At the spring meetings of the International Monetary Fund and World Bank in Washington this week, a number of challenges will be on the agenda that affect the global economy – whether of a financial or geopolitical nature, or related to climate.
Over the course of a week, bankers, finance ministers, economists, academics, development executives and civil society representatives, among others, will debate the current issues affecting the world. They are likely to seek solutions to persistent global concerns such as the eradication of poverty and the need for development assistance to countries that need it most.
The spring meetings bring together stakeholders with diverse areas of expertise. Yet the enormity of tasks that they face is better understood in the context of stalling economic forecasts. The meetings are taking place at a time when the global outlook is modest at best.
As recently as last week, Kristalina Georgieva, the IMF's managing director, said that about 90 per cent of advanced economies, including those of the US and the Euro area, are projected to see a decline in their growth rate this year as higher interest rates, aimed at taming inflation, affect expansion.
But Ms Georgieva added that there is cause for optimism in Asia. "Green shoots" are appearing in China, she pointed out, which together with India is expected to account for half of global growth in 2023.
The UAE has also seen steady growth, including in its non-oil economy, as tourism, for example, continues to thrive with air travel doing remarkably well. The Arab world’s second-largest economy saw the highest growth rate in 11 years, as it grew by 7.6 per cent last year, after expanding 3.9 per cent in 2021, according to the UAE Central Bank.
The positive trend in these countries is undeniable, but the tenor globally remains one of caution. It is no surprise that the mood in banking circles is likely to remain one of watchfulness, considering the turmoil in the US and Switzerland in the first quarter of the year, with the collapse of Silicon Valley Bank and the hurried UBS takeover of Credit Suisse.
Despite relief in the outlook of select regions in the East and the Middle East, global growth is at its lowest medium-term forecast since 1990, and likely to be at about 3 per cent over the next five years, according to per Ms Georgieva. Debt is a major concern for dozens of countries, from Lebanon to El Salvador. The sobering reality is in no small part due to what the IMF chief called the "scarring" from Covid-19, the Ukraine war and monetary tightening. Similarly, economists at the World Trade Organisation presenting their 2023 forecast, reiterated that the outlook is somewhat better than expected but it is still down.
The prominence of the Bretton Woods Institutions – the IMF and World Bank – notwithstanding, and despite their undeniable role in expanding the global economy after the Second World War, forecasts have nudged a number of countries in the East and Global South to bring to their own discussion tables the idea of de-dollarisation and an "Asian Monetary Fund".
The challenges that lie ahead are immense. As the post-pandemic financial environment continues to be fragile, it remains to be seen how economic leaders meeting this week negotiate complex realities, particularly amid great geopolitical strife. The outcomes of these meetings may not only determine the continued relevance of these two powerful institutions in a changing world order, but could also determine the future of the global economic system.