The threat facing the global economy — including the Fed’s role in it — is expected to dominate the conversation next week as economists and government officials convene in Washington for the annual meeting of the International Monetary Fund and World Bank.
In a speech at Georgetown University on Thursday, Kristalina Georgieva, the managing director of the I.M.F., offered a grim assessment of the world economy and the tightrope that central banks are walking.
“Not tightening enough would cause inflation to become de-anchored and entrenched — which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people,” Ms. Georgieva said. “On the other hand, tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”
Noting that inflation remains stubbornly high and broad-based, she added: “Central banks have to continue to respond.”
The World Bank warned last month that simultaneous interest-rate increases around the world could trigger a global recession next year, causing financial crises in developing economies. It urged central banks in advanced economies to be mindful of the cross-border “spillover effects.”
“To achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production,” David Malpass, the World Bank president, said.
Trade and Development Report said.
So far, major central banks have shown little appetite for stopping their inflation-busting campaigns. The Fed, which has made five rate increases this year, has signaled that it plans to raise borrowing costs even higher. Most officials expect to increase rates by at least another 1.25 percentage points this year, taking the policy rate to a range of 4.25 to 4.5 percent from the current 3 to 3.25 percent.
Even economies that are facing a pronounced slowdown have been lifting borrowing costs. The European Central Bank raised rates three-quarters of a point last month, even though the continent is approaching a dark winter of slowing growth and crushing energy costs.
according to the World Bank. Food costs in particular have driven millions further into extreme poverty, exacerbating hunger and malnutrition. As the dollar surge makes a range of imports pricier for emerging markets, that situation could worsen, even as the possibility of financial upheaval increases.
“Low-income developing countries in particular face serious risks from food insecurity and debt distress,” Ngozi Okonjo-Iweala, director-general of the World Trade Organization, said during a news conference this week.
Understand Inflation and How It Affects You
In Africa, officials have been urging the I.M.F. and Group of 20 nations to provide more emergency assistance and debt relief amid inflation and rising interest rates.
“This unprecedented shock further destabilizes the weakest economies and makes their need for liquidity even more pressing, to mitigate the effects of widespread inflation and to support the most vulnerable households and social strata, especially young people and women,” Macky Sall, chairman of the African Union, told leaders at the United Nations General Assembly in September.
To be sure, central bankers in big developed economies like the United States are aware that they are barreling over other economies with their policies. And although they are focused on domestic goals, a severe weakening abroad could pave the way for less aggressive policy because of its implications for their own economic outlooks.
Waning demand from abroad could ease pressure on supply chains and reduce prices. If central bankers decide that such a chain reaction is likely to weigh on their own business activity and inflation, it may give them more room to slow their policy changes.
“The global tightening cycle is something that the Fed has to take into account,” said Megan Greene, global chief economist for the Kroll consulting firm. “They’re interested in what is going on in the rest of the world, inasmuch as it affects their ability to achieve their targets.”
But many global economic officials — including those at the Fed — remain focused on very high inflation. Investors expect them to make another large rate increase when they meet on Nov. 1-2.
“We’re very attentive” to international spillovers to both emerging markets and advanced economies, Lisa D. Cook, a Fed governor, said during a question-and-answer session on Thursday. “But our mandate is domestic. So we’re very focused on inflation as it evolves in this country.”
Raghuram Rajan, a former head of India’s central bank and now an economist at the University of Chicago, has in the past pushed the Fed to take foreign conditions into account as it sets policy. He still thinks that measures like bond-buying should be pursued with an eye on global spillovers.
But amid high inflation, he said, central banks are required to pay attention to their own mandates to achieve price stability — even if that makes for a stronger dollar, weaker currencies and more pain abroad.
“The basic problem is that the world of monetary policy dances to the Fed’s tune,” Mr. Rajan said, later adding: “This is a problem with no easy solutions.”
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BEIJING — When Suriname couldn’t make its debt payments, a Chinese state bank seized the money from one of the South American country’s accounts.
As Pakistan has struggled to cope with a devastating flood that has inundated a third of the country, its loan repayments to China have been rising fast.
When Kenyans and Angolans went to the polls in presidential elections in August, the countries’ Chinese loans, and how to repay them, were a hot-button political issue.
Across much of the developing world, China finds itself in an uncomfortable position, a geopolitical giant that now holds significant sway over the financial futures of many nations but is also owed huge sums of money that may never be repaid in full.
the lender of choice for many nations over the past decade, doling out funds for governments to build bullet trains, hydroelectric dams, airports and superhighways. As inflation has climbed and economies have weakened, China has the power to cut them off, lend more or, in its most accommodating moments, forgive small portions of their debts.
The economic distress in poor countries is palpable, given the lingering effects of the pandemic, coupled with high food and energy prices after Russia’s invasion of Ukraine. Many borrowed heavily from China. In Pakistan, overall public debt has more than doubled over the past decade, with loans from China growing fastest; in Kenya, public debt is up ninefold and in Suriname tenfold.
two hydroelectric dams in southern Patagonia. Bradley Parks, the executive director of AidData, a research institute at William and Mary, a university in Williamsburg, Va., estimated that Argentina’s twice-a-year interest payment was $87 million in January and $137 million in July.
Argentina will owe a payment of over $170 million on the loan in January if interest rates keep rising at the same pace, he calculated. Argentina’s finance ministry did not respond to emails and text messages about the loan.
According to the I.M.F., three-fifths of the world’s developing countries are now having considerable trouble repaying loans or have already fallen behind on their debts. More than half the world’s poor countries owe more to China than to all Western governments combined.
For now, Chinese officials in poor countries face unpleasant jobs as debt collectors.
“You have a lot more influence when you’re providing the loan,” said Brad Setser, an international payments specialist at the Council on Foreign Relations, “than when you’re begging for repayment.”
Abdi Latif Dahir in Nairobi, Emily Schmall in New Delhi, Skandha Gunasekara in Colombo, Sri Lanka, Salman Masood in Islamabad, Pakistan, contributed reporting. Li You and Ana Lankes contributed research.
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The average household in Ghana is paying two-thirds more than it did last year for diesel, flour and other necessities. In Egypt, wheat is so expensive that the government has fallen half a billion dollars short of its budget for a bread subsidy it provides to its citizens. And Sri Lanka, already struggling to control a political crisis, is running out of fuel, food and medical supplies.
A strong dollar is making the problems worse.
Compared with other currencies, the U.S. dollar is the strongest it has been in two decades. It is rising because the Federal Reserve has increased interest rates sharply to combat inflation and because America’s economic health is better than most. Together, these factors have attracted investors from all over the world. Sometimes they simply buy dollars, but even if investors buy other assets, like government bonds, they need dollars to do so — in each case pushing up the currency’s value.
That strength has become much of the world’s weakness. The dollar is the de facto currency for global trade, and its steep rise is squeezing dozens of lower-income nations, chiefly those that rely heavily on imports of food and oil and borrow in dollars to fund them.
But much of the damage is already behind us.
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“We are in a fragile situation,” Mr. El-Erian said. “Country after country is flashing amber, and some are already flashing red.”
Many lower-income countries were already struggling during the pandemic.
Roughly 22 million people in Ghana, or a third of its population, reported a decline in their income between April 2020 and May 2021, according to a survey from the World Bank and Unicef. Adults in almost half of the households with children surveyed said they were skipping a meal because they didn’t have enough money. Almost three-quarters said the prices of major food items had increased.
Then came Russia’s invasion of Ukraine. The war between two of the world’s largest exporters of food and energy led to a big surge in prices, especially for importers like Ghana. Consumer prices have gone up 30 percent for the year through June, according to data from the research firm Moody’s Analytics. For household essentials, annual inflation has reached 60 percent or more this year, the S&P data shows.
To illustrate this, consider the price of a barrel of oil in dollars versus the Ghanaian cedi. At the beginning of October last year, the price of oil stood at $78.52 per barrel, rising to nearly $130 per barrel in March before falling back to $87.96 at the beginning of this month, a one-year increase of 12 percent in dollar terms. Over the same period, the Ghanaian cedi has weakened over 40 percent against the dollar, meaning that the same barrel of oil that cost roughly 475 cedi a year ago now costs over 900 cedi, almost twice as much.
Adding to the problem are large state-funded subsidies, some taken on or increased through the pandemic, that are now weighing on government finances.
Ghana’s president cut fuel taxes in November 2021, losing roughly $22 million in projected revenue for the government — the latest available numbers.
In Egypt, spending on what the government refers to as “supply commodities,” almost all of which is wheat for its long-running bread subsidy, is expected to come in at around 7 percent of all government spending this year, 12 percent higher — or more than half a billion dollars — than the government budgeted.
As costs ballooned throughout the pandemic, governments took on more debt. Ghana’s public debt grew to nearly $60 billion from roughly $40 billion at the end of 2019, or to nearly 80 percent of its gross domestic product from around 63 percent, according to Moody’s.
It’s one of four countries listed by S&P, alongside Pakistan, Nigeria and Sri Lanka, where interest payments alone account for more than half of the government’s revenues.
“We can’t forget that this is happening on the back end of a once-in-a-century pandemic in which governments, to try and support families as best they could, did borrow more,” said Frank Gill, an analyst at S&P. “This is a shock following up on another shock.”
In May, Sri Lanka defaulted on its government debt for the first time in its history. Over the past month, the governments of Egypt, Pakistan and Ghana have all reached out to the International Monetary Fund for a bailout as they struggle to meet their debt financing needs, no longer able to turn to international investors for more money.
“I don’t think there is a lot of appetite to lend money to some of these countries,” said Brian Weinstein, co-head of credit trading at Bank of America. “They are incredibly vulnerable at the moment.”
That vulnerability is already reflected in the bond market.
In 2016, Ghana borrowed $1 billion for 10 years, paying an interest rate of just over 8 percent. As the country’s financial position has worsened and investors have backed away, the yield — indicative of what it would now cost Ghana to borrow money until 2026 — has risen to above 35 percent.
It’s an untenable cost of debt for a country in Ghana’s situation. And Ghana is not alone. For bonds that also mature in 2026, yields for Pakistan have reached almost 40 percent.
“We have concerns where any country has yields that calls into question their ability to refinance in public markets,” said Charles Cohen, deputy division chief of monetary and capital market departments at IMF.
The risk of a sovereign debt crisis in some emerging markets is “very, very high,” said Jesse Rogers, an economist at Moody’s Analytics. Mr. Rogers likened the current situation to the debt crises that crushed Latin America in the 1980s — the last time the Fed sought to quell soaring inflation.
Already this year, more than $80 billion has been withdrawn from mutual funds and exchange-traded funds — two popular types of investment products — that buy emerging market bonds, according to EPFR Global, a data provider. As investors sell, the United States is often the beneficiary, further strengthening the dollar.
“It’s by far the worst year for outflows the market has ever seen,” said Pramol Dhawan, head of emerging markets at Pimco.
Even citizens in some of these countries are trying to exchange their money for dollars, fearful of what’s to come and of further currency depreciation — yet inadvertently also contributing to it.
“For pockets of emerging markets, this is a really challenging backdrop and one of the most challenging backdrops we have faced for many years,” Mr. Dhawan said.
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Life expectancy is a key metric used to determine the heath of a country. The World Bank says it’s improving around the world.
How long will you live? It could be an inspiring or scary question.
But to a demographer It’s neither. It’s a key metric that says a lot about the health of a country.
In 1960 the average American’s life expectancy was almost 70 years old, according to the World Bank.
The U.S. ranked 189th in the world.
Today the nation has made progress, with an average life expectancy of 77.
But other countries have made greater strides. As of 2020, the U.S. was ranked 61st out of 237 nations.
Why have other countries surged ahead? And how could the U.S. improve?
To answer these questions we’re focusing on three countries: the U.S., the richest country in the world, according to the World Bank; Japan, the third richest; and Chile, ranked 43rd.
We spoke to Joseph Chamie. He’s the former director of the United Nations Population Division.
“The U.S. was doing very well right after World War II in 1950, ’55, relative to those countries,” said Chamie.
During the post-war boom, Americans benefited from medical advances, like penicillin and open heart surgery.
Japanese men had a life expectancy of 24 during the war, thanks in part to combat and food shortages.
“Japan’s life expectancy was lower than the U.S. in the early fifties. Of course they have to rebuild their societies,” said Chamie.
The new Japanese government passed 32 health laws between 1946 and 1955 aimed at regulating doctors and nurses, requiring school lunches, reducing pollution and preventing infectious disease.
Japanese life expectancy shot up 14 years between 1947 and 1955, according to government data.
“In the case of Chile, it was even more remarkable,” Chamie said.
Chileans’ life expectancy was 54 years old in 1950.
“Chile in particular saw a dramatic increase in life expectancy. They were able to provide health care systems, developing that preventive care, dropping infant mortality rates,” Chamie said.
Meanwhile in 1961, Japan established universal health insurance.
The government covered half of everyone’s medical costs.
“But there are many factors in Japan that were contributing to a lower mortality. One of them, of course, was diet and obesity. Eating more fish and more vegetables than the American diet,” Chamie said.
Americans lived longer as the 20th century progressed, but we also developed some unhealthy habits.
“In the U.S. the diet started increasing with greater and greater reliance on prepared foods, commonly called junk foods, fast foods. More and more people involved in work and doing less exercise.”
“In the U.S., many people are lacking health care systems in place, so they are not taking preventive action early enough to deal with illnesses. Especially the last 20, 30 years, drug addiction, opioids have gotten a become an epidemic level proportion. Obesity has also gotten much higher,” said Chamie.
“Chile and Japan, they’re providing health care systems, and also supporting people so they feel integrated in society,” Chamie said. “They did some comparisons of Japanese who went to Hawaii and California. And you find that they changed their diet, increased obesity and also lower life expectancy because of that diet change.”
“We’re spending a great deal of money on our health care and doing not as well as many other countries, including China, Japan and Chile,” he continued. “Individual responsibility is certainly one area. Second, providing health care systems and adequate services to assist people so that they will live to old age.”
So many factors determine how long we’ll live. But Chamie says learning from other countries’ successes might help us improve longevity here at home.
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The declaration could spur further investment in treating the once-rare disease and worsen the scramble for scarce vaccines.
The chief of the World Health Organization said the expanding monkeypox outbreak in more than 70 countries is an “extraordinary” situation that now qualifies as a global emergency, a declaration Saturday that could spur further investment in treating the once-rare disease and worsen the scramble for scarce vaccines.
WHO Director-General Tedros Adhanom Ghebreyesus made the decision to issue the declaration despite a lack of consensus among experts serving on the U.N. health agency’s emergency committee. It was the first time the chief of the U.N. health agency has taken such an action.
“We have an outbreak that has spread around the world rapidly through new modes of transmission about which we understand too little and which meets the criteria in the international health regulations,” Tedros said.
“I know this has not been an easy or straightforward process and that there are divergent views among the members” of the committee, he added.
A global emergency is WHO’s highest level of alert, but the designation does not necessarily mean a disease is particularly transmissible or lethal. WHO’s emergencies chief, Dr. Michael Ryan, said the director-general made the decision to put monkeypox in that category to endure the gobal community takes the current outbreaks seriously.
Although monkeypox has been established in parts of central and west Africa for decades, it was not known to spark large outbreaks beyond the continent or to spread widely among people until May, when authorities detected dozens of epidemics in Europe, North America and elsewhere.
Declaring a global emergency means the monkeypox outbreak is an “extraordinary event” that could spill over into more countries and requires a coordinated global response. WHO previously declared emergencies for public health crises such as the COVID-19 pandemic, the 2014 West African Ebola outbreak, the Zika virus in Latin America in 2016 and the ongoing effort to eradicate polio.
The emergency declaration mostly serves as a plea to draw more global resources and attention to an outbreak. Past announcements had mixed impact, given that the U.N. health agency is largely powerless in getting countries to act.
Last month, WHO’s expert committee said the worldwide monkeypox outbreak did not yet amount to an international emergency, but the panel convened this week to reevaluate the situation.
According to the U.S. Centers for Disease Control and Prevention, more than 16,000 cases of monkeypox have been reported in 74 countries since about May. To date, monkeypox deaths have only been reported in Africa, where a more dangerous version of the virus is spreading, mainly in Nigeria and Congo.
In Africa, monkeypox mainly spreads to people from infected wild animals like rodents, in limited outbreaks that typically have not crossed borders. In Europe, North America and elsewhere, however, monkeypox is spreading among people with no links to animals or recent travel to Africa.
WHO’s top monkeypox expert, Dr. Rosamund Lewis, said this week that 99% of all the monkeypox cases beyond Africa were in men and that of those, 98% involved men who have sex with men. Experts suspect the monkeypox outbreaks in Europe and North America were spread via sex at two raves in Belgium and Spain.
“Although I am declaring a public health emergency of international concern for the moment, this is an outbreak that is concentrated among men who have sex with men, especially those with multiple sexual partners,” Tedros said. “That means that this is an outbreak that can be stopped with the right strategies in the right groups.”
Emergencies chief Ryan, explained what preceded the director-general’s decision.:
“(Tedros) found that the committee did not reach a consensus, despite having a very open, very useful, very considered debate on the issues, and that since he’s not going against the committee, what he’s recognizing is that there are deep complexities in this issue,” Ryan said. “There are uncertainties on all sides. And he’s reflecting that uncertainty and his determination of the event” to be a global emergency.
Before Saturday’s announcement, Michael Head, a senior research fellow in global health at Southampton University, said it was surprising WHO hadn’t already declared monkeypox a global emergency, explaining that the conditions were arguably met weeks ago.
Some experts had questioned whether such a declaration would help, arguing the disease isn’t severe enough to warrant the attention and that rich countries battling monkeypox already have the funds to do so; most people recover without needing medical attention, although the lesions may be painful.
“I think it would be better to be proactive and overreact to the problem instead of waiting to react when it’s too late,” Head said. He added that WHO’s emergency declaration could help donors like the World Bank make funds available to stop the outbreaks both in the West and in Africa, where animals are the likely natural reservoir of monkeypox.
In the U.S., some experts have speculated whether monkeypox might be on the verge of becoming an entrenched sexually transmitted disease in the country, like gonorrhea, herpes and HIV.
“The bottom line is we’ve seen a shift in the epidemiology of monkeypox where there’s now widespread, unexpected transmission,” said Dr. Albert Ko, a professor of public health and epidemiology at Yale University. “There are some genetic mutations in the virus that suggest why that may be happening, but we do need a globally-coordinated response to get it under control,” he said.
Ko called for testing to be immediately scaled up rapidly, saying that similar to the early days of COVID-19, that there were significant gaps in surveillance.
“The cases we are seeing are just the tip of the iceberg,” he said. “The window has probably closed for us to quickly stop the outbreaks in Europe and the U.S., but it’s not too late to stop monkeypox from causing huge damage to poorer countries without the resources to handle it.”
In the U.S., some experts have speculated that monkeypox might become entrenched there as the newest sexually transmitted disease, with officials estimating that 1.5 million men are at high risk of being infected.
Dr. Placide Mbala, a virologist who directs the global health department at Congo’s Institute of National Biomedical Research, said he hoped any global efforts to stop monkeypox would be equitable. Although countries including Britain, Canada, Germany and the U.S. have ordered millions of vaccine doses, none have gone to Africa.
“The solution needs to be global,” Mbala said, adding that any vaccines sent to Africa would be used to target those at highest risk, like hunters in rural areas.
“Vaccination in the West might help stop the outbreak there, but there will still be cases in Africa,” he said. “Unless the problem is solved here, the risk to the rest of the world will remain.”
Additional reporting by the Associated Press.
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Central bankers around the world are lifting interest rates at an aggressive clip as rapid inflation persists and seeps into a broad array of goods and services, setting the global economy up for a lurch toward more expensive credit, lower stock and bond values and — potentially — a sharp pullback in economic activity.
It’s a moment unlike anything the international community has experienced in decades, as countries around the world try to bring rapid price increases under control before they become a more lasting part of the economy.
Inflation has surged across many advanced and developing economies since early 2021 as strong demand for goods collided with shortages brought on by the pandemic. Central banks spent months hoping that economies would reopen and shipping routes would unclog, easing supply constraints, and that consumer spending would return to normal. That hasn’t happened, and the war in Ukraine has only intensified the situation by disrupting oil and food supplies, pushing prices even higher.
is expected to make its first rate increase since 2011, one that officials have signaled will most likely be only a quarter point but will probably be followed by a larger move in September.
Other central banks have begun moving more aggressively already, with officials from Canada to the Philippines picking up the pace of rate increases in recent weeks amid fears that consumers and investors are beginning to expect steadily higher prices — a shift that could make inflation a more permanent feature of the economic backdrop. Federal Reserve officials have also hastened their response. They lifted borrowing costs in June by the most since 1994 and suggested that an even bigger move is possible, though several in recent days have suggested that speeding up again is not their preferred plan for the upcoming July meeting and that a second three-quarter-point increase is most likely.
As interest rates jump around the world, making money that has been cheap for years more expensive to borrow, they are stoking fears among investors that the global economy could slow sharply — and that some countries could find themselves plunged into painful recessions. Commodity prices, some of which can serve as a barometer of expected consumer demand and global economic health, have dropped as investors grow jittery. International economic officials have warned that the path ahead could prove bumpy as central banks adjust policy and as the war in Ukraine heightens uncertainty.
blog post on Wednesday. Ms. Georgieva argued that central banks need to react to inflation, saying that “acting now will hurt less than acting later.”
rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:
In recent years, emerging markets have often raised interest rates in anticipation of the Fed’s slow and steady moves to avoid big swings in their currency values, which depend partly on interest rate differences across borders. But this set of rate increases is different: Inflation is running at its fastest pace in decades in many places, and a range of developed-economy central banks, including the European Central Bank, the Swiss National Bank, the Bank of Canada and the Reserve Bank of Australia, are joining — or may join — the Fed in pushing rates quickly higher.
“It’s not something we’ve seen in the last few decades,” said Bruce Kasman, chief economist and head of global economic research at JPMorgan Chase.
The last time so many major nations abruptly raised rates in tandem to fight such rapid inflation was in the 1980s, when the contours of global central banking were different: The 19-country euro currency bloc that the E.C.B. sets policy for did not exist yet, and global financial markets were less developed.
That so many central banks are now facing off against rapid inflation — and trying to control it by slowing their economies — increases the chance for market turmoil as an era of very low rates ends and as nations and companies try to adjust to changing capital flows. Those changing flows can influence whether countries and businesses are able to sell debt and other securities to raise money.
“Financial conditions have tightened due to rising, broad-based inflationary pressures, geopolitical uncertainty brought on by Russia’s war against Ukraine, and a slowdown in global growth,” Janet L. Yellen, the U.S. Treasury secretary, said in speech last week. “Now, portfolio investment is beginning to flow out of emerging markets.”
fastest pace since 1983. In the United Kingdom, it is similarly at a 40-year-high.
kick off rate increases back in December and has been steadily raising rates since. Policymakers are increasingly worried about inflation creating a cost-of-living crisis in Britain and worry that higher rates could compound economic pain. At the same time, they have signaled that they could act more forcefully, taking their cue from their global peers. There is a “willingness — should circumstances require — to adopt a faster pace of tightening,” Huw Pill, the chief economist of the Bank of England, said this month.
Understand Inflation and How It Impacts You
“Many central banks are looking at this as a sort of existential question about getting inflation and inflation expectations down,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.
The Fed raised rates by a quarter point in March, half a point in May, and three-quarters of a percentage point in June. While its officials have predicted that they will maintain that pace in July, they have also been clear that an even bigger rate increase is possible.
“Inflation has to be our focus, every meeting and every day,” Christopher Waller, a Fed governor, said during a speech last week. “The spending and pricing decisions people and businesses make every day depend on their expectations of future inflation, which in turn depend on whether they believe the Fed is sufficiently committed to its inflation target.”
The Bank of Canada has already gone for a full percentage point move, surprising investors last week with its largest move since 1998, while warning of more to come.
said in a statement.
of other central banks have made big moves. More action is coming. Central banks around the world have been clear that they expect to keep moving borrowing costs higher into the autumn.
“I wouldn’t say we’re at peak tightening quite yet,” said Brendan McKenna, an economist at Wells Fargo. “We could go even more aggressive from here.”
A key question is what that will mean for the global economy. The World Bank in June projected in a report that global growth would slow sharply this year but remain positive. Still, there is “considerable” risk of a situation in which growth stagnates and inflation remains high, David Malpass, head of the World Bank, wrote.
If inflation does become entrenched, or even show signs of shifting expectations, central banks may have to respond even more aggressively than they are now, intentionally crushing growth.
Mr. Kasman said the open question, when it comes to the Fed, is: “How far have they gone toward the conclusion that they need to kick us in the teeth, here?”
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For large and small nations around the globe, the prospect of averting a recession is fading.
That grim prognosis came in a report Tuesday from the World Bank, which warned that the grinding war in Ukraine, supply chain chokeholds, Covid-related lockdowns in China, and dizzying rises in energy and food prices are exacting a growing toll on economies all along the income ladder. This suite of problems is “hammering growth,” David Malpass, the bank’s president, said in a statement. “For many countries, recession will be hard to avoid.”
World growth is expected to slow to 2.9 percent this year from 5.7 percent in 2021. The outlook, delivered in the bank’s Global Economic Prospects report, is not only darker than one produced six months ago, before Russia’s invasion of Ukraine, but also below the 3.6 percent forecast in April by the International Monetary Fund.
Growth is expected to remain muted next year. And for the remainder of this decade, it is forecast to fall below the average achieved in the previous decade.
poorer, hungrier and less secure.
Roughly 75 million more people will face extreme poverty than were expected to before the pandemic.
Per capita income in developing economies is also expected to fall 5 percent below where it was headed before the pandemic hit, the World Bank report said. At the same time, government debt loads are getting heavier, a burden that will grow as interest rates increase and raise the cost of borrowing.
“In Egypt more than half of the population is eligible for subsidized bread,” said Beata Javorcik, chief economist at the European Bank for Reconstruction and Development. “Now, that’s going to be much more expensive for government coffers, and it’s happening where countries are already more indebted than before.”
stock market’s woes. The conflict has caused dizzying spikes in gas prices and product shortages, and is pushing Europe to reconsider its reliance on Russian energy sources.
“Insecurity and violence continue to weigh on the outlook” for many low-income countries, the World Bank said, while “more rapid increases in living costs risk further escalating social unrest.” Several studies have pointed to rising food prices as an important trigger for the Arab Spring uprisings in 2011.
In Latin American and the Caribbean, growth is expected to slow to 2.5 percent from 6.7 percent last year. India’s total output is forecast to drop to 7.5 percent from 8.7 percent, while Japan’s is expected to remain flat at 1.7 percent.
The World Bank, founded in the shadow of World War II to help rebuild ravaged economies, provides financial support to low- and middle-income nations. It reiterated its familiar basket of remedies, which include limiting government spending, using interest rates to dampen inflation and avoiding trade restrictions, price controls and subsidies.
Managing to tame inflation without sending the economy into a tailspin is a difficult task no matter what the policy choices are — which is why the risks of stagflation are so high.
At the same time, the United States, the European Union and allies are struggling to isolate Russia, starving it of resources to wage war, without crippling their own economies. Many countries in Europe, including Germany and Hungary, are heavily dependent on either Russian oil or gas.
The string of disasters — the pandemic, droughts and war — is injecting a large dose of uncertainty and draining confidence.
Among its economic prescriptions, the World Bank underscored that leaders should make it a priority to use public spending to shield the most vulnerable people.
That protection includes blunting the impact of rising food and energy prices as well as ensuring that low-income countries have sufficient supplies of Covid vaccines. So far, only 14 percent of people in low-income countries have been fully vaccinated.
“Renewed outbreaks of Covid-19 remain a risk in all regions, particularly those with lower vaccination coverage,” the report said.
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As the world economy struggles to find its footing, the resurgence of the coronavirus and supply chain chokeholds threaten to hold back the global recovery’s momentum, a closely watched report warned on Tuesday.
The overall growth rate will remain near 6 percent this year, a historically high level after a recession, but the expansion reflects a vast divergence in the fortunes of rich and poor countries, the International Monetary Fund said in its latest World Economic Outlook report.
Worldwide poverty, hunger and unmanageable debt are all on the upswing. Employment has fallen, especially for women, reversing many of the gains they made in recent years.
Uneven access to vaccines and health care is at the heart of the economic disparities. While booster shots are becoming available in some wealthier nations, a staggering 96 percent of people in low-income countries are still unvaccinated.
restrictions and bottlenecks at key ports around the world have caused crippling supply shortages. A lack of workers in many industries is contributing to the clogs. The U.S. Labor Department reported Tuesday that a record 4.3 million workers quit their jobs in August — to take or seek new jobs, or to leave the work force.
Germany, manufacturing output has taken a hit because key commodities are hard to find. And lockdown measures over the summer have dampened growth in Japan.
Fear of rising inflation — even if likely to be temporary — is growing. Prices are climbing for food, medicine and oil as well as for cars and trucks. Inflation worries could also limit governments’ ability to stimulate the economy if a slowdown worsens. As it is, the unusual infusion of public support in the United States and Europe is winding down.
6 percent projected in July. For 2022, the estimate is 4.9 percent.
The key to understanding the global economy is that recoveries in different countries are out of sync, said Gregory Daco, chief U.S. economist at Oxford Economics. “Each and every economy is suffering or benefiting from its own idiosyncratic factors,” he said.
For countries like China, Vietnam and South Korea, whose economies have large manufacturing sectors, “inflation hits them where it hurts the most,” Mr. Daco said, raising costs of raw materials that reverberate through the production process.
The pandemic has underscored how economic success or failure in one country can ripple throughout the world. Floods in Shanxi, China’s mining region, and monsoons in India’s coal-producing states contribute to rising energy prices. A Covid outbreak in Ho Chi Minh City that shuts factories means shop owners in Hoboken won’t have shoes and sweaters to sell.
worldwide surge in energy prices threatens to impose more hardship as it hampers the recovery. This week, oil prices hit a seven-year high in the United States. With winter approaching, Europeans are worried that heating costs will soar when temperatures drop. In other spots, the shortages have cut even deeper, causing blackouts in some places that paralyzed transport, closed factories and threatened food supplies.
China, electricity is being rationed in many provinces and many companies are operating at less than half of their capacity, contributing to an already significant slowdown in growth. India’s coal reserves have dropped to dangerously low levels.
And over the weekend, Lebanon’s six million residents were left without any power for more than 24 hours after fuel shortages shut down the nation’s power plants. The outage is just the latest in a series of disasters there. Its economic and financial crisis has been one of the world’s worst in 150 years.
Oil producers in the Middle East and elsewhere are lately benefiting from the jump in prices. But many nations in the region and North Africa are still trying to resuscitate their pandemic-battered economies. According to newly updated reports from the World Bank, 13 of the 16 countries in that region will have lower standards of living this year than they did before the pandemic, in large part because of “underfinanced, imbalanced and ill-prepared health systems.”
Other countries were so overburdened by debt even before the pandemic that governments were forced to limit spending on health care to repay foreign lenders.
In Latin America and the Caribbean, there are fears of a second lost decade of growth like the one experienced after 2010. In South Africa, over one-third of the population is out of work.
And in East Asia and the Pacific, a World Bank update warned that “Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century.” Businesses in Indonesia, Mongolia and the Philippines lost on average 40 percent or more of their typical monthly sales. Thailand and many Pacific island economies are expected to have less output in 2023 than they did before the pandemic.
debt ceiling — can further set back the recovery, the I.M.F. warned.
But the biggest risk is the emergence of a more infectious and deadlier coronavirus variant.
Ms. Gopinath at the I.M.F. urged vaccine manufacturers to support the expansion of vaccine production in developing countries.
Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world. In this latest report, it again called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus.
“We’re witnessing what I call tragic reversals in development across many dimensions,” said David Malpass, the president of the World Bank. “Progress in reducing extreme poverty has been set back by years — for some, by a decade.”
Ben Casselman contributed reporting.
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Paul Romer was once Silicon Valley’s favorite economist. The theory that helped him win a Nobel prize — that ideas are the turbocharged fuel of the modern economy — resonated deeply in the global capital of wealth-generating ideas. In the 1990s, Wired magazine called him “an economist for the technological age.” The Wall Street Journal said the tech industry treated him “like a rock star.”
Today, Mr. Romer, 65, remains a believer in science and technology as engines of progress. But he has also become a fierce critic of the tech industry’s largest companies, saying that they stifle the flow of new ideas. He has championed new state taxes on the digital ads sold by companies like Facebook and Google, an idea that Maryland adopted this year.
And he is hard on economists, including himself, for long supplying the intellectual cover for hands-off policies and court rulings that have led to what he calls the “collapse of competition” in tech and other industries.
“Economists taught, ‘It’s the market. There’s nothing we can do,’” Mr. Romer said. “That’s really just so wrong.”
free-market theory. Monopoly or oligopoly seems to be the order of the day.
The relentless rise of the digital giants, they say, requires new thinking and new rules. Some were members of the tech-friendly Obama administration. In congressional testimony and research reports, they are contributing ideas and credibility to policymakers who want to rein in the big tech companies.
Their policy recommendations vary. They include stronger enforcement, giving people more control over their data and new legislation. Many economists support the bill introduced this year by Senator Amy Klobuchar, Democrat of Minnesota, that would tighten curbs on mergers. The bill would effectively “overrule a number of faulty, pro-defendant Supreme Court cases,” Carl Shapiro, an economist at the University of California, Berkeley, and a member of the Council of Economic Advisers in the Obama administration, wrote in a recent presentation to the American Bar Association.
Some economists, notably Jason Furman, a Harvard professor, chair of the Council of Economic Advisers in the Obama administration and adviser to the British government on digital markets, recommend a new regulatory authority to enforce a code of conduct on big tech companies that would include fair access to their platforms for rivals, open technical standards and data mobility.
his Nobel lecture in 2018 prompted him to think about the “progress gap” in America. Progress, he explained, is not just a matter of economic growth, but should also be seen in measures of individual and social well-being.
Mr. Romer pushed the idea that new cities of the developing world should be a blend of government design for basics like roads and sanitation, and mostly let markets take care of the rest. During a short stint as chief economist of the World Bank, he had hoped to persuade the bank to back a new city, without success.
In the big-tech debate, Mr. Romer notes the influence of progressives like Lina Khan, an antitrust scholar at Columbia Law School and a Democratic nominee to the Federal Trade Commission, who see market power itself as a danger and look at its impact on workers, suppliers and communities.
That social welfare perspective is a wider lens that appeals to Mr. Romer and others.
“I’m totally on board with Paul on this,” said Rebecca Henderson, an economist and professor at the Harvard Business School. “We have a much broader problem than one that falls within the confines of current antitrust law.”
Mr. Romer’s specific contribution is a proposal for a progressive tax on digital ads that would apply mainly to the largest internet companies supported by advertising. Its premise is that social networks like Facebook and Google’s YouTube rely on keeping people on their sites as long as possible by targeting them with attention-grabbing ads and content — a business model that inherently amplifies disinformation, hate speech and polarizing political messages.
So that digital ad revenue, Mr. Romer insists, is fair game for taxation. He would like to see the tax nudge the companies away from targeted ads toward a subscription model. But at the least, he said, it would give governments needed tax revenue.
In February, Maryland became the first state to pass legislation that embodies Mr. Romer’s digital ad tax concept. Other states including Connecticut and Indiana are considering similar proposals. Industry groups have filed a court challenge to the Maryland law asserting it is an illegal overreach by the state.
Mr. Romer says the tax is an economic tool with a political goal.
“I really do think the much bigger issue we’re facing is the preservation of democracy,” he said. “This goes way beyond efficiency.”
Mr. Williamson attended the London School of Economics, graduating with a degree in economics in 1951. After completing two years of compulsory military service, he entered graduate school at Princeton, where he received his Ph.D. in 1963.
Though he had frequent offers from Oxford and Cambridge, especially later in his career, Mr. Williamson was drawn to the sort of creative research being done at some of the newly established, so-called plate-glass universities, after their modernist architecture.
He joined the University of York in 1963, the year it was founded, and later taught at the University of Warwick, founded in 1965. But he was increasingly drawn to policymaking. In 1968 he took a job as an adviser to the British Treasury, where he worked on economic relations with the European Economic Community, and later moved to Washington to work at the International Monetary Fund.
While at the I.M.F. he met Denise Rausch, a Brazilian economist. They married in 1974.
Along with his daughter and wife, Mr. Williamson is survived by two sons, Andre and Daniel; two sisters, Chris Evans and Wyn Jones; and seven grandchildren.
The Williamsons spent the late 1970s in Brazil, where she worked for a research institution and he taught at a Catholic university. Ms. Williamson taught her husband Portuguese, something he considered his greatest achievement, having struggled with foreign languages in school.
They returned to Washington in 1981, when the economist C. Fred Bergsten hired Mr. Williamson to be the first employee of the newly founded Institute for International Economics, later renamed the Peterson Institute for International Economics. He remained there until he retired in 2012. (In 1996 he took a leave from the institute to join the World Bank, where his wife worked, though he left after just three years, frustrated with the bank’s bureaucracy.)
Until he coined the Washington Consensus, Mr. Williamson was best known for his work on exchange rates. He was a passionate advocate for a middle ground between the rigidity of fixed rates — especially for developing economies — and the chaos of floating rates, which he believed put even developed economies at the mercy of global financial markets.