00:02 Well thank you very much for coming everybody.
00:04 It looks like a really good program.
00:06 Uh,
00:07 I know that starting at 9 o'clock on Monday
00:10 is no longer the best time to start,
00:12 but I think that,
00:14 I think that when I look at the program,
00:16 it looks,
00:16 it looks like,
00:17 it looks like a really rich program,
00:19 so I think we'll end up
00:21 having a very good session,
00:22 uh,
00:23 to start with,
00:23 and then
00:24 a bunch of,
00:25 uh,
00:26 really good keynotes and sessions.
00:29 So let me,
00:29 uh,
00:30 so I was thinking about what's the best way to introduce this,
00:33 and I thought that
00:35 I would just
00:37 take
00:39 like about 15 slides to show this to you,
00:41 and I've taken these slides mainly from work that has been done
00:46 by World Bank economists,
00:47 right,
00:48 um,
00:49 and as you see over here,
00:52 uh,
00:52 the,
00:53 uh,
00:53 four reports that I've especially drawn on
00:56 are the Poverty and Shared Prosperity Report 2022,
01:00 which was published about six months ago.
01:02 And then there's the Global Economic prospects report
01:06 which will be published tomorrow
01:07 so I'm giving you a bit of a preview of it,
01:10 uh,
01:10 and then there was a very nice book that was published by our prospects Group.
01:14 It's called Falling Long Term Growth,
01:17 uh,
01:17 and then of course there's the World Development Report 2024
01:21 which
01:22 is,
01:23 uh,
01:23 being,
01:24 uh,
01:25 that is just in the early stages of development
01:28 and Shomik is here and Ufuk are here too.
01:31 And they'll give you,
01:33 I,
01:33 I,
01:33 I guess they can give you a better sense of what the report will have,
01:36 so I won't talk that much about that,
01:38 but these are the sort of,
01:39 uh,
01:40 four things that I was gonna.
01:42 I'm purposely stalling because I see people still walking in.
01:46 OK,
01:47 all right,
01:47 so,
01:48 uh,
01:49 so,
01:50 so I was thinking about the growth and resilience part
01:52 and the big insight that I got over the weekend
01:56 and you're gonna laugh at this
01:57 is that there are two sides of the same coin essentially,
02:00 right?
02:01 So,
02:01 uh,
02:02 the,
02:03 uh,
02:03 I guess the simplest way to define resilience
02:06 is the ability to resist and.
02:09 Uh,
02:10 to resist
02:12 shocks and to recover from them quickly
02:15 and,
02:15 uh,
02:16 the whole aim of growth is to get bigger
02:18 and better
02:20 and we pick growth and resilience as
02:23 the themes of our work throughout the year and,
02:27 uh,
02:28 the two terms are owed to Norman Weiser.
02:30 He's the one who actually sort of said growth and resilience,
02:33 of course those are the two things that we are caring about a lot this year,
02:36 yeah.
02:38 Uh,
02:39 OK,
02:39 so I'm going to just very quickly talk about 4 things,
02:42 and this,
02:43 by the way,
02:44 the,
02:44 the,
02:44 the,
02:44 the,
02:44 these slides have not been made by chat GPT,
02:47 but there's this,
02:49 but there's this,
02:50 uh,
02:50 there's a feature that says,
02:52 you know,
02:52 how about looking,
02:53 I mean,
02:53 how about making the slides look like this?
02:55 So I picked this one over here.
02:58 I don't know if the graphics mean anything,
03:00 but.
03:02 Uh,
03:03 4 things that I just wanted to sort of talk about very quickly.
03:06 One was that
03:07 the risks are high.
03:08 Uh,
03:09 the,
03:09 the risks are high,
03:10 and they're numerous actually.
03:12 The second one is that in general we find because
03:16 we've had 3 or 4 risks,
03:18 uh,
03:18 uh,
03:19 uh,
03:19 uh,
03:19 3 or 4 major shocks in a row,
03:21 uh,
03:22 the resilience of countries is actually pretty low in terms of fiscal,
03:25 in terms of social,
03:26 in terms of financial,
03:28 and in terms of the real sector as well,
03:30 right,
03:31 uh.
03:31 And then the other thing that we're going to talk about a lot next,
03:35 uh,
03:36 the,
03:36 the
03:37 that that that that that that will actually be fleshed out in the next,
03:39 uh,
03:39 Global Economics prospects report which is coming out tomorrow
03:42 is that the immediate growth prospects are actually poor,
03:46 much worse than what we even thought,
03:48 uh,
03:49 uh,
03:49 you know,
03:49 6 or 7 months back.
03:52 Uh,
03:52 and what's even,
03:53 uh,
03:54 more worrying is that based on the work
03:57 that the prospects group has been doing in terms of the longer term prospects
04:02 that long term prospects have been worsening essentially for a long time
04:06 and they don't look any better,
04:07 OK?
04:08 So,
04:09 uh,
04:10 so growth and resilience are really a good theme for the ABCD.
04:15 OK,
04:15 so these are the 4,
04:17 these are the 4 reports that,
04:19 uh,
04:19 I'm going to talk about.
04:21 The,
04:21 the first one is called Correcting Course,
04:24 and it's a poverty and Shared Prosperity report,
04:27 and the other 2,
04:28 again,
04:28 this was the slide format
04:31 that that
04:32 that essentially popped out,
04:33 so I,
04:33 I did not want to cut off anything,
04:35 but,
04:35 uh,
04:36 the the the the there you have it,
04:38 uh,
04:39 those are the 4 reports,
04:40 yeah.
04:41 So,
04:43 so I actually,
04:43 uh,
04:44 looked at the slides that our Global Economic prospects Group
04:47 has has been putting out over the last couple of years
04:50 and if you look at the number of risks that they have
04:53 it's just becoming bigger and bigger and bigger,
04:56 right?
04:56 Started out with 5,
04:58 then 6789,
05:00 it's 9 now,
05:01 right?
05:02 And
05:03 the two or three risks that I sort of uh
05:06 feel are especially sort of,
05:08 uh,
05:09 uh,
05:09 especially dangerous.
05:11 Uh,
05:11 the first one,
05:12 the,
05:12 the,
05:12 the first has to do with the first has to do with financial stress,
05:16 and that's the most immediate,
05:18 uh,
05:18 that that that that is the most immediate risk and the most immediate danger.
05:22 And then the second
05:23 is
05:24 the weaker long term growth prospects which I mentioned,
05:26 right.
05:28 OK,
05:28 uh,
05:29 I'm sorry that this slide has so many numbers,
05:32 but if you,
05:34 I guess if you just take a look at the last two columns
05:37 and look at the world,
05:38 for example,
05:39 and you see what was the world growth rate between 2000 and 2019.
05:44 You see that
05:45 the tire it was around 3%
05:48 per year,
05:48 right?
05:49 And if you look at what the growth pros uh what the growth rate
05:54 has been over the last 5 years,
05:56 including the,
05:56 the,
05:56 the next two years,
05:57 I mean from 2020 to 2024,
06:00 you see that it's dropped by almost 1% point,
06:03 so it's dropped by a full third,
06:05 OK.
06:06 If you look at advanced economies,
06:09 their growth rates have dropped a lot
06:10 from around 2% to around 1.
06:13 And if you look at emerging markets and developing countries,
06:17 you actually sort of see that dropping a lot too from 5.5 to 3.4.
06:21 If you exclude China actually you find that it's actually down to 2.5,
06:25 which is pretty bad.
06:28 OK.
06:29 OK.
06:30 So let me go on to
06:33 So this is what all of that means in terms of simple graphs,
06:36 right?
06:37 So essentially what you sort of see over here
06:39 is that per capita income growth rates
06:41 for the World Bank's regions EAP is East Asia,
06:44 ECCA
06:46 is Europe and Central Asia,
06:47 Latin America,
06:48 MENA
06:49 is in the Middle East and North Africa,
06:51 South Asia region,
06:52 and then sub-Saharan Africa.
06:54 And then you also have advanced economies and you sort of see over here
06:57 growth rates dropping
06:59 by about
07:00 50%
07:00 right here at least
07:02 this in this case we're looking at the
07:04 10 years just before the pandemic
07:06 and comparing it over the last uh the
07:10 the the uh
07:12 5 years for which we have the data
07:15 as well as the projections.
07:16 OK,
07:17 so across the board over here
07:19 and you sort of see that the only region that appears to be very resilient to shocks.
07:24 Is the Middle East and North Africa
07:26 but is resilient at a very low uh
07:29 low growth rate and it also sort of mixes up a lot of countries
07:33 because you have both oil exporters as well as other countries in there,
07:36 OK.
07:37 Now,
07:38 uh,
07:39 uh,
07:40 the,
07:41 uh,
07:41 3 or 4 implication on the 2 or 3 implications that are sort of really big,
07:45 the first one is of course poverty rates.
07:48 So poverty rates actually increased in 2020 after,
07:52 after years of falling,
07:54 OK,
07:54 after years of falling,
07:56 uh,
07:57 so,
07:57 uh,
07:58 we were,
07:58 uh,
07:59 we were actually projecting that poverty rates would continue
08:02 to fall in 2020 instead of that they spiked.
08:05 And since then they've probably stalled,
08:07 uh,
08:08 they've stalled and they've gone up in a few places,
08:10 especially because food
08:12 and,
08:13 uh,
08:13 food,
08:14 fuel,
08:14 and fertilizer prices have spiked,
08:17 right?
08:18 Um,
08:19 If you look at inequality,
08:21 global inequality,
08:22 you see that it,
08:24 uh,
08:24 uh,
08:25 spiked also in 2020.
08:27 And it has probably increased since,
08:29 so all the calculations that we are making
08:32 about per capita incomes by when
08:34 will low income countries,
08:37 uh,
08:37 get back to
08:39 their 2019 per capita incomes
08:42 they haven't yet.
08:43 Uh,
08:43 if you look at middle income countries,
08:45 many of them still haven't.
08:47 If you look at high income countries,
08:48 almost all of them have reached,
08:50 uh,
08:51 the pre-COVID levels of income again,
08:53 so,
08:54 uh.
08:55 The,
08:55 uh,
08:56 uh,
08:59 simple result of those three comparisons is that,
09:01 is that you're starting to sort of see global inequality rising,
09:05 not falling.
09:07 And if you sort of look at uh
09:10 what has happened to income convergence,
09:12 uh this is a graph that has been made by the World Development Report team
09:18 and obviously they're trying to sort of uh
09:21 they're trying to uh they're trying to use uh that they are
09:25 trying to use statistics as propaganda because
09:28 they,
09:29 uh,
09:30 they have an x axis,
09:31 uh,
09:32 which of course years,
09:33 but the y axis
09:35 is 50.
09:37 And then you sort of see over here
09:39 you see almost no convergence at all
09:42 when you include India and China you see
09:44 some convergence uh between 2000 and uh 2000 and
09:48 about 2000
09:50 and now,
09:51 uh,
09:52 from about 5% to about 10%
09:54 but that convergence,
09:56 uh,
09:56 essentially disappears if you take out India and China,
09:58 OK.
10:00 Uh,
10:01 alright,
10:02 so here's a slide that,
10:04 uh,
10:05 that,
10:05 that,
10:05 uh,
10:06 that,
10:06 that,
10:06 that,
10:06 that,
10:06 that,
10:06 that I put because it's a slide that's not a factual slide,
10:10 it's an interpretational slide,
10:12 OK,
10:12 and it's a slide that will probably get me fired sooner or later,
10:16 uh,
10:17 but I think that it's very important to say,
10:19 you know,
10:22 uh,
10:22 we're saying that the world economy is in a crisis,
10:24 right?
10:24 I,
10:25 I think,
10:26 uh,
10:26 that,
10:26 that,
10:26 that,
10:27 that,
10:27 that,
10:27 that I guess is in a bad place.
10:29 So who put it in a bad place?
10:31 OK,
10:32 so,
10:32 uh,
10:34 so here's the blame slide,
10:35 OK,
10:36 and the blame slide is,
10:37 look,
10:38 the world is in a big hole,
10:39 right?
10:40 So it cannot be
10:41 that Zambia put
10:43 the world in a big hole or Sri Lanka put the
10:45 big or Lebanon did it and so on or even Egypt and
10:49 Pakistan did they didn't
10:51 it's these guys who did it,
10:52 OK.
10:53 So the first one is if you sort of look over here is that
10:57 you see a big policy misdiagnosis is to to actually mistake inflation
11:02 increases
11:03 as transitory
11:05 uh
11:05 and you get a late start
11:07 in monetary tightening and once you get a late start in
11:10 monetary tightening it becomes very hard to actually bring inflation down,
11:13 OK.
11:14 Especially if you're continuing loose fiscal policy
11:18 and this is important
11:20 because
11:21 the last time this combination of monetary
11:23 tightening and a loose fiscal policy happened,
11:26 this was in the 80s,
11:28 OK?
11:28 Uh two or three things happened then one was.
11:31 That it took,
11:32 it took the Fed a long time to actually get
11:35 inflation down from around 9.5% to around 3.7%. OK,
11:39 it took 67 years.
11:41 So
11:41 that's a period you,
11:42 you would expect,
11:44 uh,
11:44 if the same things happen
11:46 now
11:47 back then it was the Reagan tax cuts,
11:49 OK,
11:50 and that was a loose fiscal policy.
11:51 This time
11:52 it is not a tax cuts,
11:54 but it's expenditure increases,
11:55 OK,
11:56 uh.
11:57 The other thing that happened back then was at the end of that,
12:00 at the end of that tightening,
12:02 basically
12:03 you had,
12:04 you had,
12:05 uh,
12:06 you had essentially bankrupt governments around the world,
12:09 24 countries declared
12:11 debt default,
12:12 you had to have the Brady Plan,
12:14 etc.
12:15 Back then,
12:15 actually,
12:16 even though the Brady Plan came very late and so on,
12:19 if you compare the structure of debt
12:22 then and now,
12:23 the structure of debt now is actually much more complicated
12:25 and so as a result.
12:27 If these countries,
12:28 if the same result happens,
12:30 the problem is going to be worse because debt restructuring mechanisms
12:35 are much less,
12:36 uh,
12:37 uh,
12:37 we,
12:38 we,
12:38 we,
12:38 uh,
12:39 don't have debt restructuring mechanisms that are fit for purpose anymore,
12:42 OK.
12:44 Now the other big mistake I think was China.
12:47 It stayed
12:48 with zero COVID.
12:50 Uber and everybody else sort of
12:52 moved out.
12:52 It stayed with lockdowns.
12:54 This was combined with vaccine nationalism.
12:56 OK,
12:58 again,
12:58 two big mistakes.
13:00 And then if you sort of look at Europe,
13:02 uh,
13:04 so here's the thing that that I found that
13:06 I always thought that Europe was doing things well
13:09 I thought that Europe was moving away from fossil fuels
13:13 because it was cutting emissions a lot
13:15 and
13:16 the US
13:17 which was also cutting emissions a lot was cheating because the US was switching
13:21 from oil to gas,
13:23 OK?
13:24 and.
13:25 So I thought that until last summer
13:27 when I realized that Europe had pretty much been doing the same thing,
13:31 OK,
13:32 except that it's,
13:32 it wasn't shale gas,
13:33 it was Russian gas,
13:35 OK,
13:35 so as soon as Russian gas,
13:37 uh,
13:38 became more expensive or hard to get
13:40 or
13:41 you actually saw the same,
13:43 the same thing you actually saw
13:45 that in fact
13:47 what these countries did was
13:48 they replaced that gas with gas from elsewhere
13:51 like Qatar and so on and also diverted.
13:54 Uh,
13:54 gas from places like India and China and Korea,
13:57 OK,
13:58 uh,
13:58 so in fact it was the same thing.
14:00 So,
14:00 so we always sort of told no,
14:02 no,
14:02 no,
14:02 no,
14:02 but Germany,
14:03 Germany is doing wonderful things,
14:04 you know,
14:05 it's switching entirely to renewables,
14:07 etc.
14:09 I looked at the German statistics too,
14:10 and yes,
14:11 electricity,
14:12 in terms of electricity,
14:13 the sources of electricity
14:15 are getting cleaner in Germany.
14:17 But electricity is not the only energy use.
14:19 There's industry.
14:20 There's heating,
14:21 etc.
14:22 there's transport,
14:24 all of those things you actually,
14:25 when you
14:25 add up all of that stuff,
14:27 you find that Germany still relies a lot
14:29 on fossil fuels,
14:30 much more than you imagine.
14:32 Take a look at the numbers for yourself.
14:34 You have to dig in a little bit because all the numbers are always presented as if,
14:37 you know,
14:38 that the only source,
14:39 uh,
14:40 the only use of,
14:41 uh,
14:41 uh,
14:42 the only use of fuels is electricity.
14:44 It isn't.
14:45 OK,
14:45 it's a very small part of it it's about a 15th,
14:48 all right.
14:49 Now,
14:50 here's the problem,
14:51 core inflation is persistent,
14:53 OK?
14:54 Especially,
14:55 uh,
14:56 especially if you compare the red line
14:58 and the yellow line if you sort of look at the yellow line you actually
15:00 find that emerging markets and developing countries
15:03 have actually cut inflation down a lot,
15:05 OK,
15:06 they got an earlier start to the monetary tightening as a result of it
15:09 you actually see this big decrease
15:12 in inflation rates.
15:13 But if you look,
15:14 if you look at the red line,
15:15 you actually sort of see
15:17 a much slower increase and a and a bit of a rebound
15:20 in the case of advanced economies.
15:23 So this is core inflation.
15:24 This is not headline inflation again,
15:26 when you look at headline inflation,
15:27 which includes food and fuel prices and so on,
15:30 that looks better.
15:31 This is the number you want to look at because this,
15:33 this is
15:35 the number that will indicate how long you'll see tightening
15:38 uh
15:38 of uh you'll see tightening of monetary policies,
15:41 OK?
15:42 And it looks like we're in for the long haul then OK.
15:45 Now,
15:46 uh,
15:47 but then everybody said,
15:47 yeah,
15:48 yeah,
15:48 yeah,
15:48 yeah,
15:48 yeah,
15:48 all that is fine,
15:49 but China,
15:50 China's gonna save us again.
15:51 China's because China's opened up and China will recover and China will do fine
15:56 and the answer is
15:57 yeah,
15:58 China will actually have,
16:00 uh,
16:01 the only reason why emerging markets and developing countries,
16:05 uh,
16:05 next year.
16:08 are going to do OK
16:10 is uh
16:12 because
16:13 largely because of China,
16:14 right?
16:15 It's,
16:15 it's the only reason why growth rates for emerging
16:17 markets and developing economies will not fall next year,
16:20 right?
16:20 It'll be about the same because China's growth rate will go up.
16:22 OK,
16:23 sorry,
16:24 I'll I'll be done in a second,
16:26 OK,
16:27 but
16:27 here's the big problem
16:29 China's growth rate's also set to decline,
16:31 OK.
16:32 And you sort of see over here is that East Asia and the Pacific,
16:36 and now here you you have slightly different,
16:38 uh,
16:38 slightly different numbers.
16:40 These numbers are 2000 to 2010.
16:43 Then 20 2011 to 2021 and then
16:48 2022 to 2030
16:51 and as you sort of see over here
16:53 is that the potential growth rate
16:55 for all,
16:56 uh,
16:57 for all the regions except perhaps South Asia
17:00 are actually has had to decline,
17:02 OK.
17:03 And this is a worrying thing,
17:04 right?
17:05 These numbers are the result
17:07 of an exercise that
17:09 was done by the prospects Group
17:11 to estimate potential growth
17:13 to essentially to measure the speed limit of an economy,
17:16 uh,
17:17 and then
17:18 it comes with this common conclusion that
17:20 there are falling growth prospects in high,
17:22 middle,
17:23 and low income countries,
17:25 uh,
17:25 and this is a decline of about 13,
17:28 as I told you,
17:28 right?
17:29 This is assuming no additional crises,
17:33 all of this stuff,
17:34 so if you get more crises,
17:36 you have a bigger problem.
17:37 So this is the reason,
17:40 uh,
17:40 if you take a look at the right panel over there,
17:42 you see
17:43 what happens when you get a crisis like COVID.
17:46 You see that net flows
17:48 of finance to developing countries falls a lot.
17:51 Uh,
17:51 if you look
17:52 at,
17:53 uh,
17:54 thing like the invasion of Ukraine
17:56 again you,
17:56 you see a big fall.
17:58 And if you see failures of banks and so on,
18:01 which is the next threat that we're worried about,
18:03 you start to sort of see the same thing,
18:05 OK?
18:06 All right,
18:07 so what do you do about this?
18:09 And
18:10 so here's where I'm going to end very,
18:12 very quickly and basically,
18:13 uh,
18:14 try to tee tee off the next session,
18:17 which is that when you look at the biggest driver of growth,
18:21 I mean,
18:21 essentially what we really have to do is
18:23 reverse this long term
18:24 growth decline,
18:26 right,
18:26 and start doing it right now.
18:28 And then you start to sort of say all right how can this be done
18:32 and if you sort of look at this graph it's at least for low income countries
18:36 and for low middle income countries you see that investment
18:41 is the bigger part
18:42 of the strategy
18:43 it's not productivity growth productivity growth
18:46 always matters,
18:47 but it matters.
18:49 Uh,
18:50 relatively less in low and lower middle income countries.
18:53 That's where half
18:54 of the people of the world live.
18:56 So that's
18:57 half the agenda is investment climate,
18:59 OK?
19:00 So the next major report that I'll talk about in the next ABCDE
19:04 will be
19:05 the successor of the Doing Business report which is called Business Readiness,
19:09 OK.
19:10 Because
19:11 that's a hugely important thing.
19:14 The second thing is.
19:16 Uh,
19:16 you know that you,
19:18 uh,
19:19 start to speak about solutions
19:20 and when you start to speak about investment and physical capital work,
19:24 aging and things like that,
19:26 one of the things that comes out is that there's these,
19:28 uh,
19:29 two drivers that are really important
19:31 again.
19:31 One of them is capital deepening,
19:33 of course,
19:34 right?
19:34 And I think that the best way to think
19:36 about climate investments is a potential for these countries
19:39 to be able to sort of really drive investment rates up.
19:43 And then the second one of course
19:44 is that for countries that are either aging and even those that are
19:47 not where you have low female labor force participation rates and so on,
19:52 especially in places like the Middle East
19:54 and
19:55 in,
19:56 uh,
19:57 South Asia,
19:58 but also in other parts of the world where you have
20:02 very rapid aging right
20:04 is female labor force participation.
20:06 I know that I'm almost out of time.
20:08 OK,
20:08 then,
20:08 the other thing that you always sort of hear
20:11 is,
20:12 so the main point over here is that
20:14 we shouldn't,
20:15 I think that we shouldn't be sort of casting climate change as a threat
20:19 for these countries.
20:20 We should be casting climate change
20:23 as an investment opportunity,
20:25 but then we have to sort of make sure
20:27 that
20:28 this,
20:28 that,
20:28 that,
20:29 uh,
20:29 that the,
20:30 the,
20:30 the,
20:30 the,
20:30 the,
20:30 these countries actually get these investment flows.
20:33 So the first part of that of course
20:36 is to sort of improve the investment climate.
20:38 That's why I mentioned the business readiness report.
20:40 The second part is to make sure that the that
20:43 that
20:44 that that
20:44 that that you start to see capital flows
20:46 that flow in the right direction that flow from
20:48 low growth high income countries to high growth low income countries,
20:52 OK?
20:53 And that's the role of the World Bank.
20:55 OK,
20:56 now
20:57 the other thing that you hear a lot
20:59 is that oh
21:01 DRM,
21:02 domestic resource mobilization raised taxes in these countries,
21:04 they don't have enough etc.
21:05 etc.
21:06 Well,
21:07 the poverty and shared prosperity report actually looked
21:09 at this and say yeah maybe that that
21:11 that's a thing but the
21:13 the the problem is
21:14 that because poorer countries
21:16 generally
21:17 rely more on indirect taxes because of the nature of the economies and so on,
21:22 uh,
21:22 these taxes are less progressive.
21:25 And
21:25 they actually spend just as much on subsidies
21:28 as richer countries
21:29 and
21:30 they spend much less on transfers
21:32 so I think that I think that the main thing that comes out of this is
21:36 yes
21:37 increasing taxes is important but
21:39 probably far better to first start by rationalizing spending.
21:44 OK,
21:45 and
21:46 so I said,
21:47 you know,
21:47 you shouldn't,
21:49 uh,
21:50 think that fiscal policy won't help
21:52 but fiscal policy will help in upper middle
21:54 and richer countries much more than it will
21:56 in low income and low middle income countries,
21:58 OK.
21:59 Uh,
22:00 I'm going to stop there
22:01 and
22:03 And hand it over to this excellent panel.
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