The WEF will unite international forces to achieve global economic growth
Editor’s note: The 2022 Annual Meeting of the World Economic Forum (WEF) is taking place in Davos, Switzerland. According to the IMF, global growth is expected to slow from around 6.1% in 2021 to 3.6% in 2022 and 2023, 0.8 and 0.2 points lower than forecast in January. The global economy is stagnating and even entering recession. Erik Berglof, Chief Economist of the Asian Infrastructure Investment Bank, shares his views on this issue. The opinions expressed in the video are his own and not necessarily those of CGTN.
CGTN: US inflation hit a new 40-year high of 8.5%, while European inflation stands at 8.1%. How will such high inflation in these major economies affect the world?
Erik Berglof: I think there are several effects. The first is that it will mean less consumption in those countries, which in turn will mean that they buy less from the rest of the world, and that won’t help global growth, of course. The other thing is that in response to that inflation, they’re going to raise interest rates; thus, they will have to try to reduce inflation and slow growth and inflation by raising interest rates.
This is likely to cause disruption in many emerging developing economies as capital flows to where interest rates are high. And for many economies, I think there have been a lot of improvements in what we call macroeconomic frameworks that try to protect and stabilize economies. But it will be a very severe test for these frameworks.
On top of that, I would say that with rising inflation, not just in these rich countries, there will be rising inflation in other parts of the world. And we know that inflation, when it hits things like food and fuel prices, can also be very disruptive to the political situation. So you can have political instability in many parts of the world due to high inflation.
CGTN: What strategic priorities should countries undertake to help the global economy recover?
Bergloff: I think the first thing, which has been true for some time now, is that rich countries need to make sure that vaccines are available for the whole world, and also that their efforts to make sure that they are also deployed so that they reach people likely to be infected. This is a very important priority. A second priority is to try to bring inflation down, as this is something that will have a very big impact on many countries around the world.
There is a unique opportunity today to try to meet the need for renewable energy for green growth. This will be a very important element in combating what we call inflation, this combination of high inflation and potentially high unemployment. It must be said that until now unemployment has remained very low, and there is even a shortage of qualified workers in many areas. The risk is that we actually have much lower growth rates, possibly a recession, and that will drive up unemployment.
So you have to put all these things in place, the medical emergency, the economic situation, but also think strategically in the long term about green growth.
CGTN: How can the World Economic Forum muster international forces to achieve global economic recovery in the post-pandemic era?
Bergloff: It comes in a context of low expectations in terms of growth, worries about inflation. There is a need, and that is where we need coordination now to address the remaining immunization issues. I think there is a long-term need to rekindle the ambition of green growth. Again, this requires a lot of coordination.
Many good proposals have been put on the table. We’re not talking very large amounts, but it would come at a time when anything that can be done to stimulate that targeted growth would be welcome. So those are the kinds of things that will and should be discussed at the World Economic Forum in Davos.
Interviewer: Li Yunlong
Editor-in-Chief: Li Yunlong
Video editing: Liu Shasha
Executive producers: Bi Jianlu, Wang Xinyan, Zhang Peijin
Supervisor: Mei Yan
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