We should expect the economic cost of the closed minds to increase 

News: Although the Omicron variant has not caused the expected damage and this is seen as a positive development in global fight against the pandemic. However, the World Bank’s biannual Global Economic Prospects report shows that the effect of the pandemic is far from over. 

What are the predictions in the report for global economy? 

It forecasts that global economic growth will slow to 4.1% in 2022, from 5.5% last year. This is because governments globally are losing the capacity to provide further fiscal support because of rising debt burdens, supply-chain bottlenecks that impede the flow of goods and services, and resultant rising inflation. This also means that several economies are at high risk of debt distress.  

Energy prices will surge further. 

Although the report projects a high growth rate for some economies like 10% for Argentina, 8.3%, for India but there is a catch in this statistic. This growth is the result of the base year effect, as the pandemic caused a contraction in many of the economies in 2020. 

Usually, emerging market and developing economies (EMDEs), helped by their lower base, grow faster than advanced economies. But, they will perform poorer than advanced economies in 2023. This is because EMDEs have limited policy space to provide additional support. 

What are the reasons for this uneven growth? 

One of the main reasons for the uneven recovery is the recent growth of hyper nationalism. It is typically disastrous for an economy in the long run. 

Countries under the influence of hyper nationalism try to become self-sufficient by raising barriers to trade, capital and ideas from elsewhere.  

What are the possible implications of this hyper nationalism? 

This may stagnate growth (as happened in Argentina in the early decades of the 20th century) and prevent the development of the society.  

In this globalized world, new ideas and research is emerging everywhere. Countries should try to absorb the best from everywhere, and uphold the vision of a common human identity. 

Source: This post is based on the article “We should expect the economic cost of the closed minds to increase” published in Live Mint on 31st Jan 2022.