World Insights: Global economy facing “turning point” amid challenges
DAVOS, Switzerland, Jan. 20 (Xinhua) — The global economy has regained steam after a difficult COVID-19 pandemic, but experts at the World Economic Forum (WEF) say a recovery is far from certain.
Under the theme “Cooperation in a Fragmented World,” the WEF’s 2023 annual meeting concluded here on Friday. The gathering came amid unprecedented global challenges such as high inflation, an energy crisis, climate change and geopolitical conflict.
Growth is on an upward trajectory and could witness a more robust recovery in 2023 through global cooperation and following China’s adjusted COVID-19 response measures.
CAUTION STILL NEEDED
The global economic outlook is not as bad as feared a couple of months ago, “but less bad doesn’t quite yet mean good,” Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), told a closing panel at the WEF. “We have to be cautious.”
Georgieva said headline inflation was heading down. China’s optimized COVID-19 response is expected to boost global growth, with the IMF forecasting the Chinese economy will reach an estimated 4.4 percent, far outpacing global growth.
Signs of declining inflation, resilient consumer spending and strong labor markets, among others, suggest that growth could rebound in the short term.
“Be careful not to get on the other side of the spectrum, from being too pessimistic to being too optimistic. Stay in the middle of realism that seems to serve the world well,” Georgieva said.
The WEF issued its Global Risks Report 2023, saying that conflict and geo-economic tensions have triggered a series of deeply interconnected global risks, with the cost of living crisis being the most significant short-term risk. At the same time, climate change and climate adaptation are the most considerable long-term concern.
Georgieva said that future growth prospects depend on how supply chain security is managed.
“If we diversify rationally, the cost of this adjustment would be low — we put it down to 0.2 percent of GDP. If we trash trade that has been an engine for growth for so many decades, the cost can go up to 7 percent loss of GDP, equaling 7 trillion U.S. dollars,” she said.
“Labor markets are holding firm so far, but interest rates are yet to bite, and if they bite more severely, then we can see unemployment going up. And it is very different for a consumer to have a cost of living crisis and a job than the cost of living crisis and no job,” Georgieva said.
European Central Bank President Christine Lagarde was also cautious about the global economic outlook.
“The greatest tragedy in this moment would be if central banks were to lurch away from a focus on assuring price stability prematurely, and we were to have to fight this battle twice,” said former U.S. Treasury Secretary Lawrence Summers.
Despite recent signs of improvement, “relief must not become complacency,” Summers noted.
COOPERATION BRINGS OPTIMISM
Attendees at the forum said cooperation would be for global growth. WEF President Borge Brende expressed confidence that “we can shape a more resilient, sustainable and equitable future,” but “the only way to do it is together.”
United Nations Secretary-General Antonio Guterres called for urgent action on several interconnected challenges, including the global economic crisis and climate. He underlined the need to “forge the pathways to cooperation in our fragmented world.”
Leslie Maasdorp, vice president and chief financial officer of the New Development Bank, told Xinhua, “Without multilateral cooperation, you cannot really deal with challenges that are cross-national … I believe that the one positive lesson we can learn from COVID is that we are interconnected.”
Though challenges still threaten the global economy, attendees voiced hope that a severe recession may be avoided.
“We are now heading to a year where hopefully the corporates, the consumers, the state, policymakers will continue to have that resilient, determined approach to engineer the transitions that must take place,” Lagarde said.
“The situation around the world must be improving a little bit,” said Lagarde. “Players are moving from defense mode, that they had effectively been in 2021 and 2022, towards a more competitive mode.”
In his closing remarks on Friday, Brende said despite the many complex issues facing the global community, progress had been made at the annual meeting, especially in tackling the most urgent crises of food, energy and climate.
“For me, the greatest lesson of the week has been that although the world is more fragmented today, it does not need to be tomorrow,” Brende said.
EXPECTATIONS FOR CHINA
Business leaders worldwide have been pessimistic about the global economy in recent months, but now, cautious optimism is emerging. They are confident about the robust growth of the Chinese economy and expect China to be a “key driver” of a global recovery.
China’s economy posted steady growth in 2022 despite pressures including COVID-19 breakouts and a complex external environment, with its gross domestic product growing 3 percent year on year to a record high of 121.0207 trillion yuan (about 17.95 trillion U.S. dollars) in 2022, data from the National Bureau of Statistics showed.
The 2022 GDP growth was published at the time when the WEF was underway. With the better-than-expected data, optimism over both the Chinese and global economies spread in Davos.
Maasdorp was confident in China’s expected growth, a sentiment shared across the banking sector. Although he predicted a “bumpy period” in the first quarter of this year and potentially in the second, there are strong expectations for more robust growth driven by consumption in the year’s second half.
Haitham Al Ghais, secretary general of the Organization of Petroleum Exporting Countries, praised China for factoring renewable energy into its growth strategy.
“We are extremely proud of the steps taken by the Chinese government to promote renewable energy as a part of the energy mix as required for China to fuel its continuous development and economic growth,” he said.
“We are very confident in the Chinese economy and the strength of the leadership and the government and the people of China,” Al Ghais said.
Parliamentary resolution calls for price control of goods and services in Ramadan
Maduvvari MP and opposition People’s National Congress’ (PNC) parliamentary group leader Adam Shareef Umar, on Monday, submitted a resolution to the parliament that calls upon the government to control the prices of goods and services during the month of Ramadan.
MP Adam Shareef’s resolution states that the prices of Maldivians’ staple food products have been increased by seven percent following the hike in the Goods and Services Tax (GST) in January. It was also noted that prices increased by 7.82 percent last year, while inflation rose by 75 percent.
The resolution, referring to statistics publicized by the National Bureau of Statistics, said prices of eateries had increased by 4.3 percent.
Statistics publicized by the National Bureau of Statistics show that food prices increased the most between last year’s January and this year’s January. As per the authority, the prices of food products increased by 7.82 percent during this period.
MP Shareef, in his resolution, emphasized that most people have no avenue to increase their income while living expenses continue to gradually rise. He also alleged an increase in payable monies to the government in the guise of fines and others as the public brave through these difficult times.
Therewith, he called on the government to revise the GST rates which was increased and urged state-owned companies to decrease the prices of the services they provide. He also called on the government to control the prices of goods that have plunged above reach for the public, and make arrangements to ensure price control during the month of Ramadan.
OPEC secretary general ponders energy security, transition
HOUSTON, March 7 (Xinhua)– Haitham Al Ghais, Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), said on Tuesday the energy industry needs considerable investment to meet rising global demand and ensure market stability as energy security concerns return to the fore.
Meanwhile, he said the oil and gas industry, which will retain its share as a critical component of the energy mix, must transform and decarbonize operations.
As COP28 comes up in Dubai later this year, “We at OPEC stand fully behind the UAE to bring on board everybody,” he said during the annual CERAWeek global energy forum in Houston.
SECURITY OF SUPPLY
“The key thing that we focus on is always trying to make sure that there is stability, there’s adequate supply to the market,” said the secretary general, warning of the “underinvestment” in hydrocarbons.
“We’ve seen a significant shortfall in investments in the oil sector,” he said.
It can take a long time to come into actual energy production since the typical span is a “few years at best” and up to seven years before new projects come online, he explained.
As the global economy doubles in size, energy demand will increase by 23 percent, but “there is no imaginable way renewables can alone do this (meet the demand),” he told the audience.
He said the energy industry needs 12.1 trillion U.S. dollars in capital investment. “Unless this happens, I’m afraid, honestly, that we could be facing issues in the future with regard to energy security and, accordingly, affordability,” he added.
“We are investing already, and we urge and call others to invest. It’s a global responsibility that OPEC cannot shoulder on its own,” he went on.
SECURITY OF DEMAND
Al Ghais said it is not a concern that Russia redirects its crude oil exports while Middle East exports are increasingly going to Europe, citing his 30 years of experience in the industry.
“It’s quite normal to see this,” he said, “We’ve always seen redirection of flows, whether it’s related to geopolitical events or demand centers being created and others disappearing. So this is typical where we have a redirection in flows from the east to the west or the west to the east.”
According to the forecast from OPEC, oil demand will increase by 2.3 million barrels a year, with the majority of the rise in demand coming from China and India, the secretary general said.
However, the global energy market is big enough despite improving demand, said Al Ghais.
“What concerns us more is actually the slowdown we see in Europe and the U.S. in terms of the financial situation and the inflation,” he said, noting a divided market is emerging on the demand side.
“There is phenomenal demand growth in Asia,” he said, and Russia’s oil production has been “resilient and managed to find new homes.”
He added that without the existence of OPEC and its allies, a group known as OPEC+, there would be more instability and volatility.
“With security of supply, there is also a requirement for security of demand, and the tools fit in together like hand and glove,” said the OPEC chief.
OPEC sees energy transitions as “absolutely an opportunity,” Al Ghais said.
“I don’t think it’s a threat. Again, it was something that we are already embracing. We believe this is an opportunity for us to meet our Paris Agreement goals,” he said.
“I think it’s important to look at the whole issue of energy transition, which I prefer to call energy transitions, by the way, not transition, with a sense of reality,” he said, “There is no one size fits all solution.”
Al Ghais said the energy transitions should “focus on different countries’ capabilities, circumstances, their potentials, their financial capabilities, and so forth.”
“When we talk about transition here in the U.S. or in Europe, it means nothing to other people around different parts of the world. What we take here for granted, like switching on the light, (a) switch is not available in other places in the world,” he went ahead, noting there are a million Africans alone who have no access to electricity.
The five-day CERAWeek will conclude on Friday and is focused on the dual challenges of meeting the world’s growing energy demand while reducing emissions.
More than 7,000 participants, including policymakers, industry leaders, company executives, investors and researchers from over 80 countries and regions, joined the forum, according to organizer S&P Global.
Saudi Arabia deposits 5 bln USD at Turkish Central Bank
RIYADH, March 6 (Xinhua) — Saudi Arabia announced on Tuesday that it had deposited 5 billion U.S. dollars at the Central Bank of Türkiye.
The deposit, which was part of an agreement between the Saudi Fund for Development and the Central Bank of Türkiye, revealed the close cooperation and historical ties between the two countries, the Saudi Press Agency reported.
The kingdom’s King Salman Humanitarian Aid and Relief Centre launched in February a nationwide donation campaign to help the earthquake-hit victims in Syria and Türkiye through an online platform.
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