Remarks by World Bank Group President David Malpass at the Launch of IDA20 in Tokyo, Japan

 

Hello everyone and let me start by expressing my appreciation to you and the Japanese government for hosting us for this launch of the IDA20 replenishment, in which Japan has played such a leadership role. I would like to thank the Finance Minister personally for playing such a crucial part in this process. I would also like to thank and congratulate the colleagues gathered here in Tokyo today, coming from all over the world, for making IDA20 a successful replenishment.

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Latin America isn’t at risk of a 1980s-style crisis (but an era of missed opportunities looms)

Food lines that stretch across multiple city blocks. Spiraling unemployment. Out-of-control inflation. Unsustainable debt. These issues, which traumatized many economies across Latin American in the 1980s, continue to reverberate today and,brazil_hero.jpg given current economic conditions, you could be forgiven for fearing that history is about to repeat itself.

However, the region’s biggest risk at present is not another “lost decade” fueled by financial crises, but rather a decade of missed opportunities. 

The debt crises of the 1970s and 1980s were searing experiences that find an echo in today’s troubles. Then, as now, Latin American countries had large debt loads. Then, as now, the global economy experienced unique macroeconomic shocks that sent inflation soaring (the Arab oil embargo then; the pandemic and Ukraine war now). And then, as now, central banks around the world – especially the US Federal Reserve – were raising rates to fight inflation.

 

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Global Economic Prospect: GLOBAL STAGFLATION

WASHINGTON, July 29, 2022 – Some additional 2 million people will benefit from a second Global inflation has risen sharply from its lows in mid-2020, on rebounding global demand, supply bottlenecks,
and soaring food and energy prices, especially since the Russian Federation’s invasion of Ukraine. Markets expect inflation to peak in mid-2022 and then decline, but to remain elevated even after these shocks subside and
monetary policies are tightened further. Global growth has been moving in the opposite direction: it has declined sharply since the beginning of the year and, for the remainder of this decade, is expected to remain below the
average of the 2010s. In light of these developments, the risk of stagflation—a combination of high inflation and sluggish growth—has risen. The recovery from the stagflation of the 1970s required steep increases in
interest rates by major advanced-economy central banks to quell inflation, which triggered a global recession and a string of financial crises in emerging market and developing economies (EMDEs). If current
stagflationary pressures intensify, EMDEs would likely face severe challenges again because of their less well anchored inflation expectations, elevated financial vulnerabilities, and weakening growth fundamentals. This
makes it urgent for EMDEs to shore up their fiscal and external buffers, strengthen their monetary policy frameworks, and implement reforms to reinvigorate growth. Phase of the West Africa regional Food Systems Resilience Program (FSRP-2) approved today for a total amount of $315 million in International Development Association (IDA*) financing. FSRP-2 will support Chad, Ghana and Sierra Leone to increase their preparedness against food insecurity and to improve the resilience of their food systems. This comes at a moment where it is projected that approximately 38.3 million people in West Africa are projected to be in food security crisis.

Global Economic Prospects — June 2022 (worldbank.org)

 

 

When the debt crises hit, don’t simply blame the pandemic

Every debt crisis begins with unheeded warnings and ends with severe limits on investmentshutterstock_2051836073_blog_june_28heroimage1 in education, health, and infrastructure among other things. These crises often spark civil unrest and government collapse, delivering a lasting setback to the growth prospects of the affected country. 

Commodity Markets Outlook: Ukraine war sparks food and energy shocks 

Shift to more costly trade patterns has begun; transition to cleaner energy could be delayeddownload

WASHINGTON, April 26, 2022—The war in Ukraine has dealt a major shock to commodity markets, altering global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report.

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Braving the Storms: The outlook for East Asia and the Pacific, illustrated

The Russian invasion of Ukraine threatens the uneven recovery of developing East Asia and Pacific (EAP) countries.   The invasion comes on top of the economic distress caused by the lingering COVID-19 pandemic, the financial tightening in the United States, and the pandemic resurgence and the economic slowdown in China. While commodity producers and fiscally solid countries in the region may weather these shocks with less difficulty, these events will dampen the growth prospects of most economies in the region. Overall economic growth is projected to slow to 5 percent in 2022— 0.4 of a percentage point less than expected in October.  If global conditions worsen and national policy responses are weak, growth could ease further.

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Are we ready for the coming spate of debt crises?

Higher inflation. Slower growth. Tightening financial conditions.

In recent weeks, Russia’s invasion of Ukraine has exacerbated global economic risks.  There is a fourth element, however, that could make the mix combustible: the high debt of emerging markets and developing economies.

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