Pandemic, War and Geo-Political Risk: The Outlook for Global Economy

Title

Pandemic, War and Geo-Political Risk: The Outlook for Global Economy

Creator

Xavier V.K.; Elias I.P.; Nazar S.N.

Description

This Chapter analyses the world economic outlook in the backdrop of the Pandemic, the Russia-Ukraine war, geo-political tensions, and social unrest emerging around the world. The COVID-19 Pandemic an unwanted gift from the nature spreading across the nations in multiple waves and mutation has devastated the global economy. The governments and central banks responded with huge bailouts to beat the potential recession that led to excess liquidity and demand-pull inflation. The global GDP declined due to multiple lockdowns to contain the spread of the virus. Due to scarcity of inputs, labour and supply chain disruptions the cost of production surged and augmented cost-push inflation. Further, the Russian invasion of Ukraine aggravated the supply-side shocks from sanctions and energy and food inflation surgeda 38-year highto 6.7 percent in advanced economies and 8.7 percent in emerging markets and developing economies creating misery among people particularly in the low-income countries. The running magnitude of inflation complicated the policy efforts, and the central banks and governments reversed the trade-off for inflation from safeguarding the growth. Besides, the social unrest in developed countries (Canada, New Zealand, the US, Austria, the Netherland) and developing countries (Chile, Algeria, Iran, Iraq, Lebanon, Brazil, Belarus, Sri Lanka, Ethiopia, Burkina Faso, Tajikistan, and Sudan) have added the geo-political tensions (China and Taiwan) worsening the world economic outlook. The first section of this chapter narrates the COVID-19 pandemic impact (loss of lives and livelihood), leading to declining trends in global GDP, income, employment and international trade, and increasing trends in poverty, unemployment, inequality and inflation. The second section analyses the impact of the Russian invasion of Ukraine and social unrest gathering around the world leading to geo-political tensions, supply-side shocks and inflation trending to a level not seen in the last four decades. The policy efforts reversed to monetary tightening and increasing the interest rates causing capital outflows, currency depreciation and foreign exchange reserve meltdown. Developing countries with limited fiscal space to counteract are prone to prolonged stagflation (inflation plus unemployment) and skewflation risk (product prices rising but asset prices falling). In the near-term, the global economy is facing an extremely challenging outlook due to sharply rising food, fertilizer and energy prices, and rising interest rates, capital outflows, currency depreciation and unsustainable levels of external debt. The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024.

Source

Political Economy of the Middle East, Vol-Part F3369, pp. 25-61.

Date

2024-01-01

Publisher

Palgrave Macmillan

Subject

Geo-political risk; Inflation; Pandemic; War

Coverage

Xavier V.K., Faculty of Management, CMS Business School, Jain Deemed-to-be University, Bengaluru, India; Elias I.P., Department of Management Studies, Christ University, Bengaluru, India; Nazar S.N., Department of Economics, St. Josephs College of Commerce, Bengaluru, India

Rights

Restricted Access

Relation

ISSN: 25228854

Format

Online

Language

English

Type

Book chapter

Identifier

https://doi.org/10.1007/978-981-97-4367-4_2

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85202530986&doi=10.1007%2f978-981-97-4367-4_2&partnerID=40&md5=271bf286933739971abab00b2e23602f