World Bank president David Malpass on Wednesday said that it could take years for global energy production to diversify away from Russia after its invasion of Ukraine, prolonging the risk of stagflation, or a period of low growth and high inflation.
In a speech at Stanford University, Malpass said that there was an increased likelihood of a recession in Europe, while China’s growth was slowing sharply and US economic output had contracted in the first half of this year.
Those developments would have grave consequences for developing countries, Malpass said, citing what he called “consequential” and “worsening” challenges facing development.
Photo: AFP
Addressing the current “perfect storm” of rising interest rates, high inflation and slowing growth requires new macroeconomic and microeconomic approaches, including better-targeted spending and clearly messaged efforts to increase supplies, Malpass said.
Malpass said that the bank’s upcoming “Poverty and Shared Prosperity” report showed that decades of progress in reducing poverty had slowed by 2015, even before the COVID-19 pandemic, which sent an additional 70 million people into extreme poverty.
The report, due out next week, also showed a 4 percent decline in the global median income, the first decline since the bank began measuring that indicator in 1990, he said.
“The developing world is facing an extremely challenging near-term outlook shaped by sharply higher food fertilizer and energy prices; rising interest rates and credit spreads; currency depreciation and capital outflows,” Malpass said.
“A pressing danger for the developing world is that the sharp slowdown in global growth deepens into a global recession,” he said, adding that many of these countries were still struggling to return to pre-pandemic per capita income levels at a time of heightened climate change risks.
Malpass said that it was unclear whether there would be enough global capital to meet the needs of advanced economies, which had adopted fiscal policies favoring higher debt levels, and whether there would still be enough leftover to fund the investment needs of developing countries.
He urged countries to look for ways to reduce inflation beyond the highly synchronized interest rates hikes now under way, including by increasing fiscal efficiency to target spending more to the poor and vulnerable.
Such adjustments would improve the allocation of global capital, providing a path to reduce inflation while restarting growth in median income, he said.
More funding for education, health preparedness and adaptation to climate change was urgently needed, he said, along with steps to reduce the staggering debt levels burdening many developing countries.
CONSIDERATIONS: The NSTC instructed the park to assist laid-off workers and urge companies to use furlough programs to ease the effects of falling demand Firms in the Hsinchu Science Park (新竹科學園區), which houses major tech companies, reported laying off 496 employees last month amid weakened global demand, Hsinchu Science Park Bureau director-general Wayne Wang (王永壯) said yesterday. Wang told a news conference that 48 companies in the science park laid off employees last month, including one hard disk supplier which let go 241 employees as part of a plant closure due to falling demand. Other companies reported sporadic layoffs as they adjusted to weakening demand, he said. Wang made the remarks after local media reported the layoffs over the weekend. Although the global economy is struggling with high
German Chancellor Olaf Scholz and German Minister for Economic Affairs and Climate Action Robert Habeck have promised to solve investment subsidy issues for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Intel Corp, despite the country’s budget woes. Uncertainty over the funding to TSMC and Intel has arisen after a ruling by the German Federal Constitutional Court, which cast doubt over subsidies for construction of local semiconductor chip plants. On Nov. 15, the court ruled that the German government’s decision last year to reallocate 60 billion euros (US$65.74 billion) of unused funding from COVID-19 pandemic support measures to its Climate and Transformation Fund
LONG ROAD AHEAD: The US is somewhere between one and two decades away from achieving the Biden administration’s goal to achieve chip autonomy, Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), who runs the semiconductor industry’s most valuable company, said the US is as much as 20 years away from breaking its dependence on overseas chipmaking. Huang, speaking at the New York Times’ DealBook conference in New York on Wednesday, explained how his company’s products rely on myriad components that come from different parts of the world — not just Taiwan, where the most important elements are manufactured. “We are somewhere between a decade and two decades away from supply chain independence,” he said. “It’s not a really practical thing for a decade or two.” The outlook suggests
GREEN SOLUTIONS: The company said that it is set to become one of the very few suppliers of low-carbon emissions cement, which would give it a competitive edge Taiwan Cement Corp (台灣水泥) plans to spend up to 770 million euros (US$843.5 million) to boost its holdings in two cement ventures in Turkey and Portugal as demand for low-carbon emissions cement rises in Europe, the company said on Monday. Taiwan Cement’s board of directors has approved a plan to lift the company’s stake in OYAK Denizli Cimento, a joint venture with Turkey’s OYAK Group, to 60 percent from 40 percent and to increase its stake in Cimpor Portugal Holdings SGPS SA, a Portuguese cement joint venture with OYAK, to 100 percent from 40 percent, it said in a statement. “Through increased
RSS