hello and welcome to people in profit on France 24 I'm shael and in this week's show we'll take stock of the world economy at the start of 2024 in his global economic prospects report the World Bank reaches the conclusion that we are in a decade of wasted opportunity key development and climate goals by 2030 we've seen the slowest half decade of growth in 30 years with devastating consequences especially in developing and low-income economies this year and for the third consecutive year the world the previous year 2024 we'll see a growth rate of 2.4% that's 3/4 of a percentage Point lower than the average of the 2010s a world Bank deputy chief Economist aan Kos also the director of prospects there is joining us now thank you so much for speaking to us on people and profit thank you for inviting me well factor in particular debt uh Financial Silent debt crisis stress is marked as one of the downside risks for growth in the coming year on your report and looking at the situation for developing eon is there's what you call a silent debt crisis taking place can you explain what you mean by that now when you look at the number of developing countries uh they have very large stock of debt uh give and take around 75% relative to their GDP that's like 20 percentage points above other developing economies and they are facing a significantly higher borrowing cost and that's around you know 20 percentage points higher than what uh most other developing economies are facing in an environment you know you have elevated costs remaining in terms of the real interest rates uh these economies don't have access to global financial markets in fact many of them haven't been able to issue any Bonds in other words they weren't able to use financial markets to roll over their debt obligations but they are small and Global Community is not paying the necessary attention that's why you know we are calling it a silent dead crisis you don't hear about these economies in headlines you don't read about them in media that often so we've uh We've mentioned this the the World Bank and other multinational um multilateral financing U institutions have stepped in uh to provide these countries with financing options but what needs to happen for private sector What needs to happen loans and investment uh to return to these developing countries what needs to happen now uh ultimately it takes two to tango uh these countries need to undertake certain reforms in terms of finding ways to reduce inefficiencies when it comes to spending and finding ways to basically expand the tax pays increase the revenues improve the investment climate so uh foreign investors would like to come and invest in these economies now um this is uh easier said that done but they have done before and they need to you know put together another herculan effort to push basically their reform progress forward in the meantime what you mention is critical the global Community needs to provide at least the bridge support So during these difficult times they are able to still continue allocating the uh the the the types of uh spending for education for health so they are not going to regress when it comes to you know the basic development objectives we've seen uh how complicated it can be though for uh two people to Tango in this particular uh scenario because in some scenarios like in Zambia for instance we've seen so many out stretched out negotiations where uh it's tough to get bilateral creditors on board because they want to make sure that no one is getting a better deal than the other one is and it's tough also on top of that to get private sector uh creditors to be uh on board for restructuring how do you get all these people to sing from the same himym sheet and get these people out of this mess I think uh you basically are asking the the right question uh given the kind of the the challenges these economies are facing and the type of protracted negotiations we have been seeing over the past 3 four years it is critical for the global Community large economies large creditors uh basically get together and agree on how to accelerate the the the resolution process and agree on uh a set of broad parameters to provide relief to these economies I'd like to move on to one of the policy moves the World Bank says uh works for developing countries and that's to encourage trade and financial flows Policy moves across borders that's one of the reforms that uh the World Bank advocates for but growing trade fragmentation is proving to be a downside risk for Global growth and this is driven by a rise in in geopolitical geopolitical tensions uh what can be done to Res to reverse that Trend I think uh advanced economies especially need to realize that as much as they see issues in the context of um Security National Security in the context of diversifying Supply chains ultimately the trade uh restrictive measures take a toll on their economies as well so in a sense they are shooting themselves in the food by introducing all types of restrictive measures and really heightening the tensions uh in the context of you know large economies so we are expecting uh in a sense the calm to Prevail when it comes to trade uh trade has been a key engine of economic growth has been key in terms of reducing uh billions of out of poverty so um we need to keep in mind that rules-based trading system uh that has delivered so many dividends uh is beneficial to us all especially developing economies when countries favor economic sovereign and security by trying to Implications protect or build up their own Industries their own Supply chains um can we say that this hurts them in the short term but potentially isn't this this a good thing in the long term no uh ultimately we need to think about the kind of the implications of these policies uh for prices for efficiency uh you know if you are very good at basically producing certain things maybe you can focus on on those I am good at producing certain things uh I will you know focus on those so as much as there are on the paper good reasons we need to think about what these types of interventions uh basically absorbing the supply chain would imply for cost of production for the you know the cost uh ultimately consumers are facing and what are the implications for the you know the the welfare of the overall Society the conflict between uh Israel and Gaza and its Regional ramifications has a potential impact on global energy Supply but also global trade uh with the attacks led by the houti rebels uh on Maritime transport uh in the Red Sea what's been the impact of that so far and what can can we expect it to be in the coming year so uh you see at least you know two critical developments number one diversion of trade rather than going greated sea going to the South and of course that's going to add time in terms of uh transportation of the goods and the cost and the cost of shipping uh has increased uh at least you know when you look at the high frequency numbers significantly now uh if the conflict escalates and we see a protracted period of you know buttl necks in the Red Sea uh these types of uh Divergence in trade increased cost will have implications uh for the overall trade of course for the overall inflation um the battle against inflation is H is what dictated the moves of of major central banks especially since early 2022 and Russia's invasion of Ukraine those increases Inflation increases have since peaked and are are steadily declining but there are factors that could either slow that decline down or even push prices back up again what are those factors so we are cautiously optimistic about prospects uh of inflation in the coming months uh we have seen so far you know a significant decline now what uh we are monitoring nowadays one of course uh what we call the core inflation when you take out the prices of energy and food they tend to be quite volatile how core inflation is moving and there is still uh quite a bit of persistence when it comes to core inflation and the second thing of course we need to think about about implications of geopolitical tensions and the possibility of geopolitical tensions escalating having implications for you know the cost of oil uh cost of food and then that will have second round impact on overall inflation so um the central banks will be cautious uh look at the data carefully they will look for a sustained decline in inflation as well as in core inflation before starting you know cutting interest rate having said all of these things uh what we have seen so far uh it has been quite remarkable and we are optimistic that you know it will continue bearing all these risks I mentioned and finally uh circling back to our first topic of conversation how big an impact do the world's biggest central banks um have on the debt situation in developing countries and and can thatb distress in developing economies be linked to restrictive monetary policy in advanced economies now uh obviously uh when major central banks like the US fed uh increases interest rates uh that has implications for the cost of borrowing that is the reference uh rate so uh but does it basically um uh have this direct impact on the debt situation in developing economies uh on on the one hand you might be able to say yes uh because the cost of borrowing increases it's difficult to roll over debt but on the other hand uh there is a stock of debt out there so central banks did not trigger that that problem uh ultimately National governments were accumulating this debt and probably we not necessarily spending efficiently uh so the when we think about the Deb issues we need to think about why governments have been accumulating this much that uh over this short time period in the 2010s