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Are markets becoming immune to disruptive geopolitics?
There’s no escaping the intricate link between economics and geopolitics. Today, that link has become a crucial factor in investment decision-making, and who better to speak to that than Margaret Franklin, CEO of CFA Institute, a global organization of investment professionals? Franklin sat down with GZERO’s Tony Maciulis at a Global Stage event for the IMF-World Bank spring meetings this week.
Economists once predicted that sovereign debt would overwhelm global markets. But now, having been through the pandemic, the advent of AI, and wars in the Middle East and Ukraine, “there's almost a level of immunity,” she says, “to the dramatic nature of it until something really cataclysmic happens.”
And then? “The response, generally speaking, has been pretty positive,” Franklin says, with central bank intervention saving markets and building resilience.
In much the same way, the World Bank is trying to boost investor confidence by making changes that leverage private sector capital for public sector goals by better evaluating what level of risk the private sector will accept.
Individual investors should do the same, Franklin advises. “Really evaluate your risk profile … making sure you diversify,” she says, noting that fixed-income offerings have become more attractive. Younger investors, meanwhile, need to be cautious with getting their information on social media, she adds.
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Global Stage.
How to tackle global challenges: The IMF & World Bank blueprint
The International Monetary Fund and World Bank’s Spring Meetings in Washington have told a tale of two economies: In the developed world, inflation is falling, and recession looks unlikely. But many of the world’s poorest countries are struggling under tremendous debt burdens inflated by rising interest rates that threaten to undo decades of development progress. That means these key lenders of last resort have their work cut out for them.
The good news? There’s a proven model, as GZERO Senior Writer Matthew Kendrick discussed with Tony Maciulis at a Global Stage event while reporting on the meetings. Somalia, once the byword for a failed state, managed to implement massive reforms to its financial system to meet the guidelines of the IMF’s Highly Indebted Poor Countries Initiative.
“Because they met those guidelines — while still in a very fragile environment where they were fighting Islamic extremists in the country, dealing with semi-autonomous zones in the north — they managed to discharge 90% of their debt,” said Kendrick. “It's proof that even in very fragile countries, if, as the Somali finance minister said yesterday, you build these projects into nationally unifying efforts to build a better future, they can have tremendous success.”
Kendrick also cited comments from experts calling for the IMF and World Bank to change how they view humanitarian work more generally and not back away from countries amid war. “Conflicts are becoming a day-to-day part of our lives all over the world,” he says. “That means that the IMF and World Bank, in order to make progress on development, have to figure out ways to work with the institutions in these countries as they are also in conflict.”
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Glogal Stage.
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- Why Africa's power partnership with the World Bank should attract investors - GZERO Media ›
World Bank announces plan to bring power to 300 million in Africa
World Bank Group is bringing power to the people. Literally.
This week, during the bank’s annual Spring Meetings, the group announced a major new initiative to provide electricity to 300 million Africans by 2030. It is estimated that nearly 800 million people globally lack access to power, and the vast majority of them, 600 million, live on the African continent.
GZERO’s Tony Maciulis met with the World Bank’s Director of Infrastructure for West Africa Franz Drees-Gross, to discuss the project's details.
Over the next six years, the World Bank aims to connect 250 million people using $30 billion of public sector funding largely drawn from its International Development Association. The development finance institution provides low-interest loans and grants to the poorest countries. The group has also partnered with the African Development Bank, which has committed to supporting an additional 50 million people.
The connectivity will come from a combination of sources, some existing and some to be created by the project.
“It turns out that the most cost-effective way to connect those 250 million people is to connect about half of them using off-grid solutions,” Drees-Gross said. “So that means solar home systems, it means mini-grids that aren't connected to the larger national grid, and the other half of that goal will have to be connected by grid extensions and grid densifications.”
The ambitious plan comes with challenges including fortifying and modernizing existing utility companies to be able to consistently provide power and collect customer payments.
“The problem in many Sub-Saharan African countries is that utilities aren't recovering their costs,” Drees-Gross said. “They lose 30, 40, sometimes 50% of electricity due to commercial and technical losses. Since they only invoice a fraction of what they buy from the generators and then fail to collect that entire amount, that leads to a deficit.”
That inconsistent business has made the utilities less attractive to private-sector investors. World Bank hopes its support in stabilizing the power industry in the region will be an opportunity that will bring in private investment, ultimately powering the growth of more economies in Africa.
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Glogal Stage.
Half the world can’t access healthcare. How can the World Bank help?
Billions of individual tragedies come together to hold back development in some of the world's most fragile countries, and that’s where the World Bank has a role to play. Monique Vledder runs the Global Health Practice at the World Bank, and she sat down with GZERO’s Tony Maciulis at a Global Stage event for the institution’s annual Spring Meetings.GZERO’s Tony Maciulis met with the World Bank’s Director of Infrastructure for West Africa Franz Drees-Gross, to discuss the project's details.
She announced ambitious goals to start tackling the problem: “We are planning to reach, with our financing and our programs, 1.5 billion people over the next five years with quality health services,” she says, expanding the World Bank’s geographic footprint in healthcare to target vulnerable countries and build capacity in their healthcare systems.
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Glogal Stage.
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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- How to tackle global challenges: The IMF & World Bank blueprint - GZERO Media ›
China's economic slowdown is dragging down the rest of the world
On GZERO World, Ian Bremmer asked economist and author Dambisa Moyo to grade the health of the global economy amid ongoing geopolitical crises and Europe and the Middle East, stalled Covid recovery, and a major economic slowdown in China. Her answer is more optimistic than you might expect, given so much uncertainty and volatility around the world. It’s true that the US economy has shown surprising resiliency, which is why the world avoided a global recession in 2023.
But China’s economic slowdown is still a significant drag on the overall global outlook. Structural issues within the Chinese economy–a collapsing real estate sector, high levels of local government debt, the flight of foreign investment–have a major impact on the world’s finances because of China’s role as the largest foreign direct investor to the developing world, as well many developed economies. But so far, the policy response from the central government has been relatively slow and piecemeal compared to expectations.
Watch the full episode: Is the global economy finally on the right track?
Catch GZERO World with Ian Bremmer every week at gzeromedia.com/gzeroworld or on US public television. Check local listings.
Is the global economy finally on the right track?
How’s the global economy doing… really? When it comes to the world’s post-COVID recovery, it’s a tale of two economies: the United States and everyone else. On GZERO World, Ian Bremmer sits down with economist and author Dambisa Moyo for a hard look at the health of the world’s finances and the impact of geopolitical crises in Europe and the Middle East on trade flows and inflation.
Right now, US indicators are strong, but Germany and the UK are slipping into mild recessions, and China’s collapsing real estate sector, local government debt, and exodus of foreign investment is dragging the world’s second-largest economy into stagnation. Not to mention, Global South countries are holding record amounts of debt. So what does it all mean moving forward? Is the global economy still shaking off its post-Covid hangover or are some of these problems more entrenched?
“We need to be growing at 3% per year in order to double per capita incomes in a generation which is 25 years,” Moyo says, “Most of the global south is growing below that number, materially.”
Ian Bremmer and Dambisa Moyo unpack the confusing state of the global economy, China’s economic woes, and where they see the biggest potential for growth in developing economies during the next decade.
Catch GZERO World with Ian Bremmer every week at gzeromedia.com/gzeroworld or on US public television. Check local listings.
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The global economy: good news and bad news from economist Dambisa Moyo
Listen: In the latest episode of the GZERO World Podcast, Ian Bremmer sits down with economist, author, and member of the UK parliament’s House of Lords Dambisa Moyo for a hard look at the health of the world’s finances, the impact of geopolitical crises in Europe and the Middle East on trade flows and inflation, and how China’s economic woes are impacting everyone else.
Right now, US indicators are strong, but Germany and the UK are slipping into mild recessions, and China’s collapsing real estate sector, local government debt, and exodus of foreign investment is dragging the world’s second-largest economy into stagnation. Not to mention, Global South countries hold record amounts of debt. So what does it all mean moving forward? Is the global economy still shaking off its post-Covid hangover or are some of these problems more entrenched?
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.