Not just India, 90% countries hit too

Economic Slowdown

Dr B K Mukhopadhyay

(The author, a noted management economist and an international commentator on ongoing business and economic affairs, can be contacted at m.bibhas@gmail.com)

Global trade growth has come to a near standstill. As per latest assessments made by International Monetary Fund (IMF), about 40 emerging markets and developing economies, including 19 in sub-Saharan Africa, will have real GDP growth rates above 5 per cent. The IMF warned of an economic slowdown in 2019 in 90 per cent of the world. Accordingly, “In 2019, we expect slower growth in nearly 90 per cent of the world. The global economy is now in a synchronized slowdown…. This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade.” The new IMF chief Kristalina Georgieva has warned that the World Economic Outlook for 2019 and 2020 reflects a complex situation compared to the previous figures presented in July, 2019 in Chile. Economic activity is softening in advanced economies — the US, Japan and especially the Euro zone — while in other emerging markets, such as India and Brazil, the slowdown is even more pronounced this year. Even China’s accelerated growth is experiencing a gradual decrease.

Trade disputes — the commercial war between Washington and Beijing — has been leading global economic sluggishness, coupled with geopolitical tensions, such as Brexit, among others, that have sparked uncertainty.

Security at stake? Food, water and energy for survival

As per latest assessments, global food production has been assessed to rise by 70 per cent by 2050 to cater for growth in the world’s population of more than 30 per cent. Can we achieve the target? Global food security is one of the most pressing societal issues of our time. Though advances in agricultural technology and expertise will significantly increase the food production potential of many countries / regions, yet these advances will not increase production fast enough to meet the demands of the planet’s even faster-growing human population.

A recent report portrays a chilling scenario, the cumulative impact of three disasters driven by climate change. The possible consequences are: global food shock, resulting in food riots; the ballooning price of basic crops; and significant losses in stock markets.

The risk assessment report, produced by insurer Lloyd’s of London — with support from the UK Foreign and Commonwealth Office and vetted by academics from a number of institutions — shows how close humanity might be to a catastrophic collapse by the mid-century unless significant changes are made to curb global warming.

The scenario presented in the report examines what would happen if there were three simultaneous disasters — specifically a heat wave in South America, an explosion of windblown wheat stern rust pathogen across Russia, and a particularly strong El Niño southern oscillation cycle — all perfectly plausible phenomena given current climate trends. The impact of this would be enough to cripple global food security.

A model crafted by the Anglia Ruskin University’s Global Sustainability Institute in the context of the report concludes: “In this scenario, global society essentially collapses (in 2040) as food production falls permanently short of consumption.” But this forecast is based on a “business as usual” approach, one in which man-made climate change leads to a combination of increased flooding and extensive drought, with agriculture facing the prospect of functioning under water-stress conditions as early as 2025. However, if carbon emissions are slashed and agriculture adapts, this scenario does not have to play out. A timely warning indeed!

More areas of concern!

A recent report portrays a chilling scenario, the cumulative impact of three disasters driven by climate change. The possible consequences are: global food shock, resulting in food riots; the ballooning price of basic crops; and significant losses in stock markets.

The risk assessment report, produced by insurer Lloyd’s of London — with support from the UK Foreign and Commonwealth Office and vetted by academics from a number of institutions — shows how close humanity might be to a catastrophic collapse by the mid-century unless significant changes are made to curb global warming.

Population: No need to

put a brake?

It has been assessed that 10,000 years ago, humans made up 1 per cent of the weight of vertebrate land animals: the rest were all wild. Today, wild animals make up just 1 percent. The other 99 percent is humans, our farmed animals and our pets.

The world population has risen seven-fold over the last 200 years. For the first time in history, a majority of the world’s 6 billion people are living in cities. Between 2000 and 2025, the world’s urban population will double.

The French Institute of Demographic Studies projected that by the end of this century, there will be 10 to 11 billion people on the planet. The world population will jump from the current 7.1 billion to 9.7 billion by 2050. In India the same is assessed to rise from 1.2 billion to 1.6 billion, while that in China will remain at the same level (1.3 billion).

Is anybody there to challenge the ever gloomy scenario — the rapid population growth has led to an acute shortage of dwelling units which has resulted in overcrowding, traffic congestion, pollution, housing shortages (slum and squatter housing), high rents, poor urban living conditions, low infrastructure services, poverty, unemployment and poor sanitation which have become pervasive, and indeed high crime rate?

The FAO forecast is that we will need 70 per cent more food by 2050. Due to population growth, availability of land per person in developing countries is expected to halve by 2050. Globally, we’ll use 71 per cent more resources each by 2050, as per IRP assessment. What is more a matter of concern is the fact that more than 4 billion people will live in regions short of water by 2050. IEA’s forecast is that the global demand for energy will increase by 30 per cent by 2040. Brooking Institution is prompt enough to opine that a global ‘middle class’ of 3.2 billion people consuming at a high level in 2016 is expected to rise to roughly 5 billion by 2030!

In lieu of conclusion

Needless to remind — financial crisis is to be actively avoided in as much as the same can be caused by, among others, increase in interest rates, increases of uncertainty, asset market effects on balance sheets, problems in the banking sector, and of course government’s fiscal imbalances. These lead to adverse selection and moral hazard problems worsening, which in turn, pave the way for declining economic activity, bank panics, unanticipated decline in price level, foreign exchange crisis, etc. Factors that cause financial crisis and the consequences of changes in factors, thus, have to be regularly watched.

The combined effects of ongoing movements in interest rates, equity and commodity market mean that financial conditions worldwide would be tightening. These risks point to increasing vulnerability of the global economy to further shocks, and the rising probability of a recession almost ready to revisit. Time calls for paying top priority to these areas or we have to face irreversible consequences.

Under the stated facts and circumstances, it is better to look at what the WEF opines — One major risk in the coming year is the sharp drop-off in world trade growth, which fell from over 5 per cent at the beginning of 2018 to nearly zero at the end. With anticipated escalation in trade conflicts, a contraction in world trade could drag down the global economy even more.

Yes, the main goal should now be to fix the fractures that have emerged and called for a coordinated global response.