One message that is coming out of both the International Monetary Fund (IMF), and World Bank is that the world is still to recover in any sustainable way from serious economic challenges. A still-continuing Covid-19 pandemic– although significantly less intense than its variants during the first two years– aggregate supply shock, a fast-unfolding climate change crisis, and lack of any meaningful multilateralism have been some of the main reasons for the delay in both global economic recovery, and putting it on much-needed resilient, inclusive, and sustainable path, especially for those in the global South, who during all this time were denied vaccine justice, a meaningful debt moratorium/relief effort, and any significant level of provision of climate finance.
Hence, World Bank in its January 2023 published ‘Global Economic Prospects’ (GEP) report highlighted the difficult economic outlook for the current year, and the main challenges as ‘Global growth is expected to decelerate sharply to 1.7 percent in 2023– the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis. This is 1.3 percentage points below previous forecasts, reflecting synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine.’ In the particular case of Pakistan, economic outlook remains very difficult, with economic growth rate for fiscal year (FY) 2022/23 forecast at only 2 percent, and which becomes only slightly better, as per the forecasted number, in FY2023/24 at 3.2 percent.
Moreover, a recent The Financial Times article ‘The threat of a lost decade in development’ by Martin Wolf, highlighted the report to be indicative of global economic challenges being particularly worrisome for developing countries, and if not properly dealt with, could mean ‘lost decades’ for a number of ‘vulnerable places. He pointed out in this regard ‘The shocks of the past three years have hit all countries, but they have hit emerging and developing countries particularly hard. As a result, according to Global Economic Prospects 2023, just out from the World Bank, the convergence of average incomes between poor and rich countries has stalled. Worse, it might not soon return, given the damage already done and likely to persist in the years ahead. …An obvious danger now is that of waves of defaults in over-indebted developing countries. Taken together, these shocks will cause long-lasting effects, perhaps lost decades, in many vulnerable places.’
Hence, given the gravity of the economic challenges at hand, it is important that a mission-oriented, purpose-driven, effort is launched at the global level that deals with both the neoliberal assault, and climate change crisis, so that the global economy is put on a much-needed strong footing; something that was missing when the Covid-19 pandemic hit.
Hence, given the gravity of the economic challenges at hand, it is important that a mission-oriented, purpose-driven, effort is launched at the global level that deals with both the neoliberal assault, and climate change crisis, so that the global economy is put on a much-needed strong footing; something that was missing when the Covid-19 pandemic hit. As can be seen from the GEP report, economic growth for most of the countries across the global North and South went into the negative zone in 2020– the year the pandemic was declared– and even after nearly three years into the pandemic, the global economic outlook still remains extremely difficult; not to mention deep weaknesses of global supply chains, deeply ill-prepared public health sectors, and serious lack of climate change related disaster preparedness that the pandemic brought to the fore.
Similarly, IMF managing director, Kristalina Georgieva, also raised serious concerns at the global economic outlook, as pointed out by a recent FT published article ‘Recession will hit a third of the world this year. IMF chief warns’ as follows: ‘A third of the global economy will be hit by recession this year, the head of the IMF has said, as she warned that the world faces a “tougher” year in 2023 than the previous 12 months. The US, EU and China are all slowing simultaneously, said IMF managing director Kristalina Georgieva. …Her comments suggest the IMF is likely to soon cut its economic forecasts for 2023 again; it usually publishes updated projections during the World Economic Forum in Davos, Switzerland, which takes place later this month.’
Moreover, noted credit rating agency ‘Fitch Solutions’ in its November 2022 published article ‘Fitch Solutions global macro key themes for 2023’ pointed out ‘We expect that global real GDP growth will slow from 3.1 percent in 2022 to 2.0 percent in 2023. Other than the pandemic in 2020, this would mark the slowest pace of growth since the Global Financial Crisis. Developed markets will be hit hard, with a painful recession in the eurozone as well as a light and short recession in the US. …While leading indicators such as commodity prices, shipping rates and inflation expectations all point to weaker price growth, we believe that it will take a while for headline inflation to reach central bank targets. In fact, while inflation will trend lower over 2023, it is unlikely to hit central bank targets over the next nine-to-12 months in most economies. Inflation will remain sticky in those economies that have been hit by large supply shocks…’
