The Economic Costs of Closed Minds
While there are exceptions, hyper-nationalism is usually disastrous for an economy in the long run. At a time when policymakers are confronting an ongoing public-health crisis, and in some cases the threat of violent turmoil, the economies that succeed will be those whose leaders keep a clear head.
NEW YORK – This year began amid widespread despondency about the resurgent COVID-19 pandemic and the struggling global economy, as well as premonitions of heightened political conflict in Eastern Europe, the Middle East, and even the United States. True, there is now some hope that the Omicron variant may be the pandemic’s last hurrah. But troubling questions remain about the economic and political legacy of the crisis.
The World Bank’s latest biannual Global Economic Prospects report, released last week, points to some possible answers. Produced by a team of talented economists, the report is one of the best summaries of the current outlook for the world economy. And while the report uses the diplomatic language of multilateral organizations, it nonetheless packs a powerful cautionary punch.
For starters, the World Bank forecasts that global economic growth will slow to 4.1% in 2022, from 5.5% last year. With debt burdens rising, supply-chain bottlenecks impeding the flow of goods and services, and inflation picking up, governments are losing the capacity to provide further fiscal support. The report warns that the surge in debt caused by countries trying to soften the “pandemic-induced global recession” means that several economies are now “at high risk of debt distress.” Some may need relief.