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World Bank economist: The poorest are getting poorer globally
It’s a staggering statistic and a marked setback from the years before the COVID-19 pandemic—the world’s poorest countries are falling further behind, and the wealth gap between the least and most developed nations is growing. One in three of these countries is poorer today than in 2019.
Ayhan Kose, World Bank Group’s Deputy Chief Economist, said that the combined shocks of multiple crises, including the pandemic, wars in Ukraine and the Middle East, food insecurity, and inflation, have taken a massive toll on the 75 least developed economies.
Kose spoke to GZERO’s Tony Maciulis as the annual Spring Meetings of the World Bank and the International Monetary Fund were underway this week in Washington, DC.
“When the food price goes up, the price of oil goes up. That has significant implications for these economies,” he told GZERO. “Where we are now, when you look at 2020-24, they registered the weakest growth rate on average since the 1990s.”
In many ways, the global economic outlook presented this week tells a tale of two post-pandemic realities. Kose explained that the most developed nations, particularly the US, showed greater resilience than expected early in 2023, and the threat of recession has been kept at bay. However, the negative impacts on poor countries, many of which are in Sub-Saharan Africa, cannot be ignored and could lead to greater geopolitical risk and humanitarian emergencies.
This week, World Bank leaders are calling for a renewed commitment to the International Development Association (IDA), which provides zero-interest loans and grants to nations most in need. Kose said the risk associated with crippling sovereign debt has caused some private sector funding to dry up and that politics and protectionism are impacting how wealthier nations approach funding.
But he also pointed to enormous opportunity in nations that are IDA-funded, including a younger population that could serve as a future global workforce and rich natural resources.
With proper investment and funding, he explained, other developing countries have been lifted to find sustained growth.
“At the end of the day history is full of examples. China, India, Indonesia, Chile, (South) Korea. They all used to be IDA borrowers. They were poorer countries. They became much richer.”
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Glogal Stage.
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FILE PHOTO: An image of Cuba's former President Raul Castro and Cuba's President and First Secretary of the Communist Party Miguel Diaz-Canel is seen beside a Turkish powership, in Havana, Cuba, April 17, 2023.
Cubans cry for electricity and food in rare protests
Extended blackouts and food scarcity drove Cubans into the streets of Santiago, the Caribbean country’s second-largest city, on Monday, in rare and risky protests. President Miguel Díaz-Canel blamed the US trade embargo for shortages and warned that American “terrorists” were fomenting dissent.
Cuba depends heavily on its allies, Russia and Venezuela, for food and fuel, but the island’s rumbling economic crisis means each peso fails to go as far as it once did. The government raised prices on fuel by over 400% at the start of March as part of an effort to stabilize the economy and control spiraling inflation, which officially topped 30% (though the real rate is likely higher).
Havana is now receiving aid from the World Food Programme for the first time, after requesting help in a rare acknowledgment that the country can’t feed itself. Now, blackouts of up to 18 hours a day mean that ordinary folks can’t refrigerate what food they do have, and instead watch it spoil in tropical weather. Over 400,000 people have fled to the US in the two and a half years since the last major economic protests.
We’re watching for signs of unrest spreading to other cities, and for how hard Havana cracks down on dissent.
COP28: Why farmers need to be front and center in climate talks
Agriculture is the foundation of human civilization, the economic activity that makes every other endeavor possible. But historically, says International Fertilizer Association Director General Alzbeta Klein, the subject hasn't received attention in climate talks.
"It took us 23 climate conferences to start thinking about agriculture," she said during a GZERO Live event organized by the Sustainability Leaders Council, a partnership between Eurasia Group, GZERO Media, and Suntory. "The problem is that we don't know how to feed ourselves without a huge impact on the environment."
The good news is, leaders are catching on to the notion that a holistic approach is the only way forward.
Watch the full livestream conversation: The global water crisis and the path to a sustainable future
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Water is food, so use solutions to conserve water, says expert Alzbeta Klein
"We often say water is life," says Alzbeta Klein, Director General of the International Fertilizer Association. "And I'd like to add to it: water is food." She spoke at a GZERO Live event organized by the Sustainability Leaders Council, a partnership between Eurasia Group, GZERO Media, and Suntory, exploring the emerging issue of water insecurity.
Some 90% of the world's freshwater is used to grow food, meaning that every single drop that can be saved through more efficient uses of water and fertilizer in farming represents one step closer to ensuring all human beings have safe, fresh water to drink.
Watch the full livestream conversation: The global water crisis and the path to a sustainable future
Where is China's foreign minister?
What are the consequences from Russia's exit from the Black Sea grain deal? Where is Chinese foreign minister Qin Gang? "Oppenheimer" is out. Will you be watching? Ian Bremmer shares his insights on global politics this week on World In :60.
What are the consequences from Russia's exit from the Black Sea grain deal?
Well, a lot of antagonism from the Global South because prices are now going up. That's why the Russians hadn't wanted to leave. Look, I mean, there is an ammonia pipeline that was sabotaged that the Russians wanted to use traversing Ukraine, that hasn't gotten fixed. They also wanna be able to get back into SWIFT for the agricultural banks, and neither of those things happen. So they have pulled out of the deal. They are also now attacking Odessa, stepped up way, including grain capacity and blowing up a whole bunch of food. And this is, these are all war crimes. And now you've got a whole bunch of sub-Saharan countries in particular that are gonna be angry with Russia as a consequence, one of the places they've done comparatively well since the beginning of the war.
Where is Chinese foreign minister Qin Gang?
I have no idea, and especially because, I mean, I know him pretty well. When he was ambassador to Washington, I used to see him all the time and he is very close to the Chinese president. So the fact that it's been about four weeks now and he has not been heard from, initially, the Chinese government said it was a medical issue. They stopped saying that after the first couple of times. And the only thing we've heard is some scandals about, you know, maybe a relationship with some journalist. I have no idea, but clearly given who he is and his backing, it's going to be a fairly big deal. And some long knives from opponents have to be seriously out for him to be away as long as he has. Hopefully we'll hear about that soon because you need an effective foreign minister.
"Oppenheimer" is out. Will you be watching?
Well, I'm not watching "Barbie." I wasn't sure if I was going to, but then I saw my buddy Fred Kaplan, who wrote "Wizards of Armageddon" and is like probably one of the preeminent historians on the atomic bomb, he saw an early version of the film, all three hours of it, and said it was not only historically accurate, but also fantastic. And that makes me want to go see it, because let's face it, I mean, this is the guy, the father of the Manhattan Project, made the atomic bomb happen. He is a very, very controversial figure, and it's an issue we need to be talking a lot more about because we are facing much greater dangers from nuclear proliferation and from nuclear war today than at any point since 1962. So I'm glad it's coming out and hopefully it raises some awareness.
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The Graphic Truth: Food inflation still flying high
As the war in Ukraine lingers and pandemic aftershocks continue to pound the global economy, food inflation remains sky-high throughout much of the world. Consider that over the past year alone, egg prices in the US rose by a whopping 60% on average. While prices of some food staples have dropped in recent months, partly due to the Black Sea grain deal, stubborn inflation driving up transport and labor costs means that consumers aren’t feeling prices ease at the supermarket. We take a look at food inflation in select countries now compared to a year ago, exactly one month after Russia invaded Ukraine.
A man holds wheat grains during harvest in Qaha, El-Kalubia governorate, northeast of Cairo, Egypt.
What We’re Watching: Grain deal deadline, tech layoffs, interest rate ripples
Will the Black Sea grain deal be renewed?
Amid growing concern that Russia may refuse to renew a deal to allow food and fertilizer shipments to travel through a safe passage in the Black Sea, UN Secretary-General António Guterres this week visited Kyiv, where he called for the renewal of the agreement, which is set to lapse on March 18. Quick recap: The grain deal, negotiated by Turkey, the UN, Russia, and Ukraine, was implemented in the summer of 2022 in a bid to free up 20 million tons of grain stuck at Ukrainian ports due to Russia’s blockade. You’ll likely remember that the two states are both huge exporters of wheat, while Russia is also the global fertilizer king. Indeed, the deal has helped alleviate a global food crisis that was hitting import-reliant Africa particularly hard, and driving up global food prices. Kyiv, for its part, says that if the deal is expanded to additional ports it could export at least some of the 30 million tons of grain that remain stuck. The Kremlin hasn’t said what its plans are but this week accused the West of “shamelessly burying" the Black Sea deal in what could be used as a pretext for its refusal to play ball.
For more on what Guterres has to say about the ongoing war in Ukraine and its human toll, check out his interview with Ian Bremmer on GZERO World.
What should we make of the great tech implosion?
We’ve heard a lot about a downturn in the tech sector in recent months after giants including Amazon, Microsoft, Meta, Salesforce, Alphabet, and Spotify laid off large chunks of their workforces. All in all, an estimated 200,000 US tech workers have been shown the door since the start of 2022 – more than the equivalent of the entire Apple workforce. At the same time, however, unemployment in the US remains at record lows, with the US adding more than 311,000 new jobs in February alone, yet another sign of the labor market's resilience. So what does – and doesn’t – the great tech debacle tell us about the current state of the global economy? First, COVID was a boon for the tech sector. As the world shut down, tech companies made the most of increased demand for work/play/eat-from-home services and embarked on massive hiring sprees. Alphabet, for example, increased its workforce by 16% between 2020-2021. But as soon as things reopened, it became clear that consumers wanted to go back to exercising in sweaty gyms and dining at overpriced ramen bars. Demand plummeted. What’s more, rising interest rates – an effort to tackle runaway inflation – and a dizzying stock market are making it harder for tech companies to raise capital and putting downward pressure on stock prices, leading to massive cost-cutting measures. Crucially, analysts warn that things will get worse before they get better.
A mountain of interest rate-driven debt
In the same way that inflation is a global problem, the fix has worldwide ripple effects. Indeed, rising interest rates to tame inflation are making it more expensive to borrow money — as well as pay it back. Last year, a group of 58 developed and emerging economies accounting for over 90% of global GDP surveyed by The Economist were on the hook for a whopping $13 trillion just in interest payments on their debt, up an astounding 25% from 2021. And this is on top of all the additional money that many countries borrowed to spend on stimulus programs during the pandemic. Everyone now owes a lot more than they signed up for at the micro and macro levels: Mortgage rates in the US have skyrocketed, corporate debt has ballooned in Hungary, and highly indebted countries like Ghana are now in even bigger trouble. So long as inflation forces central banks to keep interest rates high, access to capital will be tight for everyone: people looking to finance homes and cars, countries seeking relief from their massive debt burdens, and companies looking to raise money. And as the collapse of Silicon Valley Bank on Friday showed, this kind of risk aversion on the part of investors can — when the stars misalign — threaten to unleash broader financial chaos.
Philanthropy's moment to act
Note: This interview appeared as part of an episode of GZERO World with Ian Bremmer, "Inequality isn't inevitable - if global communities cooperate" on January 29, 2023.
It's almost the first anniversary of Russia's war in Ukraine. On March 11, it'll be three years since the World Health Organization declared COVID-19 a pandemic. And 2022 was the sixth warmest year on record since 1880. We are still dealing with the fallout from all three events. But not equally. Since 2020, the richest 1% of people has accumulated nearly two-thirds of all the new wealth created in the world.
On GZERO World, Ian Bremmer speaks to UN Foundation President and CEO Elizabeth Cousens, who thinks it's the perfect time for institutions backed by the 1 percent to step up even more. Foundations have traditionally resisted going big on fixing the world's problems because they're in it for the long run. The stakes are so high and the crises so urgent that Cousens sees a window of opportunity for philanthropy to take swift action instead of their traditional long-term approach. When it comes to immediate and deadly problems like famine and flooding, an influx of money could start making a huge difference very quickly.