Watching the world economy

Starting Oct. 10, the 2022 Annual Meetings of the International Monetary Fund and the World Bank Group will be taking place in Washington, D.C., running until Oct. 16. This is going to be the first time they will have full-blown in-person meetings after two years of hiatus.

Some 10,000 delegates composed of finance and economic managers, central bankers, civil society organizations, private sector executives as well as members of the press used to take part in the meetings, but the onset of the pandemic necessitated changes such as conducting the meetings virtually in 2020 to ensure the safety of participants and personnel. Last year, the meetings as well as the other events were held using the hybrid format, with country delegations attending in person while media and other participants attended virtually for certain events and engagements.

We are preparing for the participation of our economic managers led by Finance Secretary Ben Diokno, BSP Governor Felipe Medalla, NEDA chief Arsenio Balisacan and Budget Secretary Amenah Pangandaman, including GSIS president Wick Veloso, to take part in the various meetings and events. As expected, we will be hosting them in Washington, D.C. where we made plans for a small roundtable discussion as a follow up to the successful economic briefing conducted in New York during the working visit of President Bongbong Marcos that generated substantial dollar commitments in terms of investment pledges.

There is no doubt, Washington, D.C. will be the center of attention with the whole world watching the developments mainly due to predictions that a global recession is on the horizon.

In a recent piece by the Global Editor for the World Bank John Mackedon, he noted that “the impacts of the ongoing economic crisis continue to bear down on nearly all facets of the global economy – pushing more people into poverty and impacting lives and incomes around the world. The pandemic has forced roughly 70 million more people into extreme poverty and global median incomes declined for the first time since measurements began in 1990.”

The UN Conference on Trade and Development (UNCTAD) also projects global growth to slow down to 2.2 percent in 2023, and issued a warning in its Trade and Development Report 2022 that “rapid interest rate increases and fiscal tightening in advanced economies combined with the cascading crises resulting from the COVID pandemic and the war in Ukraine have already turned a global slowdown into a downturn with the desired soft landing looking unlikely.”

Ahead of the annual meetings, IMF managing director Kristalina Georgieva disclosed that the financial institution will downgrade its 2.9 percent global growth in 2023 as recession risks continue to rise and the world veers towards financial instability.

In a speech titled, “Navigating a More Fragile World” delivered at Georgetown University in Washington, D.C., she recalled that in less than three years, the world has lived through “shock, after shock, after shock,” starting with the COVID-19 pandemic, followed by Russia’s invasion of Ukraine and the climate disasters on all continents.

“These shocks have inflicted immeasurable harm on people’s lives. Their combined impact is driving a global surge in prices, especially on food and energy, causing a cost-of-living crisis,” Georgieva said, admitting that “geopolitical fragmentation” has made it harder to deal with these shocks.

“We are experiencing a fundamental shift in the global economy, from a world of relative predictability…  to a world with more fragility – a greater uncertainty, higher economic volatility, geopolitical confrontations and more frequent and devastating natural disasters – a world in which any country can be thrown off course more easily and more often,” the IMF chief warned.

I certainly agree with her statement that the series of unfortunate events from COVID to the war in Ukraine down to the natural disasters have made countries, including the US, vulnerable to the risk of recession and prolonged stagnation. In fact, a report by Fortune quoted multinational hedge fund Citadel’s founder and CEO Kenneth Griffin saying, “Everybody likes to forecast recessions, and there will be one. It’s just a question of when, and frankly, how hard.”

Economist Nouriel Roubini, who has been nicknamed “Dr. Doom” on account of his pessimistic perspectives on the economy, predicted a “long and ugly recession” in the US and the world, with stocks sinking 40 percent.

Despite the gloom and doom scenarios facing us, we are still optimistic that Southeast Asia will be able to get up on its feet, especially with foreign direct investment inflows reaching record high levels of $174 billion for 2021 – the same as pre-pandemic levels recorded in 2019. FDI inflows have grown steadily over the past decade, according to IHS Markit, now a part of S&P Global.

“Over the long term, the ASEAN region is expected to continue to be one of the fastest growing regions of the world economy. Total ASEAN GDP, measured in nominal USD terms, is forecast to more than double over the next decade, increasing from USD 3 trillion in 2020 to USD 6.4 trillion by 2030,” the leading information services company maintains.

With our top-class economic managers taking part in the annual meetings in Washington, I am confident that they will be able to get a sense of where we should be going relative to the economic risks and threats that the world faces. As former president and now Senior Deputy Speaker Gloria Macapagal-Arroyo – an economist – put it, we are reassured that with an “impressive economic team” appointed by the President, the economy will be steered towards recovery amid the prevailing pandemic and continuing global tensions.

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