s game-changing facility for strengthening countries’ resilience to climate change, how capacity-development programs are empowering African economies in a shock-prone world, and much more.

13 October
Is the US denying China a bigger voice at the IMF?
(Deutsche Welle) China might have to wait longer to enjoy a bigger voice at the International Monetary Fund (IMF), the world’s foremost lender of last resort, thanks to a US proposal that’s gaining traction among the IMF’s 190 members.
The review of IMF quotas — the money that member countries commit to the multilateral body — was one of the main topics on the agenda at the annual meetings of the IMF and the World Bank Group this week in Marrakech, Morocco.
Sidestepping growing clamor from China and other emerging countries for a larger shareholding in the IMF, the US has proposed an “equiproportional” increase in IMF quotas. That means member countries should make higher contributions in proportion to their existing quotas without expecting a change in their voting shares, which were last revised in 2010.
US Treasury Secretary Janet Yellen said in Marrakech the US was committed to a new “fair and simple” quota formula that reflects the economic size of IMF members, but “regrets that agreement on a new formula” remains elusive.
… Experts say the US’s reluctance for a quota reform that includes a realignment of voting shares stems from concerns that such an exercise would inevitably give more voting power to China.
China accounts for about 18% of the global economy, yet it enjoys just a little over 6% of the IMF’s voting share. This discrepancy means Beijing would be the biggest beneficiary of a quota realignment. Currently, the US is the biggest shareholder with a 16.5% share, effectively giving it veto power since major decisions need 85% approval.
The US administration has to seek congressional approval for any IMF quota reform. It took the government years to get Congress to put its stamp on the 2010 reform that increased China’s voting at the expense of European countries.

9 October
GDP Center Roundup – IMF/World Bank Group Annual Meetings, 2023
Policymakers are facing a critical inflection point: the window to act on climate change is rapidly closing, climate shocks and overwhelming debt service payments threaten to undo decades of progress and stymie future investments in emerging markets and developing economies (EMDEs), while, concomitantly, the existing international financial system is not built to address increasingly global and overlapping challenges.
Financial leaders gather in Marrakech for the IMF-World Bank meetings
(Atlantic Council) Finance ministers and central bank governors from over 180 countries are gathering right now in Marrakech for the IMF-World Bank Annual Meetings, the first time the Meetings are being held on the African continent in fifty years. And the mood—just like the city—is split in two.
There’s optimism: The IMF is hinting that tomorrow it will revise its projections upwards and that there is now an increased chance of a “soft landing” not just for the United States, but for the entire global economy. But there’s also worry: War in Europe, and now in Israel, has reminded the fourteen thousand participants at these Meetings how quickly geopolitics can change their calculations.

The Bretton Woods institutions under geopolitical fragmentation
By Martin Mühleisen
(Atlantic Council) …the Bretton Woods institutions clearly lost influence in recent years. With many emerging markets enjoying stable market access even during the COVID-19 pandemic, the IMF and World Bank have been left to work mostly with low-income countries and a few larger countries with chronic economic problems. Many of those countries require debt restructuring to allow multilateral loans to resume, but China’s long-delayed debt workouts are effectively blocking the Bretton Woods institutions from fulfilling their mandate. Moreover, program countries question why they should subject themselves to the advice or conditionality of institutions in which they have little say, given that governance arrangements remain strongly in favor of the United States and other Group of Seven (G7) countries.
As a result, both institutions have been in search of a new role for themselves. The World Bank (along with other multilateral development banks) is looking to leverage its capital base to step up climate and development loans, and the IMF has repurposed dormant Special Drawing Rights (SDR) reserves provided by its richer members to increase its concessional loan volume, a model that could be also adopted by other multilateral lenders. Both approaches contain elements of financial engineering, reflecting tighter budgets in member countries and diminishing political support for development aid, even among traditional donor countries.
The example of Ukraine has set a precedent for how the institutions can be part of a strong allied effort to support a partner country within their multilateral setting. If applied more broadly, this approach could provide incentives for other governments to return to multilateral institutions, instead of China, for support. However, Western shareholders must be careful to stay within the institutions’ rules-based framework and operate on a consensual basis, where possible. The multilateral character of the IMF and World Bank is an international public good that the West would be well advised to preserve.
If and when the political climate were to turn back toward multilateral collaboration, the Bretton Woods institutions could play an important role in helping the global economy to defragment, just as they did in the years after World War II. At that point, voting shares in the institutions should be adjusted to correct the significant

8 October
IMF clings to a hopeful agenda as crisis follows crisis
Larry Elliott
At the fund’s annual meeting this week in Morocco, ambitions for climate and debt relief may be overwhelmed by events – again
(The Guardian) Last week’s turmoil in the global bond markets will be playing on the minds of finance ministers and central bank governors when they gather in Marrakech this week for the annual meetings of the International Monetary Fund and the World Bank.
After the triple shocks of the Covid pandemic, the war in Ukraine and the surge in inflation, the mood may be less febrile than it was a year ago, but few if any of those travelling to Morocco – which suffered a devastating earthquake last month – would dare say that the crisis era is over. Most will be wondering what might go wrong next.

September 18, 2023 – Since the devastating earthquake in Morocco on September 8, the World Bank (WB) and International Monetary Fund (IMF) staff have worked in close coordination with the Moroccan authorities and a team of experts to assess Marrakech’s capacity to host the 2023 Annual Meetings.
Based on a careful review of the findings, the Managements of the WB and the IMF, together with the Moroccan authorities, have agreed to proceed with holding the 2023 Annual Meetings in Marrakech.
The Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the International Monetary Fund (IMF)…bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness. This year’s events will take place in Marrakech, Morocco, October 9-15, 2023.

China’s Road to RuinThe Real Toll of Beijing’s Belt and Road
By Michael Bennon and Francis Fukuyama
(Foreign Affairs September/October 2023) …. over the last few years,… Many Chinese-financed infrastructure projects have failed to earn the returns that analysts expected. And because the governments that negotiated these projects often agreed to backstop the loans, they have found themselves burdened with huge debt overhangs—unable to secure financing for future projects or even to service the debt they have already accrued. Many Chinese-financed infrastructure projects have failed to earn the returns that analysts expected. And because the governments that negotiated these projects often agreed to backstop the loans, they have found themselves burdened with huge debt overhangs—unable to secure financing for future projects or even to service the debt they have already accrued. … The problem for the West was less that China would acquire ports and other strategic properties in developing countries and more that these countries would become dangerously indebted—forced to turn to the International Monetary Fund (IMF) and other Western-backed international financial institutions for help repaying their Chinese loans.
… Members of the G-7 and the Paris Club have several options for addressing the BRI debt crises. First, the United States and other bilateral creditors could assist BRI borrowers in coordinating with one another. Doing so would improve transparency, enhance information sharing, and enable borrowers to negotiate with Chinese creditors as a group instead of bilaterally. China’s approach of conducting renegotiations secretly and bilaterally disadvantages BRI borrowers, as well as other creditors, including the IMF and the World Bank.
Second, the IMF should establish clear criteria that distressed BRI borrowers must meet before they can receive new credit facilities from the fund. These criteria should be agreed on by a number of IMF board members in order to insulate the fund’s staff and leadership from conflict with China.
Requiring distressed countries to meet these criteria before they get new credit facilities would make the IMF less agile and limit its ability to respond quickly to balance-of-payments crises. But it would give borrowers and the sovereign finance industry much-needed clarity and certainty on the requirements for IMF intervention.
Finally, these reforms are the only way to protect the IMF from the fallout of the BRI debt crisis. Conflicts over BRI debt will continue to impede debt-relief efforts, undermining both the economic health of indebted developing countries and the effectiveness of the IMF. Only a reformed IMF can reverse the damage—to developing countries and to itself.

14 September
WTF is Christine Lagarde up to?
The ECB president has sounded the death knell for the dollar and predicted the end of the world economy as we know it — does she know something we don’t?
By Ben Munster
(Politico Eu) Deep in the Wyoming wilderness last month, Christine Lagarde, president of the European Central Bank, stood before a large audience of elite central bankers and casually predicted the collapse of the international financial order
“There are plausible scenarios where we could see a fundamental change in the nature of global economic interactions,” Lagarde announced drily to the crowd, which was gathered for the annual central banker confab in Jackson Hole, Wyoming. The assumptions that have long informed the technocratic management of the global order were breaking down. The world, she said, could soon enter a “new age” in which “past regularities may no longer be a good guide for how the economy works.”
… It is also highly likely that she earnestly believes things are taking a turn for the worse, and is, in a way, mourning the collapse of the globalized system that she shaped and that in turn shaped her.
… Key messages! Monetary policy is already a weak form of mass mind control — could Lagarde be trying to verbalize into existence a new economic paradigm on which to hitch her professional fortunes? She has always been willing to say, well, whatever it takes, for her survival, even when doing so strains beyond her level of competence. A legacy as the ECB chief who oversaw the euro’s rise as a challenge to the domination of the dollar would be an elegant feather in her cap.
And if armageddon never arrives? She’ll be well placed to take credit for averting it. Lagarde — as with most central bankers — was humiliated by the sudden rise in inflation. As Brad Setser, a former staff economist at the U.S. Treasury, said, her recent comments reflect a desire to emphasize the risks as a form of damage control. “It comes from a need to be reserved,” he said.
Call it apocalyptic expectations management. If ECB policy fails to steer Europe safely through global economic fragmentation, Lagarde can quite comfortably say that, well, sorry, but she always warned it might. And then, as usual, she will emerge from the calamity blameless — sure, the opera house may be flaming rubble, the brass players at each other’s throats and the wind section reduced to cinders, but she’s just the “conductor” after all.

29 August
The economics of water risk and future resiliency
Aquanomics uses a bespoke model to estimate the future economic impact of water risk from droughts, floods and storms in 10 geographies at both a GDP and sector level. The numbers are staggering – $5.6 trillion could be lost between 2022 and 2050.
How is the global water cycle changing?
Large volumes of rainfall are increasing storm and flood risks
Longer, hotter drought periods and wildfires are causing more damage to agriculture, buildings, infrastructure, and habitats
Underground aquifers worldwide are being drawn down
Large areas of forest and wetland continue to be cleared and drained
Rivers are being modified for hydropower, irrigation, and water supply
Aquanomics found that water risk is spread unevenly across the globe.
Loss varies by country or even region depending on a combination of factors including the state of an area’s existing infrastructure, local geographic and climate features, dominant industries, local prevention systems, existing government policies towards mitigation and more.

18 August
Wealthy oil nation lays groundwork for ‘eye-popping’ climate fund: (Politico) The United Arab Emirates is considering creating a multibillion-dollar fund to spur clean energy investments across the world that it plans to unveil at this year’s U.N. climate talks in Dubai, according to people familiar with the plan.
The fund could amount to tens of billions of dollars, with a sizable slice of the money coming from the UAE’s sovereign wealth reserves, according to seven people with knowledge of the discussions. A G-7 government official said envoys from the oil-rich Mideast nation had privately mentioned the idea of a fund of at least $25 billion.
Creation of the fund would be one of the largest ever state-sponsored financial efforts to help countries fight climate change. …
The fund would help fill a financial chasm to shift nations’ energy economies off fossil fuels, with the aim of achieving net-zero greenhouse gas emissions by mid-century. Experts have said the effort will require trillions of dollars in spending to avoid catastrophic, irreversible effects of climate change.
… The oil-rich UAE is under pressure to use its wealth to help prepare the world’s poorest countries to adapt to climate change that has been primarily caused by rich, developed economies.
Climate adaptation finance in Africa
Ede Ijjasz-Vasquez, Jamal Saghir
(Brookings) Climate change continues to cause devastation in Africa. … The financing needs to help Africa enhance its resilience and be better prepared for a rapidly changing climate are enormous.
A recent analysis by the Climate Policy Initiative and the Global Center for Adaptation shows that an annual average of $29.5 billion in climate finance was committed to Africa in the years 2019 and 2020. Further analysis of Nationally Determined Contributions (NDCs) also indicates that the adaptation finance needs for the continent over the period 2020-30 are close to $580 billion. Unless adaptation finance increases substantially in Africa, a gap of $453 billion will accumulate over this decade.

12 August
Reading the IMF’s Latest Worldview
(Policy) Kevin Lynch and Paul Deegan
The IMF projects Canada’s GDP growth this year at 1.7 percent, half that of last year, and slightly lower in 2024 (1.4 percent). This largely mirrors their growth forecasts for the United States and is a tad higher than projections for other G7 countries.
In late July, the International Monetary Fund saw fit to revisit its World Economic Outlook for this year and next in the face of continuing inflation pressures eliciting further central bank tightening in western economies and signs of a weak bounce-back in China after the ending of its pandemic lockdowns. Digesting recent developments around the world, the IMF has tweaked its global outlook slightly, but kept its economic and policy messages largely unchanged.
Global growth is expected to be subdued both this year and in 2024. At 3 percent, growth is well below its average over the 2000-2019 period of 3.8 percent, but a slight uptick of 0.2 percent from April’s projections. Underlying this global average, advanced countries are expected to grow around 1.5 percent while emerging markets should expand about 4 percent in both years. The emerging market surprise is China, whose recovery from the pandemic lockdowns is losing steam. There are a number of possible culprits: excessive debt and bankruptcies in the key real estate sector is one, reduced export demand due to the global slowdown as well as trade frictions is another, and President Xi’s attacks on, and interference in, the entrepreneurial private sector in China cannot be a boon for business confidence or investment.
For the advanced countries, but particularly the United States, the biggest surprise has been the rebound of consumers spending on the services they couldn’t access during the pandemic, drawing down “pandemic savings” to do so despite the rise in interest rates. Goods spending by households, on the other hand, has softened, triggering weakness in the manufacturing and industrial sectors. While the IMF expects further slowing in growth as interest rate hikes bite more deeply as mortgages and debt are renewed, it is silent on whether a US “hard landing” will be necessary to achieve the Fed’s quest to get inflation back to target, or whether a “soft landing” is possible given the robustness of labour markets. Similar unknowns puzzle policy makers, business leaders and financial markets in the EU, UK and Canada.

26 July
You Can’t Have It Both Ways: Why the MDB System Cannot Deliver Both Development and Global Public Goods Well
By Ranil Dissanayake
(Center for Global Development) The effects of anthropogenic climate change are upon us, and the time for serious action is past due. In this context it is unsurprising that many observers are turning to the multilateral development banks (MDBs) for this action. These are institutions whose names inspire the potential for grand action: the World Bank, the African Development Bank, the Asian Development Bank, and so on. The names imply supranational action—surely their remit must expand to tackle supranational challenges? … And the MDBs take comfort from influential figures who argue that their core mission—the economic development of the poorest places in the world and the eradication of poverty—is not only compatible with this expanded remit, it is complementary to it
In a new paper published today, I show how—except under very stringent conditions that almost certainly are not those of the world we live in—it is impossible for the MDBs to deliver both development and climate outcomes without compromising on one, or both.

24 July
Development Banks the World Needs
Lawrence H. Summers and N.K. Singh
Multilateral development banks are the only institutions that provide the combination of expertise, staying power, low-cost financing, leverage, and knowledge-sharing capabilities needed to assist developing countries. But to help transform these countries’ future, the MDBs must first transform themselves.
… These realities shaped the recommendations that we have just made to the G20 through a special expert group on development financing (which we co-chair). Our central conclusion is that this uniquely challenging moment requires a dramatic transformation of the operations of the multilateral development banks (MDBs), starting with the World Bank.
19 July
Strengthening Multilateral Development Banks: The Triple Agenda
This is the report of an Independent Expert Group that was commissioned by the Indian G20 Presidency. The Co-conveners of the group are Lawrence Summers, President Emeritus of Harvard University, and Nand Kishore Singh, President, Institute of Economic Growth and Chairperson, Fifteenth Finance Commission of India.
Radically reformed and strengthened MDBs are essential to address the immense global challenges in today’s world. The welfare of billions of people and the health of the planet, the foremost example of a global public good (GPG), are under threat. To make matters worse, the problems are getting bigger; the SDGs are badly offtrack, with over 600 million people still living in extreme poverty, and there is an intense urgency to address problems of climate change and nature conservation and protection in all countries.

12 July
How China, U.S., Russia and Ukraine tension threatens global economic growth: Jeffrey Sachs (text and video)
China, U.S. and Ukraine war sanctions limit economic growth as nations struggle to survive reduced trade, according to Columbia University professor Jeffrey Sachs.
Productivity measurements are outdated due to technological advancements.
AI and climate change regulations need improvements.
(CNBC Bottom Line) Geopolitical tension is the biggest risk to companies’ bottom lines right now said Columbia University economics professor, Jeffrey Sachs.
In an interview with CNBC, Sachs also stated that productivity measurement in the U.S. is outdated due to technological improvements in modern devices like computers and smartphones, and he expressed concern about artificial intelligence advancements, stressing a need for more regulation in the AI sector.

June 22-23, 2023, France hosts an international Summit for a New Global Financing Pact.
(Focus 2030) Called for by French President Emmanuel Macron, how does this summit fit into an international context marked by the cascading consequences of concurring climate, energy, health and economic crises, particularly in the most vulnerable countries? What can the international community and international solidarity actors expect from it? Latest intel and analyses.

19 June
African countries are fed up with being marginalised in global institutions
They will be pushing hard for change at a big global pow-wow this week
(The Economist) There will be no shortage of bigwigs in Paris on June 22nd at a development finance pow-wow hosted by Emmanuel Macron, France’s president, to discuss pressing global issues including World Bank reform, climate finance and debt distress. Among those attending the Summit for a New Global Financial Pact will be Li Qiang, the Chinese premier, Janet Yellen, America’s treasury secretary, and no fewer than 16 African presidents.
Africa’s large presence reflects a fear that the continent is being short-changed as priorities shift towards helping Ukraine and dealing with climate change. That is feeding a deeper anger—that the continent has too little say in global institutions such as the World Bank, IMF and UN, and that some of the proposed reforms could again leave Africa out in the cold. “When decision-makers are quite far from the realities of the country it’s more difficult to build empathy,” says Vera Daves, Angola’s finance minister. “That’s why it so important for us [Africans] to be more present within the institutions.”

17 June
In This Cold War, the Global South Has Some Leverage
Once manipulated by the great powers, the nations that make up what has come to be called the Global South have suddenly been blessed with a golden opportunity to exercise some leverage of their own.
The implications for developing nations could be profound.
(Bloomberg New Economy: Cold War II) If developing nations play their cards right, a successful strategy could well be playing the two great-power blocs off each other, to lure maximum capital.
Of course, there are plenty of potential pitfalls. Many previous investments have been tainted by corruption.
There’s also the risk of developing nations taking on excessive debt for dubious projects, as was the case in Sri Lanka. It defaulted after taking on large-scale loans from China for a port and other developments that failed to generate sufficient revenue.
Nevertheless, as China and the US compete over high technology, securing sources of key inputs is the strategic goal. Lithium, nickel and cobalt are critical to military and commercial advantage—and developing nations have a lot of all three.
Indonesia is one example of a nation that appears to be making the most of this opportunity, driving deals with China to process its raw materials domestically while last month hosting a major US trade delegation.
And rather than the proxy wars of Cold War I, what’s emerging in CWII is an emphasis on the value of peacemaking, or at the very least the value of looking like a peacemaker.

20 May
Partnership for Global Infrastructure and Investment at the G7 Summit
At the 2023 G7 Summit in Hiroshima, Japan, G7 leaders affirmed their commitment to identify new opportunities to scale the Partnership for Global Infrastructure and Investment (PGII), President Biden and the G7’s flagship infrastructure initiative which has attracted major investors to better respond to the global demand for high quality infrastructure financing, in low- and middle-income countries.
Since its launch, G7 Leaders have, through PGII, started to work towards the goal to mobilize hundreds of billions of dollars in infrastructure financing – delivering energy, physical, digital, health, and climate-resilient infrastructure. This work is done with a real focus on advancing gender equality and equity, raising labor and environmental standards and promoting transparency, governance, and anti-corruption measures.
During the Summit, G7 Leaders were joined by leaders and senior officials of Australia, Comoros, Cook Islands, India, Indonesia, Vietnam, the Republic of Korea, and the World Bank. They were also joined by private sector executives of Citi, Global Infrastructure Partners, Japan Foreign Trade Council, and Nokia to reaffirm their commitment to opening a serious, sustainable channel for unlocking public and private capital for these projects in the developing world.

10 May
Winners and Losers in the AI Arms Race
Barry Eichengreen, Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund.
Generative artificial-intelligence models like ChatGPT will revolutionize the economy, though no one can say when. Equally important, no one can say where, though there is no reason why AI, like previous general-purpose technologies, shouldn’t produce widely shared net benefits.
(Project Syndicate) Developing countries would seem to be at a significant disadvantage in this AI arms race and are at risk of losing their competitive advantage: abundant low-cost labor. Yet AI also holds out the promise of benefits for these countries. Companies like Apollo Agriculture use agronomic machine learning and satellite imaging to provide customized advice to smallholder farmers in Kenya. AI can also be used to reduce technological and financial impediments to economic development. For example, using AI to gauge credit risk in the absence of bank branches and loan officers would enable the operation of peer-to-peer lending platforms and a loosening of financial constraints on budding entrepreneurs. More than anything, however, economic development depends on human development – that is, on the accumulation of human capital. Where developing countries lack the resources, financial and otherwise, to increase significantly their spending on traditional modes of education, AI holds out hope for providing what is missing. It can be used to design individualized learning assistants capable of providing personalized instruction to students in settings where teachers are in short supply. When it comes to economic development, a bit of additional literacy and numeracy can go a long way. Throughout history, technological change has created both winners and losers. There is no reason why AI, like previous technologies, shouldn’t produce more of the former than the latter.

17-18 April
1 big thing: The global economy’s fractured new normal
European Central Bank president Christine Lagarde came to New York yesterday with a warning: A more fragmented world economy is here to stay.
(Axios) If the geopolitical instability and supply disruptions of the last three years amount to a new normal, it will make it hard — maybe impossible — for policymakers to keep their economies on an even keel.
Lagarde told the Council on Foreign Relations yesterday that “we are witnessing a fragmentation of the global economy into competing blocs, with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values.”
It is a contrast, she argued, with a U.S.-led international order that prevailed in the immediate aftermath of the Cold War, in which “global supply became more elastic to changes in domestic demand,” keeping inflation down.
“But that period of relative stability may now be giving way to one of lasting instability resulting in lower growth, higher costs and more uncertain trade partnerships,” she said.
The pandemic and war in Ukraine already created massive disruptions to global supply. Climate concerns and deepening tensions between the U.S. and China could make those kinds of problems more routine.
Lagarde argued this new era demands that policymakers focus their energy on such areas as securing resilient supply chains with allies and diversifying energy production.
She contrasted that approach with simply using fiscal policy to supplement peoples’ incomes, which she argued is inflationary.
Central banks in a fragmenting world
Speech by Christine Lagarde, President of the ECB
(ECB) The global economy has been undergoing a period of transformative change. Following the pandemic, Russia’s unjustified war against Ukraine, the weaponisation of energy, the sudden acceleration of inflation, as well as a growing rivalry between the United States and China, the tectonic plates of geopolitics are shifting faster.
We are witnessing a fragmentation of the global economy into competing blocs, with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values. And this fragmentation may well coalesce around two blocs led respectively by the two largest economies in the world.
All this could have far-reaching implications across many domains of policymaking. And today in my remarks, I would like to explore what the implications might be for central banks.

10-14 April
IMF-World Bank Spring Meetings
World’s fractured financial leaders grasp for unity
Financial officials have conveyed dire warnings about growing dislocations in trade and cooperation.
(Politico) One big theme has hung over this week’s meetings in Washington of the International Monetary Fund and the World Bank: The global economy is coming apart at the seams and needs to be sewn back up.
Financial officials have conveyed dire warnings about growing dislocations in trade and cooperation. Russia’s war in Ukraine has caused a huge disruption in global commerce. U.S.-China tensions are on the rise, as are U.S.-EU squabbles over clean energy industries.
Fragmented world’s rival blocs may risk new cold war, says IMF head
Warning from Kristalina Georgieva after G7 explores economic resilience, secure global supply chains and less reliance on China
“What we have learned from Covid-19 and the war is that security of supply and the reliable functioning of global supply chains are taking a higher priority in economic discussions and decision making,” she said.
Georgieva was speaking after fears of fragmentation were heightened by the G7 group of leading industrial countries, which wants to reduce dependency on China by building alternative supply chains.

WEO April 2023 Overview: The outlook is uncertain again amid financial sector turmoil, high inflation, ongoing effects of Russia’s invasion of Ukraine, and three years of COVID
What the World Economic Outlook didn’t say
The WEO is published twice a year and presents the IMF’s analysis of global economic developments over the near and medium term. This year, the report comes in the midst of tightening financial conditions in most regions and the aftermath of a banking crisis. The IMF forecasted that global growth will slow from 6 percent in 2021 to 2.7 percent in 2023.
…experts generally agreed that the report was missing important discussions in several areas: the US debt ceiling, artificial intelligence, structural reforms to address aging populations and declining productivity, and the normal analysis of specific countries or regions. The group talked about the report’s increased attention toward economic fragmentation despite the political sensitivity of this issue. In addition, they discussed the potential for stagnation versus stagflation and the complexity of debt relief with China and private creditors. The experts also gave a defense of the WEO and why it matters in an economically divided world.
Highlights from the sidelines of the IMF and World Bank Spring Meetings
(Atlantic Council) Central bankers, finance ministers, executives, and civil-society leaders are meeting at the International Monetary Fund (IMF) and World Bank Spring Meetings this week with an ambitious economic-reform and fiscal agenda. The talks come six months after IMF Managing Director Kristalina Georgieva told the world’s economic leaders to “buckle up and keep going” in the face of multiple financial crises stemming from the pandemic, Russia’s invasion of Ukraine, global debt distress, high inflation, and more.

22 March
The Economist: Central banks face an excruciating trade-off
Just now they have to choose between financial instability and high inflation. It wasn’t meant to be that way
he job of central bankers is to keep banks stable and inflation low. Today they face an enormous battle on both fronts. The inflation monster is still untamed, and the financial system looks precarious.
Stubbornly high inflation led the Federal Reserve to increase interest rates by a quarter of a percentage point on March 22nd, less than a week after the European Central Bank raised rates, too. The Fed acted days after three mid-sized American banks had collapsed and Credit Suisse, a grand old Swiss bank with more than SFr500bn ($545bn) in assets, suffered a wounding run that ended in a shotgun wedding with its rival, UBS.
Jeffrey Sachs: The Global Banking Crisis and World Economy
The banking crisis that hit Silicon Valley Bank (SVB) last week has spread. We recall with a shudder two recent financial contagions: the 1997 Asian Financial Crisis, which led to a deep Asian recession, and the 2008 Great Recession, which led to a global downturn. The new banking crisis hits a world economy already disrupted by pandemic, war, sanctions, geopolitical tensions, and climate shocks.
At the root of the current banking crisis is the tightening of monetary conditions by the Fed and the European Central Bank (ECB) after years of expansionary monetary policy. In recent years, both the Fed and ECB held interest rates near zero and flooded the economy with liquidity, especially in response to the pandemic. Easy money resulted in inflation in 2022, and both central banks are now tightening monetary policy and raising interest rates to staunch inflation.

20 March
Bloomberg: The market turmoil has faded after the run of banking woes in the US and in Europe. Even Swiss stocks have bounced back from the lows hit after the rescue of financial giant Credit Suisse.
But as the squall retreats for now, it leaves in its path a series of difficult questions for governments. None more so than the Swiss.
Most poignantly, the whole unravelling of one of Switzerland’s most vaunted financial institutions runs counter to the country’s image for probity and stability, a fundamental of its banking sector.
In truth, it’s been challenged on banking secrecy for years, most notably after the Lehman crisis of 2008 and during the Barack Obama administration’s confrontation with the authorities in Bern over the country’s status as a tax haven.
Swiss Look On in Dismay as Once-Mighty Credit Suisse Craters
UBS to buy rival bank in government-brokered rescue deal
Collapse is a stain on Switzerland’s reputation for stability

16 March
It’s not 2008: Keep calm as central banks carry on
The data show that there is much more money in the system right now than there was in 2008, and there’s a huge market available for banks that are trying to resolve problematic parts of their balance sheets. It’s night and day from the abyss that confronted bankers and regulators in the fall of 2008.
(Atlantic Council) For anyone who lived through the global financial crisis, the past week is feeling hauntingly familiar. A bank collapse followed by a weekend scramble in Washington to figure out a rescue plan. The public is told that this bank’s issues are unique, and the problem has been isolated. Soon after a bank in Europe is close to failing and needs its own government to save it.
But if you look past the surface, it’s clear that 2023 bears little similarity to 2008. The international financial system is much stronger today thanks to the lessons learned over the past decade—and that’s why this time policymakers stand a much better chance of containing the fallout.

10 March
Will Geopolitics or Technology Reshape the Global Monetary Order?
Barry Eichengreen, Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund.
China was supposed to be the main beneficiary of a shift away from the dollar by countries fearing its “weaponization” by US authorities. So why isn’t diversification toward the renminbi visible in data on foreign reserves and international payments?
(Project Syndicate) … China’s government has repeatedly changed its posture toward the private sector. This points to the possibility that it may change terms of access for foreign central banks holding reserves in Shanghai and for commercial banks seeking to transfer funds through its cross-border payment system. China’s capital controls provide levers with which to make such changes, and Xi’s centralization of power means that there are few countervailing forces to prevent him from taking such steps were he so inclined. Rather than putting their eggs in China’s basket, other countries, in Asia and elsewhere, have been seeking to use their own currencies for cross-border payments. Singapore and Thailand have connected their real-time fast payment systems, PayNow and PromptPay, enabling customers of participating banks to transfer funds between the two countries using just a mobile number. Similarly, Bank Negara Malaysia and the Bank of Thailand have expanded their ringgit-baht direct settlement framework to enable Malaysians and Thais to make direct payments through qualified commercial banks. Five Southeast Asian central banks have signed an agreement to link their fast payment systems, bypassing the need to use either the dollar or the renminbi for cross-border transfers. And Indonesia, during its G20 presidency, established a Local Currency Settlement Task Force to identify regulatory reforms to encourage the practice. Similarly, on the foreign-reserves front, diversification away from the dollar has not meant diversification toward the renminbi, in the main, but rather toward the Korean won, Singapore dollar, Swedish krona, Norwegian krone, and other nontraditional reserve currencies. These trends reflect not so much geopolitics as developments in technology. Because payment systems like PayNow and PromptPay are digital natives, they are readily linked, removing the need to use the dollar or renminbi when transferring funds. The currencies of these smaller countries have also become easier to hold and cheaper to trade with the rise of digital foreign-currency platforms featuring automated market-making and liquidity-provision algorithms. This, in turn, makes such currencies more attractive for payments and as a form of international reserves. The presumption has been that geopolitics will reshape the global monetary and financial order in China’s favor. But technology may have the final say. And, if it does, it may alter that order in a very different way.

9 March
The Inflation Picture Gets Murkier
Despite signs that inflation in most major economies has peaked and is trending back down, recent data releases have renewed fears that central banks will have to tighten monetary policy still further. In the face of maddeningly mixed signals, much will depend on a few key factors.
(Project Syndicate) …several new sources of uncertainty have presented themselves. First, the evidence for a sustained downward trend in inflation has weakened both in the US and Europe, leading central bankers to warn that they may need to resume rapid monetary-policy tightening. US Federal Reserve Chair Jerome Powell has just told Congress that, after having reduced the size of its last interest-rate increase from 50 basis points to 25, the Fed may need to return to larger hikes. Given US monetary policy’s central importance in the global economy, such changes are no small matter.

26 February
Bitter harvest for some in a global economy changed by Russia’s war
Richard Partington and Damian Carrington
(The Guardian) A year of conflict has brought soaring prices and faltering trade, but also a step change in the switch to renewables
Russia’s invasion of Ukraine sent shockwaves through the global economy and now, a year on from the start of the attack, the world is fundamentally changed.
Trends that were already in motion have accelerated, as the need to move away from fossil fuels to greener, renewable energy supplies became more urgent. Food prices have soared, increasing hunger in the developing world, and forcing governments, businesses and people to adapt to lasting shifts. …
International trade was already fragmenting before the Russian invasion, but the trend has been accelerated in the past year amid rising geopolitical tensions and concern over supply chain security. After the disruption caused by Covid, and with an eye on the conflict and shifting global relations, companies have pushed to reshore or “friendshore” production, bringing it closer to home.
Russia itself had relatively few export links with the rest of the world – it deals mainly in commodities – but has found itself further isolated as a result of sanctions. However, these were applied mainly by western countries; Russia’s trade with Asia, the Middle East, Africa and Latin America has grown. …
End of the oligarch?
Russia’s oligarchs lost almost $95bn last year as the result of sanctions: they have been shedding $330m a day ever since the Kremlin launched its invasion. Questions have been raised over whether the influence of the country’s politically connected business elite has been permanently diminished, after years of accumulating luxurious London properties, superyachts and football clubs.

23 February
Biden administration nominates Ajay Banga to lead World Bank
The White House is touting Banga’s experience with financial inclusion and climate change
(WaPo) The Biden administration has nominated Ajay Banga, a former Mastercard executive now serving as vice chairman at the private equity firm General Atlantic, to become the next president of the World Bank.
Banga is still subject to a months-long confirmation process before the bank’s board reaches its final decision.
The announcement puts an end to intense speculation about who would take over the bank, which has tremendous sway over international development projects and policy worldwide. The bank’s current leader, David Malpass, has been under fire recently over his views on climate change. He announced his resignation last week.
16 February
World Bank chief resigns after climate stance misstep
David Malpass was criticised when he dodged question about fossil fuels’ link to climate crisis

22 February
Nouriel Roubini: India is a big global player – but there are problems it must tackle
Make in India was intended to strengthen the economy’s tradable side by fostering the production of goods for export, not just for the Indian market. Instead, India is moving toward more protectionist import-substitution and domestic production subsidisation (with nationalistic overtones), both of which insulate domestic industries and conglomerates from global competition. Its tariff policies are preventing it from becoming more competitive in goods exports, and its resistance to joining regional trade agreements is hampering its full integration into global value and supply chains.

16 February
Debt in focus as G20 finance chiefs meet in India
(Reuters) – G20 finance and central bank chiefs meet in India next week at the first-year anniversary of Russia’s invasion of Ukraine to discuss rising debt troubles among developing countries, the regulation of cryptocurrencies and the global slowdown.
The Feb. 22-25 meeting is the first major event of India’s G20 presidency and will be followed by a March 1-2 meeting of foreign ministers in New Delhi.
The Economist writes: The global economy is still grappling with the effects of the war, with the West still trying to tamp down inflation as interest rates continue to climb. The rising costs of finance, energy and food have pushed some countries to the edge of bankruptcy. This will be in the news this week as finance ministers from members of the G20 gather in India, with the plight of heavily indebted countries high on the agenda. On this issue, as on so much else, America and China find themselves pulling in opposite directions. China is refusing to play by the old rules of international financial diplomacy. . Sri Lanka, in urgent need of a bail-out, and deeply in hock to China, may test the willingness of the West and the IMF to go it alone—i.e., to provide the money and restructure the debt without China’s taking part in the process.

15 February
Invisible Trillions review: global capitalism operates beyond the rule of law and threatens democracy
John J Stremlau, Honorary Professor of International Relations, University of the Witwatersrand
(The Conversation) Secrecy has become as important for corporations as transparent and taxable profits used to be, according to Raymond W. Baker in his new book Invisible Trillions: How Financial Secrecy Is Imperiling Capitalism and Democracy and the Way to Renew Our Broken System. Global capitalism, he argues, operates beyond the rule of law. This contributes to extreme inequality that threatens liberal democracy.
Deals in the financial secrecy system account for half of global economic operations. This is far beyond illicit transfers of funds through corporate under-pricing and overpricing of exports and imports, or the drug and other criminal networks 50 years ago. Tax havens, “shell companies”, anonymous trust accounts, fake foundations and new digitised money laundering technologies have proliferated. Add to that falsified trade. All of this is facilitated by international lawyers, accountants and financial strategists based mostly in rich countries.
The book’s timely contribution is how financial secrecy threatens both free enterprise and political freedoms.

10 January
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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