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Darkening Prospects: Global Economy to Slow to 2.9 percent in 2019 as Trade, Investment Weaken

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Global economic growth is projected to soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook, the World Bank said on Tuesday. International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures.

Growth among advanced economies is forecast to drop to 2 percent this year, the January 2019 Global Economic Prospects says. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies. Growth for this group is anticipated to hold steady at a weaker-than-expected 4.2 percent this year.

“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead”, said World Bank Chief Executive Officer Kristalina Georgieva. “As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardized. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies.”

The upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating. Per capita growth will be insufficient to narrow the income gap with advanced economies in about 35 percent of emerging market and developing economies in 2019, with the share increasing to 60 percent in countries affected by fragility, conflict, and violence.

A number of developments could act as a further brake on activity. A sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies. Past increases in public and private debt could heighten vulnerability to swings in financing conditions and market sentiment. Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.

“Robust economic growth is essential to reducing poverty and boosting shared prosperity,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “As the outlook for the global economy has darkened, strengthening contingency planning, facilitating trade, and improving access to finance will be crucial to navigate current uncertainties and invigorate growth.”

Analytical chapters address key current topics:

The informal sector accounts for about 70 percent of employment and 30 percent of GDP in emerging market and developing economies. Since it is associated with lower productivity and tax revenues and greater poverty and inequality, this is symptomatic of opportunities lost. Reducing tax and regulatory burdens, improving access to finance, offering better education and public services, and strengthening public revenue frameworks could level the playing field between formal and informal sectors.

Debt vulnerabilities in low-income countries are rising. While borrowing has enabled many countries to tackle important development needs, the median debt-to-GDP ratio of low-income countries has climbed, and the composition of debt has shifted toward more expensive market-based sources of financing. These economies should focus on mobilizing domestic resources, strengthening debt and investment management practices and building more resilient macro-fiscal frameworks.

Sustaining historically low and stable inflation is not guaranteed in emerging market and developing economies. Cyclical pressures that have depressed inflation over the past decade are gradually dissipating. The long-term factors that have helped reduce inflation over the past five decades – global trade and financial integration, widespread adoption of robust monetary policy frameworks – may lose momentum or reverse. Maintaining low global inflation may become as much of a challenge as achieving it.

Policies aimed at softening the blow of global food price swings can have unintended consequences if implemented by many governments in uncoordinated fashion. Government interventions can provide short-term relief, but widespread actions are likely to exacerbate food price spikes, with heaviest impact on the poor. For example, trade policies introduced during the 2010-11 food price spike may have accounted for more than one-quarter of the increase in the world price of wheat and maize. The 2010-11 food price spike tipped 8.3 million people (almost 1 percent of the world’s poor) into poverty.

“Designing tax and social policies to level the playing field for formal and informal sectors as well as strengthening domestic revenue mobilization and debt management will be important priorities for policymakers to overcome the challenges associated with informality in developing economies,” said World Bank Prospects Group Director Ayhan Kose. “As the economic outlook dims, such efforts become even more important.”

Regional Outlooks:

East Asia and Pacific: East Asia and Pacific remains one of the world’s fastest-growing developing regions. Regional growth is expected to moderate to 6 percent in 2019, assuming broadly stable commodity prices, a moderation in global demand and trade, and a gradual tightening of global financial conditions. Growth in China is expected to slow to 6.2 percent this year as domestic and external rebalancing continue. The rest of the region is expected to grow at 5.2 percent in 2019 as resilient demand offsets the negative impact of slowing exports. Indonesia’s growth is expected to hold steady at 5.2 percent. The expansion of the Thai economy is expected to slow in 2019 to 3.8 percent.

Europe and Central Asia:  The lingering effects of financial stress in Turkey are anticipated to weigh on regional growth this year, slowing it to 2.3 percent in 2019. Turkey is forecast to experience weak activity and slow to a 1.6 percent pace due to high inflation, high interest rates, and low confidence, dampening consumption and investment. Growth in the western part of the region, excluding Turkey, is projected to slow. Poland is anticipated to slow to 4 percent as Euro Area growth slows. Growth in the eastern part of the region is also anticipated to slow as large economies including Russia, Kazakhstan, and Ukraine decelerate.

Latin America and the Caribbean: Regional growth is projected to advance to a 1.7 percent pace this year, supported mainly by a pickup in private consumption.  Brazil is forecast to expand 2.2 percent, assuming fiscal reforms are quickly put in place, and that a recovery of consumption and investment will outweigh cutbacks to government spending. In Mexico, policy uncertainty and the prospect of still subdued investment is expected to keep growth at a moderate 2 percent, despite the fall in trade-related uncertainty following the announcement of the U.S.-Mexico-Canada Agreement. Argentina is forecast to contract by 1.7 percent as deep fiscal consolidation leads to a loss of employment and reduced consumption and investment.

Middle East and North Africa: Regional growth is projected to rise to 1.9 percent in 2019. Despite slower global trade growth and tighter external financing conditions, domestic factors, particularly policy reforms, are anticipated to bolster growth in the region. Growth among oil exporters is expected to pick up slightly this year, as GCC countries as a group accelerate to a 2.6 percent rate from 2 percent in 2018. Iran is forecast to contract by 3.6 percent in 2019 as sanctions bite. Algeria is forecast to ease to 2.3 percent after a rise in government spending last year tapers off. Egypt is forecast to accelerate to 5.6 percent growth this fiscal year as investment is supported by reforms that strengthen the business climate and as private consumption picks up.

South Asia: Regional growth is expected to accelerate to 7.1 percent in 2019, underpinned by strengthening investment and robust consumption. India is forecast to accelerate to 7.3 percent in FY 2018/19 as consumption remains robust and investment growth continues, Bangladesh is expected to slow to 7 percent in FY2018/19 as activity is supported by strong private consumption and infrastructure spending. Pakistan’s growth is projected to decelerate to 3.7 percent in FY2018/19, with financial conditions tightening to help counter rising inflation and external vulnerabilities. Sri Lanka is anticipated to speed up slightly to 4 percent in 2019, supported by robust domestic demand and investment boosted by infrastructure projects. Nepal’s post-earthquake momentum is forecast to moderate, and growth should slow to 5.9 percent in FY2018/19.

Sub-Saharan Africa: Regional growth is expected to accelerate to 3.4 percent in 2019, predicated on diminished policy uncertainty and improved investment in large economies together with continued robust growth in non-resource intensive countries. Growth in Nigeria is expected to rise to 2.2 percent in 2019, assuming that oil production will recover and a slow improvement in private demand will constrain growth in the non-oil industrial sector. Angola is forecast to grow 2.9 percent in 2019 as the oil sector recovers as new oil fields come on stream and as reforms bolster the business environment. South Africa is projected to accelerate modestly to a 1.3 percent pace, amid constraints on domestic demand and limited government spending.

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Economy

An Uneven Recovery: the Impact of COVID-19 on Latin America and the Caribbean

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Employment rates in some Latin American and Caribbean countries have experienced a relative recovery, although in most, rates fall short of pre-pandemic levels. The quality of available jobs has also declined, as has the number of hours of paid work per week, according to data from a new survey by the World Bank and the United Nations Development Program (UNDP).

The High-frequency Phone Surveys, the second phase of which was implemented this year in 24 countries of the region, provides a snapshot of families’ well-being and their perceptions regarding the crisis. The goal is to take the pulse of the region and measure the impacts of the pandemic in key areas such as the labor market, income and food security, gender equality, and household access to basic services, such as education, health (including the COVID-19 vaccine), Internet connectivity and digital finance. The survey took a representative sample of the population aged 18 and over with access to a telephone in each country.

“The COVID-19 pandemic underscored the pre-existing inequalities in the region, where the most vulnerable and poorest groups have been disproportionately affected,” said Luis Felipe López-Calva, UNDP Regional Director for Latin America and the Caribbean. “This survey allows us to take the pulse of the region and propose evidence-based solutions.”

“The pandemic severely impacted millions of families in the region,” said Carlos Felipe Jaramillo, World Bank Vice-president for Latin America and the Caribbean. “These surveys we present today are crucial for obtaining current data on the scope of the crisis and for recommending informed measures to help improve the quality of life in our countries.”

Survey results demonstrate that the crisis particularly affected women, both because of the stronger initial impact on them and their slower labor market recovery. Mothers of young children (aged 0 to 5 years) have been most affected. In fact, a year and a half after the onset of the crisis, women are twice as likely as men to be unemployed owing to the pandemic. This situation is exacerbated by an increase in women’s household responsibilities, including supervision of children in remote education, and a higher incidence of mental health problems.

For the region as a whole, the employment rate stood at around 62 percent, almost 11 percentage points below the pre-pandemic level. Employment rates surpassed pre-crisis levels only in Guatemala, Nicaragua and El Salvador.

Moreover, formal employment fell 5.3 percent in the region while self-employment grew 5.7 percent, and the proportion of workers employed in small businesses (maximum of four workers) increased by 8 percent. These figures point to a deterioration in the quality of available employment. Even among the employed population, regional survey results identified a decrease in weekly hours of paid work, from 43 to 37, confirming this negative trend.

The survey data found that 28 percent of people employed before the pandemic lost their jobs, and more than half (17 percent) of those with a job before the pandemic have left the labor force. These impacts disproportionately affected women with young children: 40 percent of female workers over 18 with children aged 0 to 5 years lost their pre-pandemic job, compared to 39 percent of women in general and 18 percent of men.

The pandemic had a greater impact on less educated workers (both men and women). Thirty-five percent of those with a primary education or less lost their job during the pandemic, as did 28 percent of employees with a secondary education. Approximately 19 percent of individuals with a tertiary education became unemployed.

Survey data revealed that as a consequence of labor market setbacks, just over half of the households in the region have not yet managed to recover their pre-pandemic income levels. This situation occurred despite government efforts to help families through direct transfer programs and other benefits. Approximately 38 percent of survey respondents had received emergency cash transfers.

The survey demonstrated that food insecurity still affects 23.9 percent of households in Latin America and the Caribbean. This figure is almost double that reported by households prior to the pandemic — 12.8 percent. However, most countries have improved in this area with respect to the levels observed in June 2020.

Results also demonstrated that more than a year after the onset of the crisis, 86 percent of school-age children and youth receive some type of education (face-to-face or remote). However, figures vary widely across countries: in Guyana and Guatemala, it is 64 percent while in Peru and Chile, it reaches 95 and 97 percent, respectively. Additionally, education coverage falls below pre-pandemic levels in the countries surveyed. Just under a quarter of students in the region attended face-to-face classes.

Access to health services improved significantly. However, the percentage of unvaccinated people remains high in some countries. Eight percent of the regional population has not been vaccinated or is not willing to receive a vaccine. This percentage is especially high in the Caribbean: 60 percent in Haiti, 49 percent in Jamaica and 43 percent in Saint Lucia and Dominica.

Finally, according to the survey results, the use of mobile banking and online transactions (e-commerce) rose sharply during the pandemic. The use of digital payments also increased — currently, 26 percent of survey respondents said they used mobile wallets. The highest increases were among the rural population, the population over age 55 and those with low levels of education (primary or less).

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Gender-based violence in Bangladesh: Economic Implications

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Violence against women is one of the most heinous crimes perpetrated in today’s   world. However, despite the gravity of the violence perpetrated against women, it is still the pervading reality in the world. Bangladesh is also afflicted with this malaise of violence against women which is manifested in the deluge of news across the media about the violence against women in various  form .While Bangladesh has made commendable strides in the economic front, the  perennial subjugation of the women who account  for virtually half of its population remains a hurdle. Against this backdrop, this article investigates the economic toll incurred to the economy owing to the entrenched culture of systemic violence in our country.

Women constitute nearly half of the population of Bangladesh. As such, their innate potentials have considerable bearing on the socio-economic progress of the country. Admittedly, advancement of a country in socio-cultural indicators presupposes the simultaneous improvement of  women from the subjugated position culturally attributed to them. It is impossible  to envisage a prosperous thriving economy without the contribution and participation of the women equally. Therefore, the lack of women’s participation commensurate with their capabilities   hinders the development of the country.

One of the obstacles women confront in their journey of transforming into human capital is perhaps the retrograde views that society harbor about the traditional gender role of the women which fetter their contribution to the economy and society by bestowing them only  the  circumscribed role of  looking after the domestic affairs and rearing and educating child. The pastoral as well as urban culture   perpetuate these traditional gender roles and deny women a free rein over their fate. Whenever  women   disavow the preordained and predictable roles  provided by the society, they  have  to face mounting pressure from society so as to conform to the prevailing norms .Failing to  conform to the  regressive gender role will spell grave consequences for the women .When the society fails to cower the woman with the threats that are at its disposal ,it resort to the egregious path of violence. While   violence against women is one of the most reprehensible crime one can ever commit, it however is normalized through a power dynamics that  reinforces the overbearing male role and relegate women to the subjugation. Therefore, the culture of violence against women isn’t anomalous rather is embedded in the prevailing  patriarchal power dynamics which deem chastising women for their  rebellious attitude is solicited and  invoke often contrived and distorted religious edicts in order to legitimize their deplorable crime. Moreover, the culture of violence against women which has been  aptly termed as a epidemic by the United Nations  is rooted in the prevailing socio-economic  structure of the country that  systematically condone the browbeating of women into submission to patriarchal  norms and wield violent measures when the woman stubbornly gainsay their patriarchal hegemony.

While the social, cultural and health toll of the violence perpetrated against women is undoubtedly strenuous, the economic losses incurred by the violence and the opportunities nipped in the bud owing to violence against women also need to be taken into account in order to the adequately discern the deleterious ramifications of the violence against women .However, despite profound economic toll that are inflicted due to the violence against women, it is still unaddressed in the economic literature worldwide and discussion and cognizance about this momentous issue and its economic implications still scant.

As has been mentioned earlier, women constitute the lynchpin of the economy of Bangladesh which has been adequately manifested in the participation of women in Bangladesh’s much-heralded RMG sector and other productive sectors. However, this success of the economy   overshadows the plight and perils  this working class women confront in their bid to become economically productive. The violence against women is systemically entrenched in the country and women’s engagement in the economic activities are frowned upon by the society and culture .Therefore ,the this patriarchal fetter women behind the door of their  houses  and worst women are inflicted  physical and mental violence in event of questioning the dictates of the elders and the male custodians. Therefore , the fundamental impact of violence against women on the economy of the country related to the untapped opportunities due to the constrains imposed by the patriarchal society on women under the pretext of social, religious and cultural norm. This threat alone or normalization of the gender role of the women as a care-giver hinder women in taking part in the economy on a par with their male counterparts  .

Beside the lost  opportunities that can be tapped, the violence against women has numerous other implications on the economy. Firstly, the violence against women inevitably  results in the physical damage and mental trauma of the victim which has enduring toll on her. Therefore ,violence against women translate to toll on the health of the victim and therefore the cost incurred on the victim due to medical fees  as a result of the violence is also included in the economic cost of violence against women. Secondly, the violence against women also leads to diminished productivity of the victim due to the health hazards. Therefore, violence against women has implicit economic cost on the economy as a result of the lost productivity.

Thirdly,the cycle of the violence against women negatively sensitize women in not challenging the sacrosanct patriarchal norms and therefore women fit themselves with the prevailing adverse society and they themselves reproduce and reinforce these norms .Therefore, a vicious cycle set in which prevents women to actualize their potential and stymie them in their path of realizing their goal .This result a sense of apathy in women with regards to education and other means of social mobility and they deliberately avoid the economically productive activities that are deemed taboo by the prevailing social norms and cultural ethos.

Moreover, violence against women is an egregious form of crime perpetrated by a   patriarchal agent while the society has entrenched roles, norms and ethos that condone and encourage such outrageous violence .Moreover, a vicious cycle is at play in the gender based violence. The economic repercussions of the violence committed against women is considerable. Violence against women hinder the development  of the women commensurate with their inherent potential which nip the dreams of women in the bud. Besides, gender based violence also deter women in challenging the prevailing patriarchal norms and undertaking productive economic activities that are frowned by the patriarchal society and are deemed taboo. Moreover, a widespread sensitization in societal level as well as a drastic  overhaul of the patriarchal structure is necessary in order to avert the adverse socio-economic consequences of gender-based violence and extirpate the heinous root of this deplorable crime.

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Economy

Omicron Variant: Implications on Global Economy

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The prolonged battering of the Covid-19 has been considerably hitting the world economy. While vaccination and a receding in the cases of the cases in virus transmission has provided   brief respite to   the countries that are grappling with the recurring surge of the virus, the resurfacing of another virulent   mutation termed as  Omicron sounds ominous for the future of the world economy .Against this backdrop, this article projects the plausible economic ramifications of the new strand of the virus on the global economy.

The economic downward trajectory occasioned by the Covid-19 has been unprecedented in recent global history. While the economic depression of 2007-08 proved disastrous for the world economy, the toll   emanating from Covid-19 pandemic and consequent   economic stagnation has surpassed all the previous   economic plunge .In fact, some analysts have gone to the extent of   comparing the Covid-19 induced economic depression with the great depression of the 1920s.However, whether the far reaching repercussions of the Covid-19 on the global economy will be as momentous is still remains to be seen. Nevertheless, the   profound   economic jolt triggered by the Covid-19 pandemic is poised to reverberate across the world through shaping socio-economic and political events

The scar inflicted by a protracted economic recession owing to Covid-19 is apparent in the arduous path of economic rejuvenation in the western countries and eastern countries alike. Virtually every country is grappling with the toll that Covid-19 has incurred in the economy. The western countries are finding it   difficult to retrieve the losses that Covid-19 has precipitated. Although the swift vaccination of the western countries at the expense of the developing countries has provided a fleeting lull in their battle against Covid-19,it seem however the virus has resurfaced with increasing virulence in order to offset whatever gain these embattled countries managed to garner in their fight against Covid-19.

The skyrocketing and unprecedented inflation of the western countries coupled with a plummeted consumer confidence has meant a prolonged period of stagnation of their economies. However, in the wake of vaccination induced temporary respite in the viral cases, the economies rebounded strongly from the pits of economic recession. However, these hard-earned   gains will be reversed in the event of the advent of any new strand of the virus. Already, the delta variant which originated in India had triggered a spate of Covid-19 flare-ups in the United   States and United Kingdom. Against this backdrop, the Omicron variant is set to aggravate the   economic woes of the western countries and in turn the world.

While the western countries are reeling from economic stagnation, the developing and underdeveloped countries are confronting many abysmal realities due to their prevailing economic backwardness. Their economic plight has been lingering in want of adequate vaccination due to the apathetic stance of the western countries and global governance institutions .Therefore, while the western countries has rebounded from the Covid-19 induces economic predicaments, the difficulties confronted by the developing countries has continued unabated. While the influence of advanced countries and their less advanced counterparts in world-economy is inextricably tied, the callous attitude of the developed countries to the vaccination of countries in Asia and South Asia turn out to   be sheer lack of economic prudence.

While western countries are considered as the economic hub of the world, it is however the developing countries on which the vital supply chains of the world economy hinges on. Therefore, the tardy pace of vaccination in these countries is prejudicial to the global economic stability. The economic ramification of the slow pace of vaccination is twofold for the world economy. Firstly, the slow vaccination hinders the revival of the economic activities in the developing countries thereby obstructing the supply chain of the commodities .This supply chain crisis has ripple effect in the western economies. The recent predicament of inflation and attending macroeconomic woes in countries like the United States and United Kingdom is manifestation of the supply chain crisis plaguing the world economy. Due to the paucity of commodities and raw materials, the prices of necessary goods has escalated in the western countries which has plummeted consumer confidence and triggered a vicious cycle of stagflation in the economy that is reminiscent of the 1970s when a similar crisis in oil supply has  precipitated economic downturn in the western economies.

Secondly, the slow rate of vaccination also run the risk of allowing the virus to mutating to newer and much virulent variants and due to the unfettered communication as a result of globalization the emergence of any new variant doesn’t remain in the confines of any border rather proliferate like wildfire and precipitate global crisis. Therefore, the lack of vaccination or slack pace therefore has global repercussions. Therefore, it is judicious of the developed countries to concentrate efforts in contributing to the vaccination of the less developed countries which will yield good results for their economy.

The ubiquitous mechanism in battling Covid-19 remains one of containment that entails halting economic and other activities and insulating the countries from other countries through imposing border controls, curbs on air communication and other stringent measures echoing protectionist attitude. However, these measures are antithetical to the spirit of the globalization and global trade. While lockdowns and other protectionist measures yield temporary improvement in the Covid  cases, it is not viable in the longer term. Besides, lockdowns have deleterious ramifications on the economy and further aggravate economic rebounding of the developed countries and developing countries alike. Therefore, efforts should be aimed at preventing the Covid cases rather than grappling with the Covid with a knee-jerk policy of improvisation. .

Moreover,Covid-19 has already occasioned far-reaching economic fallout in the world economy. Indications abound regarding the fact that the world economy is verging on profound and prolonged recession. Against the backdrop of ominous predictions and slackening growth and painful inflation of the world economy, the prospects of the world economy due the advent of a new variant remain mired in obscurity. It can be concluded that the economic repercussions of yet another novel variant will be momentous and will offset hard-earned growth of the countries .Unlike previous precedent of haphazard policy and knee-jerk policy solutions, this time around the countries need to undertake challenge much prudently and should concentrate all of their efforts aiming at universal vaccination of all countries so as to prevent the resurfacing of similar virulent viral strands.

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