Indeed, I am committed to deepening the cooperative relationship between the economic and financial sectors in all countries of the world, so that together we can find effective solutions to the issues we face. Let me begin by reviewing the state of the global economy today, how we see the prospects for growth, and what these prospects look like in the Arab world.
The good thing is that the recovery continues, and its underpinnings remain strong. As you know, we expect global growth to reach 5.9 percent this year. For the Arab world, we expect 4.4 percent for 2021 and 4.5 percent for 2022.
Why do we see that the pillars of recovery are strong?
First, because of the resounding success of science in finding vaccines, and vaccination rates that continue to rise in many countries.
Second, because of the great support provided by the policies that allowed businesses and families to pass a period of severe and far from normal stagnation, and then provide the necessary capacity to revitalize the global economy.
However, this is not the full story.
We must be aware of objectively that the balance of risks favors adverse developments, and that the cost of the pandemic and recovery is clouded by a great deal of uncertainty. New very serious cases have emerged in the past few months.
In the middle of last year, we identified the problem of diverging paths that arose primarily as a result of the uneven fiscal space available at that time. Unfortunately, this divergence has become even more entrenched in light of unequal access to vaccines, speed of vaccinations, and the continued possibility of taking advantage of policy space to provide support.
In the Arab world, we have seen a really good performance in many countries, especially the Gulf Cooperation Council countries and Morocco, in terms of vaccinating individuals and opening up economies. And we’ve seen an impressive policy move to make the best use of fiscal space. But we see other countries in the Arab world falling behind, which is a matter of concern in the case of fragile and conflict-affected countries in particular. This divergence reinforces the growing disconnect between the surge in demand in countries and sectors where the recovery is proceeding at a faster pace, and supply that has not been able to catch up with this pace so far.
Unfortunately, divergence also means disruptions in supply chains. Even in countries with high rates of vaccination, we have seen the impact of the outbreak of the pandemic around the world, causing temporary restrictive measures to be imposed. More recently, we have seen this in Europe. With disruptions in supply chains, inflation has become an even more worrisome phenomenon. But at the current stage, we still see that this disconnection between supply and demand is the main cause of inflation, which makes us hope to achieve our likely expectations of a decline in inflation during the next year. However, if supply disruptions persist or inflation expectations deviate from their target base, inflation may become more rigid. There are other factors that push prices up, including natural phenomena that have affected agricultural productivity and added to pressures on food prices.
So, in the face of these three problems – divergence, supply chain disruptions and inflation – what should we do?…continued.
* Quoted from Al-Eqtisadiah newspaper.
All published articles represent the opinion of its authors only.
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