LONDON, July 28 (Reuters) - Sharply rising interest rates, soaring inflation and an ongoing energy crisis are leading to the belief the global economy is heading for an inevitable downturn. The IMF warned this week inflation and war could drag the global economy towards the edge of a recession. With higher-than-expected inflation -- particularly in the U.S. and key European economies -- world financial conditions are getting tighter. In the US, reduced household spending power and a contractionary monetary policy are set to drag growth to 2.3% this year and 1.1% next year, according to forecasts.
The International Monetary Fund had projected world growth at 4.4 per cent for 2022, but those forecasts have been revised down because of conflicts and sanctions spillovers. The base case projection for global growth is that it will slow down from 6.1% last year to 3.2% in 2022, which is 0.4% lower than forecast in its latest outlook update in April. A larger share of respondents expect the world to move toward a less sustainable future (characterized by rising inequality and an increasing environmental footprint) rather than toward a more sustainable future (characterized by lower inequality and a smaller environmental footprint). Those respondents who believe that the world will be on a trajectory toward a More Sustainable future in three years time (see below) also expect that there will be a trend toward more local and nationally self-reliant economies.
What China wants is a world where the Chinese brand of state capitalism and authoritarian domination is not impeded. China is likely to surpass the U.S. by late this decade or early in the next, becoming the largest economy in the world as measured by market capitalization. Just below the surface of U.S. anxiety is fear of a world where China has replaced the U.S. as a dominant political and economic actor. COVID-19 is a simultaneous crisis, just as Chinas unrelenting rise in the last forty years has lifted many boats, rich and poor, alike, Chinas slowdown, the USs, and Europes, will all have a global effect on the world.
If COVID-19 can teach global leaders the value of working together to avert shared disasters, then future global emergencies will be much easier to handle--for everyones benefit. The Arab World, Africa... countries which, if we do not come up with an agreed upon, common de-escalation settlement, are going to be a flashpoint of tensions over the medium to long-term. Given the amount of mutual mistrust that the pandemic has sown between China and the West, they are going to find it difficult to find agreement to reform the WHO.
Understanding the world, understanding countries, is crucial if one wants to get anything done in the globalized world. Through Javier Solanas wisdom, Esade will seek to understand more about the world in which we live, and that our children will inherit. These students that we are teaching must understand this world, know there is another world, a different world, one where suffering is taking place, where values are being won and lost. The war was waged without UN consent, it has divided countries, societies, the Western world.
If you like this world and you want to know how I evolved in it: Stay tuned!
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Thanks and see you soon.
