Hassouna Al Tayeb (Abu Dhabi)
The World Bank, from its headquarters in Washington, USA, warned of a decline in growth more than expected, and the consequences of a debt wave sweeping low- and middle-income countries, during the years 2022 and 2023.
It is likely, in light of the ongoing war between Russia and Ukraine, that millions of residents of these countries will enter the cycle of extreme poverty, as the repercussions of the war will exacerbate the effects of the Covid 19 epidemic, resulting in more than 75 million people facing the risk of hunger, more than what was previously Expected in 2019.
Ayhan Kose, Director of the Development Economics Prospects Group at the World Bank, said: “We expected things to get worse, at the beginning of the year, but they have gone from bad to worse at the moment, and political will is necessary, to avoid a terrible deterioration. And the fiscal crunch, which has happened faster than expected, may push countries into a kind of debt crisis, similar to the one the world experienced in the 1980s. This constitutes a real danger, which raises concern and calls for precaution.”
external debt
Data from the World Bank indicate that the external debt in low-income countries increased by about 15.5 billion dollars to 166 billion dollars in 2020, while it increased in its middle-income counterparts, by 423 billion dollars, to 8.5 trillion dollars, which exposes this Countries are likely to raise interest rates by more than expected, according to the Financial Times.
Under the Bank’s scenario, global growth is expected to decline, from 5.7 last year, to 2.9% this year, and about 3% in 2023. But perhaps, the unexpected rise in interest rates and energy prices and the persistence of Corona virus cases, will result in a decline in The growth of the global economy, to about 2.1% this year and down 1.5% in 2023.
Economic growth in developed countries during 2022 recorded a rate of 5.1%, while economists expect it to decline to about 2.6% this year and to about 2.2% in 2023. If these risks are realized, these percentages may turn to 2% and approximately 0.8% .
And economic growth, in emerging and developing countries, achieved 6.6% in 2021, with expectations of a decline to about 3.4% during this year, and to about 4.2% in 2023. In the presence of risks, growth is likely to decline, to about 2.2% during the current year, before it can from achieving a partial recovery of about 2.6% in 2023.
global conditions
The Bank’s semi-annual report on the future of the global economy says that global economic conditions are close to those the world witnessed in the seventies of the last century, when it was necessary to raise interest rates by a large percentage to curb inflation. However, this rise was followed by a global recession and a series of debt crises that swept developing countries. While the commodity price shock is considered less violent so far, a further rise in the cost of commodities and the continued spread of the Covid 19 virus may lead to a significant increase in interest rates, which warns of risks The growing debt crisis.
Central banks are rapidly increasing interest rates in the broadest process of monetary tightening for more than 20 years. In the past 3 months to May, the monetary authorities announced an increase in interest rates of more than 60%, with more expected over the next few months.
The report concluded that the combined effect of the epidemic and war may make global economic output in the five-year period from 2020 to 2024 below the growth level between 2010 to 2019.
There is no doubt that poor countries bear the brunt of this shock, with output declining in emerging and developing countries, by approximately 35%, and the production of goods being dealt a severe blow as a result of the significant increase in food and fuel prices, by more than 40%, under the circumstances. left over from the Russo-Ukrainian war.
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