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What to know about the global economy in 2023

Fri, 20/01/2023 - 11:52

The world is on the brink of a remarkable transformation. What will happen, how will it play out, and what can we do to prepare?

Green skills should be at the heart of the action to deliver net zero

One of the most essential factors in achieving net zero emissions by 2050 is the skills we need to create new sustainable business models and reshape existing value chains. To accomplish this, governments, businesses, and NGOs must partner to build a sustainable future. It is a daunting task, but one that can be achieved.

The transition to a green economy offers an array of opportunities for sustainable growth. Still, it comes with its own set of challenges. Organizations along the supply and demand chain will face different challenges as they implement new working practices and financing strategies.

One way to solve this problem is to incubate sustainable business processes within the organization. By doing this, organizations can leverage scarce sustainability porno expertise and embed it into their business. This can be done across the entire company or in particular locations.

Various game-changing policies are supporting net-zero value chain plays in some developed nations. For instance, the US Inflation Reduction Act, which targets clean tech industries, and the US Bipartisan Infrastructure Act, which encourages reindustrialization. These policies are designed to spur the development of new sustainable enterprises and jobs.

While the United States has been slow to adopt a green skill strategy, the European Union is taking a different approach with its five-year Skills Agenda and Future Skills Unit. A vital element of the agenda is to develop core green skills, such as the skills required to design intelligent appliances and smart grids.

As a result, we are now beginning to see specialized sustainability positions pop up across the global economy. Using this as a starting point, we must consider how best to include these skills in a sustainable infrastructure planning process.

Several countries are already developing their own green skilling plans.

But to be effective, these plans need to be globally adopted. They should include an analysis of green occupations and local labor markets. Additionally, countries should consider the benefits and burdens of pursuing a sustainable future.

Although the path to net zero has been long and winding, it is now becoming an organizing principle for datezone businesses and governments. Investing in green jobs can ensure long-term economic growth and set the stage for a net-zero emissions target by 2050.

Interest rates are having knock-on effects on emerging markets

As interest rates rise, the knock-on effects on emerging markets can be significant. For instance, a jump in energy and food prices could lead to inflation in countries that rely heavily on those commodities. In addition, the strong US dollar can make debt repayment more challenging for developing nations.

A sharp increase in borrowing has been an issue for many emerging markets in recent years. However, it’s also important to note that many are still well-positioned in their tightening cycles. And some markets, including Brazil, have been able to bounce back.

One of the key factors underlying this is a growing number of emerging economies’ ability to access local capital markets. However, many of these economies are experiencing a slowdown in global economic growth. This could negatively affect the demand for their exports.

Interest rate hikes in the United States, Europe, and Japan are increasing pressure on global financial conditions. This could eventually cause a recession. That’s because the rising interest rates will dampen economic growth and make it harder for borrowers to service debt.

Another factor affecting EM debt is currency volatility.

Some countries, such as China, benefit from lower natural resource prices, while others suffer from increased import bills.

Another significant implication of higher interest rates is a deterioration in the quality of assets borrowers hold. Increasingly, governments are implementing measures to support borrowers’ ability to repay. However, while these may help stabilize asset-quality levels, they will not have a lasting effect.

In addition, the global economy is amid a protracted slowdown. As a result, rising rates and other global headwinds will impact bank profitability and the ability of borrowers to service their debt.

While there is no guarantee that a protracted slowdown will lead to a recession, the longer the period of deceleration, the more significant the impact on the economy. Furthermore, many EM economies are still facing tough budget decisions.

Despite the market’s shortcomings in January, the risk-on environment remains. Moreover, many investors are interested in investing in the EM markets because they represent a quarter of the world’s equity market capitalization.

Middle East, North Africa, and South Asia are the most vital regions for growth.

The World Economic Forum (WEF) recently released its annual chief economists survey. It aims to highlight the prevailing economic situation, identify policy priorities and discuss the outlook for the global economy. This survey was conducted by the WEF XXX Centre for New Economy and Society in November and December.

According to the report, the world is facing anemic growth prospects. However, the survey also said that regional variations in growth expectations were high despite these challenges.

While most respondents expect moderate growth in South Asia, the Middle East, and North Africa (MENA), there is a divergence in expectations between the US and Europe. As a result, the US and Europe are expected to go into recession in 2023.

In addition, many experts expect further shocks to the global economy over the next two years. These shocks include high inflation and a cost-of-living crisis, which will continue to impact the lives of millions of people.

At the same time, many emerging market and middle-income countries are experiencing profound terms-of-trade shocks. This has curtailed their access to market financing. Meanwhile, the United States is set to slow down its rate of interest hikes to keep inflation in check.

However, the rising fuel and food costs are putting pressure on many consumers.

This is a concern for the most vulnerable people in the world. Furthermore, the war in Ukraine has also pushed up food and fuel prices.

Despite these issues, most respondents expected that the cost-of-living crisis would ease by the end of the year. Another 68 percent expected it to be less severe in the long run.

The report notes that the high price of energy and food contributes to depleted inventories. These factors are lowering the incentives for investments.

Among the challenges, the region faces are high levels of debt and fragmentation, which limit the incentives for investment. Therefore, the area must continue implementing reforms and protect itself from external headwinds.

Amid continuing economic uncertainty, the WEF report outlined various policies that can help stabilize the global economy. Although these policies will be complex, they must be made.

China’s pitch to the global elite

The Chinese charm offensive has resumed at the World Economic Forum in Davos, Switzerland. This is China’s top-level delegation’s first major foreign trip since Beijing rolled back curbs on its zero-Covid economy.

Liu He has re-engaged the global elite with a new message. After three years of isolation, China is ready to engage with the world. Its leaders are urging more foreign investment and consumption to revive the economy.

The global economic downturn has prompted Western business leaders to discuss nearshoring and a “China plus one” business strategy. These strategies seek to reduce dependence on China and shorten supply chains to minimize risks.

The Chinese government has invited its Vice Premier Liu He to speak at Davos. He is expected to tell the international business community that China is on the verge of a return to reform and has turned a corner.

But some Western officials have concerns about China’s outreach.

They point to the recent Russian invasion of Ukraine, a key ally of China. In addition, some of China’s initiatives in the Indo-Pacific region have aimed at bellicose military postures.

A survey by the Pew Research Center last year showed that nearly eight out of ten Americans were unfavorably inclined toward China. Another recent study showed that over three-quarters of respondents had a negative view of human rights in China.

While Beijing’s diplomats fan out with a softer message, the United States and other countries are increasingly concerned about the Chinese military’s growing threat. As a result, China’s new leaders are reversing some of the leftward policy changes implemented by former presidents.

Chinese Vice Premier Liu He has a big message for the international business community. His speech at Davos will outline the Chinese model of modernization and the shared future for humankind.

Meanwhile, the US climate envoy, John Kerry, has warned that time is running out to reach a low-carbon economy. As a result, the European Union is preparing to mobilize state aid and build a sovereignty fund to prevent firms from moving to the United States.

The upcoming Davos meeting will be the place to discuss significant achievements in global trade. This includes a new WTO agreement on investment facilitation for development and a coalition of Trade Ministers for Climate.

Der Beitrag What to know about the global economy in 2023 erschien zuerst auf Summit for Global Solidarity.

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