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
