Rising tensions, falling growth: prospects for the global economy?

Partners:

Economies around the world have been on the back foot in recent years. The Covid pandemic and the policy response to it – from lockdowns and restrictions on travel to business restrictions and furlough payments – continues to be felt. The war in Ukraine has created problems with energy and food supplies, as well as calling into question assumptions about trade. Covid supply-chain problems have reinforced calls to ‘reshore’ or ‘friendshore’ production, potentially putting a brake on globalisation.

But it’s not just such ‘one off’ issues that are leading many commentators to look gloomily at the prospects for economic growth. Poor economic news from Beijing has called into the question of the ability of China to continue to drive the world economy as it has since the crisis in 2008. From ageing populations to dealing with climate change, there are some longstanding headwinds, too.

In the past, the US could play a central role of determining how an economic crisis would be handled. But America is no longer in a dominant economic position to call the shots. Geopolitical tensions, in particular between America and China, may make agreeing on a way forward through the current problems more difficult. The BRICS countries (Brazil, China, Russia, India and South Africa) are trying to forge a path independent of the US, while Europe has plenty of problems of its own.

What are the prospects for the global economy? How will the changing global order affect the international response to an economic slowdown?