Alarm bells are ringing for many economies around the world, from Laos to Sri Lanka to Pakistan to Venezuela to Argentina to Guinea, and more. Some 1.6 billion people in 94 countries face at least one dimension of the crisis in food, energy, and financial systems, and about 1.2 billion of them live in “perfect-storm” countries, severely vulnerable to a cost-of-living crisis plus other longer-term strains, according to a report by the Global Crisis Response Group of the United Nations Secretary-General. The exact causes for their problems vary, but all share rising risks from surging costs for food and fuel, driven higher by the European war, which hit just as disruptions to tourism and other business activity from the coronavirus pandemic were fading. As a result, the World Bank estimates a global slowdown in the offing and that per capita incomes in developing economies will be 5% below pre-pandemic levels this year. Expansionary fiscal and monetary policies had no doubt helped many economies to come out of the pandemic-induced recession but left them with debt burdens that they are struggling to meet. And a contractionary policy to check inflation might lead to a slow down. More than half of the world’s poorest countries are in debt distress or at high risk of it, according to the UN. Maybe some debt written off would help the global economy. Economies seem to be hobbling along, in a stationary equilibrium stage. However, supply-side economics seems to have faltered according to many economists and well-managed demand-side economics is the order of the day. What do you think?
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