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Monday 16 January 2023

Piloting spaceship Earth in the new year 2023

The World Bank’s latest outlook sees the global economy growing by only 1.7% in 2023 and 2.7% in 2024.

As we begin the new year and approach Chinese New Year, we need to reflect on how to face a grimly uncertain future.

Gold prices are back up, the Ukraine war grinds on horrendously, politics are messier than ever, and most analysts signal a recession ahead.

The World Bank’s latest outlook sees the global economy growing by only 1.7 percent in 2023 and 2.7 percent in 2024.

That’s a full one-percentage decline of 2.7 percent from the IMF forecast in October 2022. The bank thinks the downgrade in growth will affect 95 percent of advanced economies and nearly 70 percent of emerging markets and developing economies (EMDEs).

The US and Europe are forecast to grow by 0.5 percent and 0 percent respectively for 2023, which I personally think is optimistic, particularly for Europe.

You cannot have a war without some serious costs. Brace for tough times.

The bank thinks that global inflation may “remain higher for longer.”

After peaking at 7.6 percent in 2022, global headline CPI inflation may remain at 5.2 percent in 2023 before easing to 3.2 percent in 2024, above its 2015-19 average of 2.3 percent per annum.

So, interest rates will remain elevated for longer, killing those poorest indebted economies, where total EMDE debt is at a 50-year high.

A divided word

If I were looking at the Earth from the Moon, I see a spaceship where the first class passengers are quarreling with the business class section, whilst the economy class passengers are suffering from overcrowding and worrying about a real crash.

The world is now divided into three blocs: the 1.1 billion rich West (Nato plus Japan and Australasia), the 1.7 billion East (which the West classifies as Russia and China, Iran, and North Korea), and the South (meaning the 5.2 billion rest of the world).

In short, the first-class passengers think that the business class is taking over and is doing everything to contain them, asking the economy guys to be on their side.

The South looks at this nonsensical cold war emerging and refuses to take sides, but since the West still controls the money (even though a lot is borrowed from the rest), everyone is on a “wait and see.”

Can someone please remind the captain and chief engineer that Spaceship Earth is wasting energy and polluting Planet Earth at unsustainable levels?

Instead of trying to land, the first two cabins are committed to more defense expenditure, decouple from each other, and label anyone who disagrees with them as revisionists or terrorists.

The world is already spending $2 trillion on defense annually.

Even without a nuclear war, which would be terminal, one study suggested that the richest countries are spending 30 times as much on their armed forces as they spend on providing climate finance, and seven of the top 10 historical emitters are among the top 10 global military spenders.

The latest jet fighters, missiles, and aircraft carriers are all energy guzzlers, and the Ukraine war shows the futility of destroying not just lives, but the whole environment.

Common sense needed

How can the Rest knock some common sense into Spaceship Earth?

For those of us used to dealing with different cultures, using your language, history, and culture to explain to another is like ducks talking to chickens.

You would have thought that science and rationality are a common, universal language.

The billions who have been taught science in English often find that using non-Western logic to explain their point of view to Westerners is often futile.

Modernity, often equated with the West, treats non-Western points of view as at best mystic, non-empirical, and therefore non-scientific, or worst, inferior.

This is changing fast after last year.

The Indians, like their foreign minister Jaishankar, are clearly leading the intellectual charge in formulating views from the South that are articulate and convincing—don’t drag us into fighting a cold war of your own making, we are only on our own side.

The Indian motto for G20 Summit this year, which they are hosting, is One Earth, One Family, One Future.

No family can survive quarrels by committing mutual suicide.

The one ancient Western philosopher who can bridge almost all cultures is emperor/philosopher Marcus Aurelius (121-180 AD).

Stonic philosophy

His stoic philosophy is not only worldly, but practical and personal in approach.

Unlike most desk-bound theoreticians, Aurelius was the last of the Five Good Roman Emperors, who applied his philosophy to government, war, personal life, and relationships.

His stoic approach views the importance of self-cultivation, self-reflection, self-control, and fortitude in order to master one’s emotions so that one can have a clear and unbiased ability to do one’s duty.

He does what he thinks is right, but is willing to accept that he himself may be wrong, needing to understand the other’s point of view.

Aurelius’ “Meditations” showed remarkable awareness that mastery requires self-discipline and the exercise of unbiased judgment.

He accepted change and death, humility, not fame and status, and sought truth from understanding: “When another blames you or hates you, or people voice similar criticisms, go to their souls, penetrate inside, and see what sort of people they are. You will realize that there is no need to be racked with anxiety that they should hold any particular opinion about you.”

Making lives better

For those in first class, remember that no one is entitled to first class forever. For those in economy class, we may not be able to knock sense into those in the privileged classes, but at least we can do something at the local level to make life better for our families and our communities.

Aurelius is surely correct in understanding that a good life is when you know you have enough and overall happiness is that less is more for the more, not more for the few.

I may not be able to change Spaceship Earth, but enough that I can change myself.

Happy Year of the Rabbit. Asia News Network 

    By: Andrew Sheng is former chair of the Hong Kong Securities and Futures Commission.

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Friday 13 January 2023

Global Economic Prospects report: Sharp, Long-lasting Slowdown to Hit Developing Countries Hard

 

 The World Bank Working for a World Free of Poverty

2023 global growth to slow to 1.7% from 3% expected six months ago

WASHINGTON, Jan. 10, 2023 — Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine, according to the World Bank’s latest Global Economic Prospects report.

Given fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.

The global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024. The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies.

Over the next two years, per-capita income growth in emerging market and developing economies is projected to average 2.8%—a full percentage point lower than the 2010-2019 average. In Sub-Saharan Africa—which accounts for about 60% of the world’s extreme poor—growth in per capita income over 2023-24 is expected to average just 1.2%, a rate that could cause poverty rates to rise, not fall.

“The crisis facing development is intensifying as the global growth outlook deteriorates,” said World Bank Group President David Malpass. “Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates. Weakness in growth and business investment will compound the already-devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change.”

Growth in advanced economies is projected to slow from 2.5% in 2022 to 0.5% in 2023. Over the past two decades, slowdowns of this scale have foreshadowed a global recession. In the United States, growth is forecast to fall to 0.5% in 2023—1.9 percentage points below previous forecasts and the weakest performance outside of official recessions since 1970. In 2023, euro-area growth is expected at zero percent—a downward revision of 1.9 percentage points. In China, growth is projected at 4.3% in 2023—0.9 percentage point below previous forecasts.

Excluding China, growth in emerging market and developing economies is expected to decelerate from 3.8% in 2022 to 2.7% in 2023, reflecting significantly weaker external demand compounded by high inflation, currency depreciation, tighter financing conditions, and other domestic headwinds.

By the end of 2024, GDP levels in emerging and developing economies will be roughly 6% below levels expected before the pandemic. Although global inflation is expected to moderate, it will remain above pre-pandemic levels.

The report offers the first comprehensive assessment of the medium-term outlook for investment growth in emerging market and developing economies. Over the 2022-2024 period, gross investment in these economies is likely to grow by about 3.5% on average—less than half the rate that prevailed in the previous two decades. The report lays out a menu of options for policy makers to accelerate investment growth.

“Subdued investment is a serious concern because it is associated with weak productivity and trade and dampens overall economic prospects. Without strong and sustained investment growth, it is simply impossible to make meaningful progress in achieving broader development and climate-related goals,” said Ayhan Kose, Director of the World Bank’s Prospects Group. “National policies to boost investment growth need to be tailored to country circumstances but they always start with establishing sound fiscal and monetary policy frameworks and undertaking comprehensive reforms in the investment climate.”

The report also sheds light on the dilemma of 37 small states—countries with a population of 1.5 million or less. These states suffered a sharper COVID-19 recession and a much weaker rebound than other economies, partly because of prolonged disruptions to tourism. In 2020, economic output in small states fell by more than 11%— seven times the decline in other emerging and developing economies. The report finds that small states often experience disaster-related losses that average roughly 5% of GDP per year. This creates severe obstacles to economic development.

Policymakers in small states can improve long-term growth prospects by bolstering resilience to climate change, fostering effective economic diversification, and improving government efficiency. The report calls upon the global community to assist small states by maintaining the flow of official assistance to support climate-change adaptation and help restore debt sustainability. 

Download Global Economic Prospects here.

Regional Outlooks:

East Asia and Pacific: Growth is expected to increase to 4.3% in 2023 and to 4.9% in 2024. For more, see regional overview.

Europe and Central Asia:  Growth is expected to slow to 0.1% in 2023 before increasing to 2.8% in 2024. For more, see regional overview.

Latin America and the Caribbean: Growth is projected to slow to 1.3% in 2023 before recovering to 2.4% in 2024. For more, see regional overview.

Middle East and North Africa: Growth is expected to slow to 3.5% in 2023 and 2.7% in 2024. For more, see regional overview.

South Asia: Growth is projected to slow to 5.5% in 2023 before picking up to 5.8% in 2024. For more, see regional overview.

Sub-Saharan Africa: Growth is expected to be at 3.6% in 2023 and rise to 3.9% in 2024. For more, see regional overview.

 

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