A few days into the new year, there does not seem to be a strong chance for the world economy to emerge from the current crisis, with the continuing factors of decline, be it high inflation and the tightening of monetary policies or the repercussions of the crisis in Ukraine, which prompted the International Monetary Fund to lower its forecasts for the growth rate of the global economy in the new year to 2.7 percent, compared to 3.2 percent of GDP this year.
According to an analysis prepared by a group of analysts and experts from the Center for Strategic and International Studies in Washington, led by Matthew Goodman, senior vice president of the Center for Economic Studies, the global economy will record its fastest growth over the next year low rate in 20 years, with the exception of the period of the global financial crisis in 2009 and the peak of the emerging 2020 Corona virus pandemic.
Analysts said in the report published by the Center for Strategic and International Studies under the title “5 Things That Will Happen in the World in 2023” that the main question asked in the United States is whether the Federal Reserve will be able to achieve a good “landing” of the economy that guarantees a reduction in the rate of inflation without harming the growth of the economy, or is the economic recession the only way to reduce the rate of inflation, which has reached its highest level in 40 years?
At the same time, investors expect the US economy to stagnate over the next year, while markets appear to be in an awkward position regarding the negative reaction to indicators of continued job and wage growth, which bolster the inflation is high and could prompt the Reserve Board to raise the interest rate to more than 5% over the next year.
The situation looks no less ambiguous for the Chinese economy in the new year, as China has abruptly abandoned its “zero cases with the emerging coronavirus” policy and the stringent restrictions and measures it includes to limit the spread of the infection, and it is now focusing on economic stability. It’s possible that China will see growth in domestic consumption as the current wave of coronavirus infections overcome it, but there doesn’t seem to be clear support from policy makers for domestic consumption. On the other hand, the troubled real estate sector could stabilize thanks to the recent government support measures. However, exports are unlikely to help boost growth in China’s economy due to the slowdown in the global economy overall, meaning China may have to roll out a new stimulus package if it wants to outpace economic growth. 5 percent of GDP.
The world will continue to feel the repercussions of rising interest rates and the appreciation of the US dollar. Many developing countries may fail to pay their foreign currency debts over the next year, because US monetary policy tightening has reduced levels of cash liquidity in the United States, and therefore the amounts of cash they would have could be invested in debt instruments of developing countries have declined.
If developments in the global economy are the first of the five developments, the second is the development of US economic relations with Asian countries. Analysts say the new year will be proof of the success of the policy adopted by US President Joe Biden’s administration to revive US-Asia economic relations after his predecessor, Donald Trump, withdrew from the partnership agreement transpacific, which includes 12 countries in the Asia-Pacific region. President Biden’s administration hopes to reap some of the fruits of its economic rapprochement with Asia through the “Indo-Pacific Economic Framework for Prosperity” (IPEF) by mid-November next year, when Biden will host Asia-Pacific Economic Cooperation “APEC” at their annual summit in American San Francisco.
The third development expected next year is the US President’s administration’s expansion into imposing export restrictions on advanced technology in China. On Oct. 7, the Biden administration announced that the technology export restrictions aim to deprive China of access to the latest semiconductor technology and the equipment needed to produce it. This step is considered a quantum leap in the strategy to limit US exports: competing or hostile countries are no longer allowed to climb the ladder of technological development behind the US, at a safe distance, but export restrictions will now used for the United States to maintain the highest degree of leadership and outsourcing in the field of technology globally.
At the same time, the United States is trying to form an international alliance to deny China access to advanced semiconductor technology. Although the United States controls some of the major semiconductor manufacturing equipment industries, Japanese and Dutch companies are major players in this field. And if Dutch and Japanese companies fail to comply with the US ban on China, Washington could threaten to take punitive measures against those companies, which threatens to encourage companies to reduce their dependence on the US in various long-term supply chains. term.
The fourth expected development will be the share of global development and infrastructure financing policy, as global infrastructure is a major component of the Biden administration’s foreign policy over the next year, with the administration seeking to enhance credibility of a large number of infrastructure-related initiatives, including the “Partnership for Global Infrastructure.” Investment, the Blue Point Network, the Tripartite Infrastructure Partnership and the Quadruple Security Forum. All these initiatives aim to counter China’s international Belt and Road Initiative.
Although developing countries need infrastructure investments, 60 per cent of low-income countries are already suffering from, or facing the risks of, a serious debt crisis, and therefore cannot wait for such initiatives to develop, mainly because the private sector is not very keen on investing in infrastructure projects Infrastructure is not profitable, which increases the financial burden on the Biden administration to achieve its goals in this field.
The latest of five developments planned for next year concerns funding for efforts to combat climate change around the world. In light of the US Inflation Act and its huge incentives for domestic clean energy projects, efforts to increase investment in climate change mitigation and adaptation are likely to be strengthened globally. However, the big questions will remain about the funding and mechanisms of the Loss and Damage Fund, announced during the “COP 27” World Climate Summit in the Egyptian city of Sharm el-Sheikh last November, and about the fund’s relationship with the funding obligations of the climate in the Paris Agreement and the role of international financial institutions in financing climate-related projects and other global public interests.
