Two reports out this week — the World Bank’s Global Economic Prospects and the OECD’s Global Economic Outlook — paint a picture of slow growth and incremental recovery threatened by persisting economic, political, and environmental risks. Both reports emphasise the importance of sound macro-economic policy, including addressing inflation, responsible debt management, and structural policy reforms that enhance productivity and can sustain longer-term growth.What it’s about: The prospects of global economic growth remain bleak. Both the World Bank and the OECD project very moderate growth across all regions for 2023 and 2024. The projections are not identical in the last detail of every percentage point, but the underlying message is clear: growth is at best fragile and risks remain significant. Above all, whatever economic growth might be possible is unlikely to be sufficient to create the fiscal space for governments to address a vast number of socio-economic, political, and environmental challenges by simply throwing money at these problems. Instead, the World Bank and the OECD both point out the need to return to the fundamentals of macro-economic policy making; that is, to move away from a permanent crisis mode that responds to whatever appears as the most pressing issue of the day and ensure that foundations are (re-) built that will enable sustainable long-term growth. The growth required to deal with the challenges that lie ahead is substantial. Populations are growing globally, but unequally; climate change requires a transition to net-zero and much greener economies than we have today; workforces need to become more diverse and inclusive and will need a whole range of new skills.Why it matters: This is not the first time that key economic and financial institutions have pointed out that the underlying drivers of economic growth are weak and that the prospects for achieving levels of sustainable growth that would be sufficient to deal with challenges as diverse as climate change, sovereign debt crises, and demographic change are mixed at best.“Is global growth doomed?” was a question that we discussed some two months ago (On Our Radar, 5 April 2023), the problems are deep-seated, the consequences of not addressing them will be negative and long-lasting, and the solutions, while in many ways obvious, difficult to achieve at a time of geoeconomic and geopolitical fragmentation.In this sense, the World Bank’s Global Economic Prospects and the OECD’s Global Economic Outlook don’t tell us anything new per se. They identify similar underlying trends — inflationary pressures, the risks to global trade from ‘de-coupling’ and ‘de-risking’, etc. Both note the lasting impact of the COVID-19 pandemic in terms of the unsustainable loosening of fiscal policies. Both point to Russia’s aggression against Ukraine as an exacerbating factor.Counter to the perennial call for everyone to “think outside the box” to find the solutions, what is important, is the emphasis on “getting back in the box”. That a permanent crisis mode of economic policy making can all too easily become a self-fulfilling prophecy by making the crisis itself permanent. For that reason alone, both reports are important, and their advice needs to be heeded by policy makers around the world. Our take: Resilience is at the top, front, and centre of a seemingly never-ending series of global summits, as we covered in our On Our Radar pieces on 22 May and 5 June — “Moving on from Ukraine? China-West relations between Xi'an and Hiroshima” and “Summitry continued: the EU and Central Asia, BRICS and Friends, and the European Political Community”.And if any further proof of the focus on resilience was needed, the OECD’s 2023 Ministerial Council Meeting, which endorsed the Global Economic Outlook report, was imaginatively titled “Securing a Resilient Future: Shared Values and Global Partnerships”. Its Key Issues paper identified Ukraine, trade, energy, and innovative technologies as key factors in “a world [that] faces economic, social, environmental, political and development challenges on a scale not witnessed for decades” and in which “geopolitical uncertainty grows”.Yet, many of the prescriptions on how to achieve resilience are driven primarily by geopolitical imperatives around national security concerns. These may be narrow in their intended economic impact as evident, for example, in speeches given by European Commission President Ursula von der Leyen on 30 March 2023, US Treasury Secretary Janet Yellen on 20 April 2023, US National Security Advisor Jake Sullivan on 27 April 2023. However, their broader perception and consequences reinforce exactly the kind of geoeconomic and geopolitical fragmentation that has been repeatedly identified as one of the key risks to sustainable economic growth. Pointing out the risks of ‘de-risking’ is one thing, offering an alternative is quite ...
