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1、TRADE AND DEVELOPMENT REPORT UPDATE APRIL 2023Global Trends and Prospects 2023,United Nations Conference on Trade and Development The findings,interpretations and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the United Nations or its officials or
2、Member States.The designations employed and the presentation of material on any map in this work do not imply the expression of any opinion whatsoever on the part of the United Nations concerning the legal status of any country,territory,city or area or of its authorities,or concerning the delimitat
3、ion of its frontiers or boundaries.This publication has not been formally edited.UNCTAD/GDS/INF/2023/1iiiTable of contentsTable of contentsA.INTRODUCTION.1B.WEAKENING GROWTH OUTLOOK AGAINST MOUNTING FINANCIAL STRAINS.21.Bailing out better?.22.Global growth and trade.53.Regional prospects.10C.INFLATI
4、ON WOES:THE LIMITS OF MONETARY TIGHTENING.141.Hungry for profits:food prices and the cost-of-living crisis .20D.CHRONICLE OF A DISASTER FORETOLD:DEBT AND DEVELOPMENT DISTRESS IN 2023 AND BEYOND.241.Developing country debt dynamics under unfavourable monetary conditions .242.From debt distress to dev
5、elopment crisis.273.Towards a new debt architecture.30E.LOSS AND DAMAGE IN A TIME OF POLYCRISIS.311.Pakistan:in the eye of the polycrisis.312.The role of loss and damage financing.323.Existing financing for loss and damage .33REFERENCES .34TRADE AND DEVELOPMENT REPORT UPDATEApril 2023ivList of figur
6、es1.World merchandise trade,January 2010January 2023 .82.Global supply chain pressure index(GSCPI),January 1998February 2023 .93.Consumer price index,selected economies,January 2020January 2023 .164.Deflators for Germany,Italy and the United Kingdom,first quarter of 2019fourth quarter of 2022 .185.D
7、eflators for Indonesia and Poland,first quarter of 2019fourth quarter of 2022.206.International price indices of fertilizer and food,January 2018January 2023.217.Median food traders profits and revenues,20182022.228.Total global commodity trading gross margin,20182022.239.Bond and equity emerging ma
8、rket fund flows,20172023.2510.Sovereign bond market indicators,1 January 201917 March 2023.2611.Net resource transfers on external public debt in low-and middle-income countries,20122021.2812.Change in public external debt service and other key public spending,20122014 and 20192021.2913.Economy of P
9、akistan,selected indicators,20152022.31List of tables1.World output growth,19912023.62.CPI inflation rates and contributions,selected developed countries,20182023.173.CPI inflation rates and contributions,selected developing countries,20182023.19List of boxes1.Inflation targeting and the primacy of
10、financial stability .4List of charts in boxesB1.Effective federal funds rate,June 1976February 2023.51Global Trends and ProspectsA.INTRODUCTIONAccording to most recent data,the world economy grew by 3.1 per cent in 2022.To many,the rebound suggested that a soft landing was possible in 2023,and that
11、the key problems of the year 2022 rising prices,supply-chain disruptions and recession risks have been addressed.As a result,the very first months of 2023 were viewed with optimism by decision-makers,as it appeared that the anti-inflationary stance of the central banks had set a path to price stabil
12、ization without causing a major disruption to growth.Trade and Development Report 2022 cautioned against such optimism because it was based on short-term dynamics.Long-term issues which had emerged after the global financial crisis(GFC)of 200709 and gained greater visibility during the pandemic weak
13、 investment,slow productivity growth,supply chain vulnerabilities,high levels of indebtedness remain in place.The ongoing war in Ukraine continues to impact international markets for energy,food and commodities.Moreover,inflation is proving a stubborn adversary due to persistent supply-side factors
14、and excessive markups by large corporations,particularly in food and energy markets.With global growth decelerating during the fourth quarter of 2022,the world economy has begun 2023 in a more fragile state than the optimistic accounts were suggesting.With the conflict in Ukraine continuing into 202
15、3,major financial,investment and strategic decisions are clouded by geopolitical uncertainty and risks of economic insecurity.The collapse of the crypto exchange FTX in November 2022 and a string of bank failures in Europe and the United States in March 2023,raise the spectre of financial contagion
16、in an already slowing economy.How deep these financial stresses reach and how long they persist will determine whether advanced economies slip back into recession in 2023.With long-term challenges remaining unaddressed,growth is expected to decelerate to 2.1 per cent in 2023.This could set the world
17、 onto a recessionary track.Concerted actions by governments in early 2023 and the initial reaction from markets suggest this is still avoidable.However,the room for manoeuvre may be constrained given the heightened sovereign debt levels not seen since the global financial crisis,the expansion of cen
18、tral bank balance sheets and the growth of the large and unregulated shadow banking system.With the era of cheap credit coming to an end at a time of“polycrisis”and growing geopolitical tensions,the risk of systemic calamities cannot be ruled out.The damage to developing countries from unforeseen sh
19、ocks,particularly where indebtedness is already a source of distress,will be heavy and lasting.Without the kind of financial safety net enjoyed by private actors in advanced economies,the year ahead will be a challenging one even for those developing countries not in immediate distress.In this sense
20、,inequalities,both within and across countries,that emerged with the lop-sided recovery from the pandemic,are likely to increase.Financial support and rescue packages to failing lenders and enhanced swap lines in advanced economies reduce the threat of a financial meltdown by offering a safer haven
21、from financial turbulence.But they will tilt the scale of financial flows further in advanced economies favour,as well as benefiting larger financial institutions within their own markets.Areas of policy concern for 2023 It appears that the year 2023 will test the financial resilience of the post-pa
22、ndemic world.While it is difficult to predict the precise timing and contours of a financial crisis,if any,the first weeks of spring 2023 do make it clear that in an interconnected and fragile world economy,central bank decisions in advanced countries should not be taken without consideration of the
23、ir wider TRADE AND DEVELOPMENT REPORT UPDATEApril 20232systemic impact.This should inform policymakers thinking when they try to find a balance between financial stability and price stability in the coming months of 2023.It is also becoming clear that the age of ultra-low interest rates is giving wa
24、y to one of higher interest rates.Three entrenched legacies from this passing era will need urgent attention and action from the international community if the global economy generally,and the developing world in particular,is to end this decade in a healthier position than it began.First,the weakne
25、ss of productive investment,including for the climate transition.This will require policymakers to take a closer examination of corporate governance and the way in which profits are generated,managed and distributed.Second,the use of monetary policy as the main tool of macroeconomic management.This
26、will require recovering the active role of fiscal policy and an overhaul of the tax systems in both advanced and developing countries towards higher progressivity,but also reform of the international financial system to protect and expand fiscal space.Third,the growing dependence on debt.This will n
27、ot only require a return to responsible lending and borrowing,but a new institutional architecture to better manage debt distress and restructuring.B.WEAKENING GROWTH OUTLOOK AGAINST MOUNTING FINANCIAL STRAINS1.Bailing out better?As this Report goes to press,financial markets are rattled by fears of
28、 contagion,following a series of bank failures and near-collapses in Europe and the United States in the first two weeks of March 2023.Meanwhile,share values across the banking sector on both sides of the Atlantic have continued to fall and a heightened sense of investor anxiety remains.In the Unite
29、d States,depositors of two regional lenders Silicon Valley Bank(SVB)and Signature Bank were rescued by a mixture of government support and liquidity injection from other banks.SVB was later acquired by First Citizen Bank.The bankruptcy of a third lender,First Republic,was averted by a consortium of
30、leading banks.In the United Kingdom,the banking giant HSBC acquired the domestic arm of the failing SVB for just one pound sterling.In Switzerland,a major rescue merger was rushed through by the Government.As a result,UBS acquired its former rival Credit Suisse for 3.5 billion.Six major central bank
31、s of the advanced economies including the Federal Reserve of the United States(hereafter Fed),the ECB,the Bank of England,the Swiss National Bank,the Bank of Japan and the Bank of Canada released a joint statement on 19 March 2023 announcing that they would launch a series of joint operations to mak
32、e funding available to the market via standing swap lines.The Secretary of the Treasury of the United States,Janet Yellen,has pledged continued,though not blanket,support to smaller lenders and depositors(Politi,2023).The fact that banks,including major regional lenders as well as a systemically imp
33、ortant institution such as Credit Suisse,need rescuing again,does not necessarily mean a repeat of the 200709 crisis.But there are rhyming motifs.Beginning in the spring of 2007,having started with crisis of regional mortgage 3Global Trends and Prospectslenders in the United States,an international
34、financial meltdown.This was driven by a cascade of undetected risks,unknown interconnections inside banking structures and the growth of a de-facto unregulated shadow banking system.Bad financial governance,as well as the very idea that financial markets are self-regulating,amplified those risks,the
35、 consequences of which linger on even today.Policymakers nowadays are better prepared than previously to address signs of market distress and troubles at individual institutions,and the financial system,part of which is regulated with a view to macroprudential and systemic concerns,is more robust.Al
36、so,as the experience of the pandemic shows,central banks have expanded their arsenal of liquidity support and coordination measures.But there are still grounds for concern.The actual implementation of post-2009 financial regulations has left the non-banking parts of the financial system outside of t
37、he area of systemic oversight.The decade of quantitative easing(QE)and ultra-low interest rates has contributed to asset inflation,new risks and capital market distortions(Harnett,2023).In the current global environment of heightened uncertainty,higher inflation and market volatility,such risks may
38、cascade through the system in new ways.Importantly,while failures of individual banks may not necessarily herald a wider financial crisis,the inversion of the yield curve poses serious risks to the balance sheets of financial institutions,as was the case in 2007 after three years(and 500 basis point
39、s)of interest rate hikes(Rennison,2022).As investors move capital into United States assets seeking safety amidst global political-economic uncertainty,there is strong downward pressure on long-term yields in the country.At the same time,rate hikes by the Fed are pushing short-term rates higher,addi
40、ng further stress to financial institutions balance sheets.In this respect,while lose regulation of mid-size banks may offer one explanation for the failure of United States lenders in spring 2023,the wider structural problem should not be ignored.No matter how tightly the banking system is regulate
41、d,this cannot cover for a major global structural imbalance in the world financial system.In times of global uncertainty,there is a shortage of safe assets,and investors tend to pile into United States Treasury bonds(hereafter Treasuries),forcing down the yield.As monetary policy tightens,short-term
42、 rates go up,yield curves are inverted,and balance sheet distress can cascade through the system,threatening a wider crisis.Given the impact of monetary policy on asset prices(box 1),central banks across the advanced economies will have to find a balance between their anti-inflation measures,and fin
43、ancial stability concerns.The financial stress caused by recent events is leading to a reassessment of global economic prospects and risks,with markets effectively anticipating substantial interest rate cuts already this year(see figure 9).The structural imbalance in the financial system is already
44、having contagion effects.Developing countries are in a particularly vulnerable position due to the lack of an adequate global financial safety net(GFSN).Under normal circumstances,expectations of lower interest rates in developed countries are supportive of capital flows to developing countries.Howe
45、ver,in the current context,uncertainty is triggering a flight to safety which is visibly hurting developing countries.Capital outflows from developing countries are accelerating,as indicated by the evolution of net investors flows to emerging market funds(section D).Sovereign bond spreads vis-vis Tr
46、easuries have already widened considerably in the face of these developments.This is an indicator of heightened risk aversion as investors dump risky assets with countries in Africa particularly affected by this dynamic(figure 10).These challenges highlight the urgent need to strengthen the GFSN.The
47、 special drawing rights(SDRs)are a central part of the GFSN as well as the fast liquidity windows in the IMF and the World Bank.That is why UNCTAD,as well as the United Nations Global Crisis Response Group(GCRG),have insisted that as part of an emergency response package,a new SDR issuance should be
48、 considered to provide liquidity support to developing countries.And that the quota limits of the emergency windows have to be revised.TRADE AND DEVELOPMENT REPORT UPDATEApril 20234Box 1 Inflation targeting and the primacy of financial stability The recent failure of SVB in the United States,and the
49、 liquidity assistance of the Swiss National Bank to Credit Suisse in Europe has raised concerns about primacy of financial stability over central banks other concerns.Often referred to as“financial dominance”concerns,this stance contrasts with fiscal dominance and exchange rate dominance.Under fisca
50、l dominance,an increase in the interest rate to fight inflation may also push the required primary balance to stabilize public debt beyond what is politically acceptable by the citizens(Ghosh et al.,2017).In such a context of fiscal fatigue something has to give,the stance of the central bank or fis
51、cal policy.When investors anticipate higher budget deficit and that the authorities will resort to money printing or default,the result is a“flight to quality”,usually to real assets and foreign exchange.This pushes inflation up instead of down.Knowing that monetary policy will backfire,the central
52、bank does not hike the interest rate and monetary policy becomes subordinate to fiscal policy(Blanchard,2004).Under exchange rate dominance,the economy may be in a depressed state,where the level of economic activity justifies cutting the domestic interest rate,but the central bank cannot do so beca
53、use the resulting reduction in the carry trade between domestic money and foreign exchange would weaken domestic currency,which in turn will push the price of tradable products up.Cutting rates would thus lead to higher inflation through the exchange-rate channel.This kind of constraint is very comm
54、on in developing countries with high capital mobility and a fully floating exchange rate(Barbosa-Filho,2008 and 2015).Third,by analogy with the previous cases,financial dominance arises when,say,inflation is up and unemployment is down.This triggers an increase in the interest rate and risks a finan
55、cial crisis due to liquidity and/or solvency problems in the financial system(Gros and Shamsfakhr,2021).Similarities with the current situation in the United States are apparent since most monetary tightening cycles by the Fed have ended up in heightened financial stress that inverted the direction
56、of monetary policy itself(Minsky,1982).The most recent and dramatic case of financial dominance happened in 20062008,when the subprime meltdown first stopped and then reversed Ben Bernankes first monetary tightening cycle.The same thing happened twice under Alan Greenspan,during the“financial crash
57、of 1989”and the burst of the“dot-com bubble”in the early 2000s.Going back a little further,it was not by accident that the debt crisis of 1982 coincided with the change in direction of the Fed interest rates during that same year,nor that the next hiking cycle ended precisely when the saving and loa
58、ns crisis gained force at the end of 1980s.Rather than an exception,financial dominance seems to be a common pattern in the United States economy.Asset price movements signal the need to lower interest rates to avoid major capital losses in advance of any signals from product and labour markets that
59、 it is necessary to ease monetary policy.5Global Trends and ProspectsFigure B1 Effective federal funds rate,June 1976February 2023(Percentage)Source:Federal Reserve Bank of St.Louis.Returning to the current situation and assuming the United States is experiencing financial dominance,there are basica
60、lly two scenarios facing the Fed.First,to proceed with a hawkish monetary policy using the credit crunch to accelerate disinflation and to hope that existing support mechanisms and regulations will prevent widespread bank runs,a financial meltdown and a return to recession.Alternatively,the Fed can
61、first slow down and then quickly stop raising interest rates,accepting a slower disinflation in exchange for avoiding a financial crisis and crashing the economy.The recent economic history of the Fed,including the most recent move,suggests that the second scenario is the more likely path it will ta
62、ke.The federal funds interest rate will therefore probably stop between 5.0 and 5.5 per cent in the coming months,while inflation may slows more gradually than initially expected,with output growth decelerating to an annual growth rate of about 1 per cent.024680Feb-76Feb-77Feb-78Feb-79Feb
63、-80Feb-81Feb-82Feb-83Feb-84Feb-85Feb-86Feb-87Feb-88Feb-89Feb-90Feb-91Feb-92Feb-93Feb-94Feb-95Feb-96Feb-97Feb-98Feb-99Feb-00Feb-01Feb-02Feb-03Feb-04Feb-05Feb-06Feb-07Feb-08Feb-09Feb-10Feb-11Feb-12Feb-13Feb-14Feb-15Feb-16Feb-17Feb-18Feb-19Feb-20Feb-21Feb-22Feb-23Latin America debt crisis Savings and l
64、oans crisisDot-com bubble burst Subprime meltdown2.Global growth and tradeGlobal growth in 2023(measured in constant United States dollars at market exchange rates)is expected to drop to 2.1 per cent compared to 3.1 per cent in 2022(table 1).However,the risks are strongly on the downside with global
65、 macroeconomic conditions this year hanging in a precarious balance as monetary and fiscal policies adjust to slowing global growth and the financial fallout from a year of rising interest rates.TRADE AND DEVELOPMENT REPORT UPDATEApril 20236Table 1 World output growth,19912023(Annual percentage chan
66、ge)Reported TDR 2022RevisionCountry groups1991-1999a2000-2009a2010-2014a2015-2019a20022b2023b2022202320222023World2.93.43.23.02.5-3.25.93.12.12.52.2+0.6-0.0Africa2.45.52.73.02.6-2.34.43.02.52.72.4+0.3+0.2North Africa(incl.South Sudan)2.75.3-1.94.12.3-3.14.62.32.93.02.4-0.6+0.5South Africa
67、2.74.02.51.00.3-6.34.92.0-0.31.41.3+0.6-1.6Sub-Saharan Africa(excl.South Africa and South Sudan)2.06.46.32.93.4-0.74.23.63.02.82.6+0.8+0.4America3.42.52.41.91.7-3.86.02.51.12.11.0+0.4+0.1Latin America and the Caribbean3.33.53.40.1-0.3-7.26.73.91.32.61.1+1.3+0.2Central America(excl.Mexico)and Caribbe
68、an2.84.43.53.12.2-8.68.04.32.53.72.5+0.6-0.1Mexico 3.01.93.22.1-0.2-8.35.03.11.81.81.4+1.2+0.4South America 3.43.93.4-0.9-0.8-6.67.14.10.92.70.7+1.4+0.2Argentina4.63.82.7-0.3-2.0-9.910.35.4-0.54.1-0.8+1.3+0.3Brazil2.93.63.2-0.41.2-3.35.02.90.91.80.6+1.1+0.3North America 3.42.32.12.32.3-3.05.82.21.02
69、.01.0+0.2+0.0Canada2.82.32.62.01.9-5.15.03.42.13.22.2+0.2-0.0United States3.52.32.12.32.3-2.85.92.10.91.90.9+0.2+0.0Asia(excl.Cyprus)4.35.65.74.83.8-1.06.33.64.03.54.1+0.0-0.1Central Asia-4.48.36.83.43.8-1.25.54.44.43.63.5+0.8+0.9East Asia 4.45.65.84.84.10.36.42.63.93.24.3-0.6-0.4China11.010.68.66.8
70、6.02.28.13.04.83.95.3-0.9-0.5Japan1.20.91.40.9-0.2-4.51.61.61.61.01.8+0.6-0.2Republic of Korea6.84.93.62.92.2-0.74.12.61.92.22.0+0.4-0.1South Asia 4.76.35.46.03.6-4.27.25.75.14.94.1+0.9+1.0India5.97.26.67.04.5-6.68.36.66.05.74.7+0.8+1.3South-East Asia5.35.45.65.04.4-3.73.75.44.14.13.8+1.3+0.3Indones
71、ia4.85.25.85.15.0-2.13.75.24.64.34.4+0.9+0.3Western Asia(excl.Cyprus)4.15.05.52.91.4-3.26.46.13.14.12.9+2.0+0.2Saudi Arabia1.74.05.81.90.8-4.33.98.63.66.63.9+2.0-0.3Trkiye 3.95.07.64.30.91.811.64.62.62.42.4+2.1+0.2Europe(incl.Cyprus)1.32.21.22.11.8-6.15.62.90.51.20.5+1.7-0.0European Union(EU 27)1.91
72、.80.82.21.8-5.75.43.50.82.00.6+1.4+0.1Euro area 1.91.60.62.01.6-6.25.33.40.72.00.6+1.4+0.1France1.81.61.11.71.8-7.86.82.61.02.01.0+0.6-0.0Germany1.61.02.01.81.1-3.72.61.90.01.10.0+0.8+0.0Italy1.50.7-0.81.10.5-9.06.63.70.72.50.5+1.2+0.2Russian Federation-5.96.23.11.22.2-2.75.6-2.1-1.3-7.41.3+5.3-2.7U
73、nited Kingdom2.32.01.82.11.6-11.07.54.10.02.6-0.9+1.5+0.9Oceania 3.63.22.82.62.1-2.14.83.81.93.62.1+0.1-0.3Australia3.73.32.82.52.0-2.14.83.91.83.92.3+0.0-0.4Memo items:Developed (M49,incl.Republic of Korea)2.32.21.72.11.8-4.35.32.50.91.71.0+0.9-0.0Developing(M49)4.96.45.84.43.6-1.66.93.83.93.73.9+0
74、.1-0.0Source:UNCTAD secretariat calculations,based on United Nations Global Policy Model;United Nations,Department of Economic and Social Affairs National Accounts Main Aggregates database,and World Economic Situation and Prospects 2023;and national sources.Note:Calculations for country aggregates a
75、re based on GDP at constant 2015 dollars.a Average.b Forecasts.7Global Trends and ProspectsFinancial distress in developing countries and private financial institutions in developed countries,heightened by rising borrowing costs,can trigger a crisis that may spread to the real economy through highly
76、 leveraged sectors,such as non-financial corporations and real estate.If central banks in developed countries continue to increase policy rates,losses for holders of existing bonds will mount as will the financial burden for developing countries facing the threat of capital flight and currency decli
77、nes as they look to rollover their debts.The global average results from a slight downward revisions for developed and developing countries.In developed countries,fiscal policy in 2022 retrenched more gradually than anticipated,likely in response to concerns that monetary tightening would choke off
78、demand quickly and in order to cushion the energy crisis in the fall.In fact,household consumption contracted in most large economies,as real wages stagnated or decreased,but business investment held up.In 2023,the combined impact of higher interest rates and high energy prices(even though not as hi
79、gh as in early 2022)with receding fiscal support is expected to further weaken household spending for consumption and residential investment.Business investment is also expected to slow down further or contract in response,as already witnessed in real estate,to weakening aggregate demand.This will l
80、eave annual growth well below the performance registered before the pandemic hit.Uneven growth across the developing world will remain a significant feature in 2023.Chinas expected return to stronger growth,close to its target of 5 per cent,will have positive knock-on effects on neighbouring develop
81、ing countries and beyond.However,this will be partly offset by persistent weakness elsewhere,particularly in Latin America.In many developing countries,fiscal space and the overall fiscal stance remain unstable,as external financial conditions make debt servicing costs more difficult to anticipate,w
82、hile softening commodity prices bring extra revenues to an end for exporters.Overall,pressure on developing countries to reduce fiscal deficits is expected to increase,while their role in global value chains is affected by strategic reshoring and“friendshoring”in the changing geopolitical situation.
83、Growth of global merchandise trade reached 2.7 per cent in 2022.This expansion of trade was almost at par with global output as expected in the Trade and Development Report 2022.This confirms that the 9.4-per cent boom registered by trade in 2021 was short-lived and partly due to a low base effect(U
84、NCTAD,2023).This figure also shows that the elasticity of trade to economic output has returned close to unity a pattern observed in the post-GFC era,which contrasts with the two pre-GFC decades when such metric used to exceed two.Although the annual growth of world trade was positive last year,on a
85、 monthly basis,international trade saw declining patterns across the board during the second half of 2022 and especially during the last quarter(figure 1).In volume terms,global trade was down 2 per cent(quarter on quarter)during the fourth quarter of 2022,while in dollar terms,the decline was almos
86、t twice this rate,because key commodity prices continued receding from their peak of the second quarter.This downward trend partly resulted from difficult supply conditions owing to the delicate COVID-19 situation in China which also spilled over into its neighbouring trade partners before the count
87、ry started to relax its pandemic restrictions.Also,manufacturers and distributors worldwide tried to reduce excess inventories after over-ordering due to the supply chain disruptions in 2020 and 2021.Under these circumstances,Kemp(2023)notes that the slowdown in global trade in late 2022 had been mo
88、re severe than the ones observed at the onset of the latest recessions(2001,2008 and 2020)or at mid-cycle slowdowns(2013 and 2015).TRADE AND DEVELOPMENT REPORT UPDATEApril 20238Figure 1 World merchandise trade,January 2010January 2023(Index numbers,average 2010=100)Source:CPB Netherlands Bureau for
89、Economic Policy Analysis,World Trade Monitor database.Note:The figures refer to data at constant prices.Country group classification relies on Ebregt(2020).60708090001802010-Jan2010-Nov2011-Sep2012-Jul2013-May2014-Mar2015-Jan2015-Nov2016-Sep2017-Jul2018-May2019-Mar2020-Jan2020-
90、Nov2021-Sep2022-Jul60708090001802010-Jan2010-Nov2011-Sep2012-Jul2013-May2014-Mar2015-Jan2015-Nov2016-Sep2017-Jul2018-May2019-Mar2020-Jan2020-Nov2021-Sep2022-JulWorldAdvanced economiesEmerging economies6070809000001806070809
91、00000180ChinaEmerging Asia excl.ChinaEastern Europe and CISLatin AmericaAfrica and Middle EastEuro areaUnited StatesUnited KingdomJapanAdvanced Asia excl.JapanOther advanced economies2010-Jan2010-Nov2011-Sep2012-Jul2013-May2014-Mar2015-Jan2015-N
92、ov2016-Sep2017-Jul2018-May2019-Mar2020-Jan2020-Nov2021-Sep2022-Jul2010-Jan2010-Nov2011-Sep2012-Jul2013-May2014-Mar2015-Jan2015-Nov2016-Sep2017-Jul2018-May2019-Mar2020-Jan2020-Nov2021-Sep2022-Jul2010-Jan2010-Nov2011-Sep2012-Jul2013-May2014-Mar2015-Jan2015-Nov2016-Sep2017-Jul2018-May2019-Mar2020-Jan20
93、20-Nov2021-Sep2022-Jul2010-Jan2010-Nov2011-Sep2012-Jul2013-May2014-Mar2015-Jan2015-Nov2016-Sep2017-Jul2018-May2019-Mar2020-Jan2020-Nov2021-Sep2022-Jul?Imports9Global Trends and ProspectsOver the course of 2023,trade is expected to initially pick up owing to a normalization of the inventory cycle and
94、 the rebound of Chinas economy.Also,recent movements of the Global Supply Chain Pressure Index(GSCPI)show that global supply chain conditions in many key markets have returned to normal after experiencing temporary setbacks,albeit relatively mild,around the turn of the year.As a result of its strong
95、 decline in February 2023,GSCPI decreased even below its historical average,the first time this index landed again in negative territories since August 2019(figure 2).Altogether these diverse normalizing patterns are expected to support trade,though these effects are likely to be moderate and also r
96、elatively short-lived.Yet,world trade is facing several headwinds.First,weaker economic activities worldwide will inevitably result in feebler external demand,and thus subdued international trade.Second,tighter financial conditions will affect primarily investment,which is more trade-intensive than
97、other components of aggregate demand.Also,continuing trade conflicts between China and the United States or Europe will be other drags on trade.As a result,the annual growth of international trade is expected to remain close to the growth of the world economy in 2023,though this forecast remains sub
98、ject to high uncertainties.Figure 2 Global supply chain pressure index(GSCPI),January 1998February 2023(Standard deviations from average value)Source:Benigno et al.(2023).Note:The index is normalized such that a zero indicates the index is at its average value,with positive values representing how m
99、any standard deviations the index is above this average value(and negative values representing the opposite).1998-Jan1998-Dec1999-Nov2000-Oct2001-Sep2002-Aug2003-Jul2004-Jun2005-May2006-Apr2007-Mar2008-Feb2009-Jan2009-Dec2010-Nov2011-Oct2012-Sep2013-Aug2014-Jul2015-Jun2016-May2017-Apr2018-Mar2019-Fe
100、b2020-Jan2020-Dec2021-Nov2022-Oct-2-1012345TRADE AND DEVELOPMENT REPORT UPDATEApril 2023103.Regional prospectsAmericasGross domestic product in the United States expanded 2.1 per cent in 2022,close to the previous estimate of 1.9 per cent(TDR,2022).For 2023,growth is expected to more than halve.This
101、 is below the figure foreseen last September,on the assumption that the credit crunch arising from increased financial risks will not be fully offset by an earlier than expected halt in monetary tightening.A possible upside could still arise from stronger improvements in the construction sector in t
102、he second half of the year.In 2022,Latin Americas largest economies expanded faster than initially expected.Mexico grew 3.1 per cent,compared to the initial projection of 1.8 per cent(TDR,2022).In 2023,the Mexican economy is expected to expand by the same rate,which will still be a substantial decel
103、eration in comparison to 2022,pulled mostly by the continuing disinflationary policy of the Central Bank of Mexico.Brazil grew 2.9 per cent instead of 1.8 because of fiscal expansion and the rebound in world commodity prices.Since these two forces are no longer in action,UNCTAD expects Brazils GDP t
104、o decelerate to 0.9 per cent in 2023.The slower growth will come from a restrictive fiscal policy together with the delayed recessive effects of the sharp monetary tightening by its Central Bank in 2022.Argentina benefitted from favourable international conditions in 2022 growing 5.4 per cent instea
105、d of 4.1.However,for 2023,we continue to expect a substantial deceleration with a contraction of 0.5 per cent due to falling agricultural production(for climatic reasons)and an increase in monetary and exchange-rate uncertainty(due to rising inflation and the October presidential election).Disinflat
106、ion policies,coupled with current-account constraints,are expected to put the brakes on growth in Chile,Colombia,and Ecuador.Central America and the Caribbean are projected to decelerate more mildly in 2023,owing to a rebound of tourism.EuropeIn 2022,the three largest economies of the European Union
107、 Germany,France and Italy regained their pre-pandemic levels of real income.For Germany and Italy,however,the year was not entirely one of catching up:in the last quarter of 2022,economic activity contracted compared to the previous quarter.Aggregate data for the European Union reflect this oscillat
108、ion,with a recovery in the first half of the year and a slight contraction toward years end.Since the publication of TDR 2022,economic growth in Germany has been dragged down by falling private consumption expenditure,which was hit by falling real wages,and falling investment,both private and govern
109、ment.The economy has been buoyed by an improvement of the trade balance,which turned around after a year of deterioration,and by an increase in the Governments current expenditure,which includes compensation of military personnel.These positive forces were not enough to push the whole economy into g
110、rowth territory.Recent data for the first quarter of 2023 indicate that,although input prices have eased,Germanys economy is facing stagnating or contracting demand for its manufacturing product.Advance indicators thus point to contracting industrial production.In this context,Germany is forecast to
111、 experience no growth in 2023.The French economy suffered a contraction of real private consumption expenditure in the last quarter of 2022,as households were affected by falling real wages,the impact of which was softened by government subsidies and price controls through State-owned energy compani
112、es.The drag on growth 11Global Trends and Prospectsexercised by private consumption was outweighed by moderate expansions in private investment and government spending on goods and services(in the form of both investment and government employment)as well as by a slight improvement in the external ba
113、lance.In 2023,the French economy is expected to grow 1.0 per cent.Italy experienced contracting consumption demand,with household spending hit by falling real wages,especially for energy,but the economy was sustained by moderately expanding private investment and government spending.The countrys eco
114、nomy was also buoyed by an improved trade balance in the last quarter of 2022.With energy prices easing,early data point to a recovery of real household spending in 2023.The country is projected to grow 0.7 per cent in 2023.By the end of 2022,the United Kingdom had not yet regained its pre-pandemic
115、level of real income.It experienced a recovery in the first half of the year but stagnated in the last quarter,mostly due to two factors:falling real household consumption,due to falling real wages,and a deteriorating external balance.Moderate expansion of private investment and government spending
116、on goods and services were able to keep the economy from contracting but were short of the investment push necessary to build up the economys manufacturing sector in response to Brexit.The United Kingdom is forecast to continue to deal with this transition in 2023 and to stagnate throughout the year
117、.Russian Federation Provisional data indicate that in 2022 the Russian GDP contracted by 2.1 per cent.The impact of sanctions has been smaller than many predicted.There are two main reasons behind the relative resilience of the Russian economy.First,capital controls and stimulus measures introduced
118、by the government in spring 2022 have helped avoid a crisis of the financial system and support the rouble.Second,the adaptability of trade and business links,with redirected exports in the face of external sanctions supporting domestic retail trade and production.Also,during the course of 2022,the
119、decline in household final consumption expenditure,which is in part related to the winding down of demand stimulus measures such as preferential mortgages,has had a negative impact on economic growth.Partly this loss has been compensated through government support to individual sectors.Looking ahead
120、,the Russian economy is expected to contract by 1.3 per cent in 2023,with inflation fluctuating around 6 per cent and pressures on the federal budget increasing.Japan and East AsiaJapan had not yet regained its pre-pandemic level of real income by the end of 2022.However,the year was one of catching
121、 up for its economy,with expanding demand across the board.Household consumption increased,thanks to stable real wages,as did private investment and government spending.The economy also benefited from a recovery of its trade balance in the last quarter of 2022,despite a depreciated currency vis-vis
122、the dollar and the euro.Altogether,the Japanese economy is forecast to grow 1.6 per cent in 2023.East Asias GDP growth declined sharply to 2.6 per cent in 2022,following a rebound of 6.4 per cent in 2021.The 2022 regional figure is 0.6 percentage point below its previous estimate(TDR,2022),owing to
123、a slowdown in China,which adversely impacted several economies across East Asia and beyond.Following changes in the Chinese zero-Covid strategy,regional economic activity is expected to expand moderately at a rate of 3.9 per cent in 2023.China grew 3.0 per cent in 2022,following a contraction that l
124、asted through the third quarter.In the fourth quarter,the relaxation of the zero-Covid measures led to an uptick.All components of GDP TRADE AND DEVELOPMENT REPORT UPDATEApril 202312decelerated strongly in 2022,especially private consumption and external demand.In a context of slowing trade expansio
125、n,Chinas current account remained positive.Inflationary pressures remained mild in China.With non-performing loans in real estate still burdening the financial sector,Chinas monetary policy remained accommodative and interest rates were lowered last August,against the global trend.Also,fiscal policy
126、 is expected to become more supportive.Chinas GDP growth is expected to pick up to 4.8 per cent in 2023.The Republic of Korea slowed down to 2.6 per cent in 2022 and is expected to decelerate to 1.9 per cent in 2023.The ongoing slowdown has been driven by falling exports in the second and third quar
127、ter,particularly in the electronics sector,related to supply bottlenecks in China.It was further enabled by a more neutral fiscal stance and aggressive monetary tightening,which already started in August 2021.Inflation,however,rose above 5 per cent in 2022 pushed by the countrys strong dependence on
128、 imported fossil energy.South AsiaSouth Asia registered growth of 5.7 per cent in 2022,0.9 percentage points higher than projected in TDR 2022.However,the stark rise in already high poverty rates has not abated yet.UNCTAD expects the region to expand at a still fast pace of 5.1 per cent in 2023,driv
129、en by the growth of its largest economy,India.Strong dependence on extra-regional fossil imports will keep the region vulnerable to inflationary pressures,which may trigger further monetary tightening while public spending may be curtailed by budgetary pressures.India grew 6.6 per cent in 2022,cedin
130、g the pole position among G20 countries in 2022 to oil-rich Saudi Arabia.The positive effect of high public and private investment and consumption as well as rising exports was partly offset by higher energy import bills,which deepened the current account deficit and ate up reserves.The Reserve Bank
131、 of India started tightening its policy stance during the spring of 2022 to limit damage caused by foreign capital outflows,a weakening currency and inflation risks.Higher financing cost slightly dented buoyant economic activity,and over-leveraging in the corporate sector may become a factor of fina
132、ncial instability.In view of financing its growth ambitions,the Indian Government has committed to massive infrastructure investment.In 2020 and 2021 and in the energy sector alone,funds amounting to$160 billion had been committed to fossil and non-fossil projects alike.Meanwhile,as current governme
133、nt spending has been weakening,but export orders remain on the rise,GDP growth is projected to decelerate to 6.0 per cent in 2023.Highly indebted South Asian countries,such as Sri Lanka or Bangladesh,will keep facing pressures from external creditors to cut public spending and cancel social,producti
134、ve and climate adaptation investments.Meanwhile,Pakistan may register a rebound as the country progressively recovers from the floods of 2022,which generated loss and damage amounting to an estimated 8 per cent of GDP(section E).South-East Asia South-East Asia expanded by 5.4 per cent in 2022.In 202
135、3,growth in the region is expected to decelerate to 4.1 per cent in the context of sluggish growth of global trade and continued monetary tightening in advanced economies exerting negative ripple effects on developing economies.The Indonesian economy grew by 5.2 per cent in 2022,a strong performance
136、 largely resulting from the lifting of COVID-19 restrictions,favourable conditions for energy and commodity exports as well as the accommodative stance of the central bank during the first half of the year.As authorities initiated 13Global Trends and Prospectsmonetary tightening in August 2022,house
137、hold consumption started weakening,but supply-side induced inflationary pressures remain.Indonesia,like other developing economies,is caught in the double bind of economic development and climate targets and has limited policy space to invest in clean energy and reconcile these objectives.As the 202
138、3 budget aims at bringing the Government deficit down to 3 per cent of GDP,including by rolling back fuel subsidies by 30 per cent,economic expansion is projected to decelerate to 4.6 per cent in 2023.West AsiaIn 2023,West Asia is expected to grow by 3.1 per cent;almost half the 6.1 per cent registe
139、red in 2022 following the strong recovery from the COVID-19 pandemic.Commodity-importing countries are particularly exposed to energy and food prices.These pressures may be aggravated by rising interest rates and tightening of international financing conditions.Meanwhile,in the regions commodity-exp
140、orting countries,higher fiscal revenues from energy exports have opened large fiscal space to provide relief to households from increased consumer prices.Several countries in the region face additional risks emanating from conflict and political unrest.The State of Palestine is exposed to serious ri
141、sk and uncertainty.Escalating confrontations with Israel and security deterioration compound longstanding,pre-existing vulnerabilities.In the Syrian Arab Republic,a devastating earthquake in February 2023 and the ongoing armed conflict suggest that economic performance this year will be one of the w
142、eakest in the region.In Saudi Arabia,growth in 2023 is expected to be 3.6 per cent;down from 8.6 per cent registered in 2022.Saudi Arabias robust performance was driven by the oil sector in line with the output increases contained in the OPEC+agreement.In fact,Saudi Arabian Oil Company(Aramco)announ
143、ced a record$161 billion net income in 2022.Increased fiscal revenues from oil exports will continue to help finance the governments ambitious public investment plans,particularly for large-scale infrastructure projects.Improved revenues from oil exports also secure resources for the fiscal packages
144、 aimed at mitigating inflationary pressures on households.In February 2023,Trkiye suffered a devastating earthquake that caused an estimated$34.2 billion in direct physical damages,or 4 per cent of GDP.Reconstruction and recovery costs will be much larger,potentially twice as large(World Bank,2023).
145、Though earthquakes usually take a gigantic toll on existing assets and affect negatively economic activity in the short term,subsequently,large-scale rebuilding activities add to GDP.In this context,Trkiyes GDP is expected to grow by 2.6 per cent in 2023,though this forecast is subject to significan
146、t uncertainties.In 2022 Trkiyes inflation rate topped 70 per cent,owing partly to the continued depreciation of the Turkish Lira.The cost of servicing the countrys considerable foreign-denominated debt increased,while tightening global financing conditions heaped additional challenges.The upshot is
147、sharply reduced fiscal space.AfricaIn 2023,Africa is projected to expand 2.5 per cent,a drop from last year and at a pace insufficient to make a dent in poverty levels.Like in other developing regions,weaker external demand and tighter financial conditions have made growth prospects gloomier for the
148、 region.In the case of commodity exporters,the fading of the initial effects of the 2022 price boom will add to the equation.Rising global interest rates have triggered significant capital outflows and have further constrained fiscal space,at a time when public finances were already severely affecte
149、d by costly subsidy schemes aiming at contending the adverse effects of high food and energy prices.TRADE AND DEVELOPMENT REPORT UPDATEApril 202314Under these circumstances,the risk of stagflation is a key concern for many African economies.In approximately half of the countries,inflation remained d
150、ouble digits in early 2023.In many instances,these recent inflation spikes relate to the continuing depreciation of several African currencies in early 2023 often following a loss in 2022 of 1030 per cent of their value vis-vis the dollar.Public debt,in many cases standing at levels not seen since t
151、he early 2000s,is another worry across the continent.Out of the 38 African countries that are part of the Debt Sustainability Framework(DSF)of IMF and World Bank,8 entities are already“in debt distress”,while 13 are considered“at high risk”of distress.1 Furthermore,many African economies are approac
152、hing a maturity wall as maturities on international bonds issued in the previous decade are expected to peak in2024and to remain elevated for the next decade,with most governments unable to tap international capital markets to roll over maturing debts.Country-specific challenges and idiosyncratic sh
153、ocks in large African economies also contributed to the grimmer aggregate outlook of the region.In South Africa,persisting disruptions in electricity supply,including more intensive load-shedding will keep raising input costs for producers looking for costlier energy alternatives,and overall,greatly
154、 affect economic activity.In Nigeria,a shortage of cash,triggered by the replacement of the highest denominations of the countrys currency,hobbled the economy,especially the informal sector.Meanwhile,the continuing decline of oil production,accompanied by large-scale oil theft,poses a main threat to
155、 strained finances in Africas most populous nation.In Egypt,a foreign currency shortage has hit badly the import-dependent economy,forcing the Government to accept an agreement with the IMF for the fourth time in six years and to plan a vast privatization programme.On the positive side,Africas touri
156、sm-dependent economies recovered altogether about two thirds of their pre-pandemic visitors in 2022(UNWTO,2023),while this upward trend is expected to continue over the year.Also,the reopening of the Chinese economy is expected to boost demand for key commodities such as iron ore,platinum,copper and
157、 steel in early 2023,though such initial boost might not continue throughout the entire year since Chinas commodity-intensive construction sector is unlikely to grow at a fast pace in the years ahead.Overall,risks remain tilted to the downside.The rising domestic cost of living and a deteriorating s
158、ecurity situation remain of a key concern in many parts of the continent.More than 116 million African people are currently in acute food insecurity according to the latest projections of WFP and FAO(2022).C.INFLATION WOES:THE LIMITS OF MONETARY TIGHTENINGAchieving price stability without sacrificin
159、g growth has remained a challenge for policymakers in most advanced economies.In the final quarter of 2022,with inflationary pressures still entrenched,central banks continued to hold to strict inflation targets and to tighten monetary policy in an effort to squeeze any“excess demand”out of the econ
160、omy;both the Fed and the ECB(from a lower starting point)raised rates over the final three months of the year,by 175 and 225 basis points respectively,with similar moves by other leading central banks.1 https:/www.imf.org/external/pubs/ft/dsa/dsalist.pdf15Global Trends and ProspectsThis happened des
161、pite mounting evidence that pointed away from excess demand and to supply-related problems.Calls were voiced for a new monetary normal around a higher inflation target,which would ease the restrictive pressures on the Fed and the ECB,without sacrificing too much in terms of efficiency and price vola
162、tility.Some observers suggested central banks should adopt a 3-per cent target(Blanchard,2022)while others proposed a more flexible target varying,for example,between 2 and 4 per cent(Stiglitz,2023).With the heightened financial instability discussed earlier now taking centre stage in central bank d
163、ecisions the willingness of governments to use a broader set of policy instruments to deal directly with the multiple sources of current inflationary pressures,including rising profit margins in some key sectors,would seem the right move.Doing so would,moreover,help alleviate the undue financial pre
164、ssure facing many developing countries as interest rates have risen.As discussed in the Trade and Development Report 2022,the first signs of accelerating inflation began to appear in the United States and in some emerging markets in the early months of 2021.Various temporary factors contributed to t
165、he initial acceleration,as well as some factors that eventually proved more persistent.Disruptions to global trade impacted availability and cost of imports;looser health restrictions and the wealth effect of extra-loose monetary policy drove consumption demand in key markets,while small increases i
166、n the real wages of lower income groups created some cost pressure.The well documented pro-cyclical pricing behaviour of producers and retailers also began to kick in.By the third quarter of 2021 prices were rising at a pace last seen just before the GFC but not noticeably dissimilar from earlier re
167、covery episodes(figure 3).At that point key policy decisions were taken,which defined the subsequent path of inflation and growth.First,failure to distribute effective vaccines worldwide prolonged the pandemic,allowing some of the more temporary factors to linger on,eventually interacting with an in
168、crease in commodity prices,triggered largely in futures markets.As the war in Ukraine began,some commodity prices spiked up,raising inflation rates further,especially in the European Union(see TDR,2022:61-62 and 88-89 for a discussion of energy commodity prices).Second,as the focus of policymakers t
169、urned to the threat of a wage-price spiral and accompanying expectational consequences(a worry,which would turn out to be mostly unfounded),the danger from speculative pressures on commodity prices as well as retail and producers price-setting practices was ignored or missed altogether.As a result o
170、f this policy myopia,prices in some key sectors with a direct bearing on the cost of living,such as natural gas,food and the rental housing sector,continued to rise alongside a sharp increase in profit margins(see subsection C.1).Where data is available,as in the European Union,the United Kingdom an
171、d the United States,there is clear evidence of a significant contribution of higher profit margins to inflation coming out of the pandemic(Bivens,2022;Ferguson and Storm,2022;Hayes and Jung,2023;Onaran,2023;Schnabel,2022;Weber and Wasner,2023)and indirect indicators suggest that similar dynamics hav
172、e been at play elsewhere,including in developing countries(TDR,2022:27).Inflation appears to have peaked in the final quarter of 2022 in most regions.Since then,the energy component has weakened thanks also,in some cases,to the introduction of price caps.However,starting with developed countries,tab
173、le 2 shows that,in some members of the European Union,the cost of food items has risen significantly.A similar trend is visible in the United Kingdom and,to a smaller extent,in the United States.TRADE AND DEVELOPMENT REPORT UPDATEApril 202316Figure 3 Consumer price index,selected economies,January 2
174、020January 2023(Year-on-year percentage change)Source:OECD.Stat.---------112023-01OECD economiesBrazilChileIndonesiaSouth Africa-202468204060801001-
175、--------112023-01OECD economiesArgentinaTrkiye---------112023-01-20246810121416-0
176、--------112023-01-2024681012141618OECD economiesCanadaFranceGermanyItalyOECD economiesJapanPolandUnited KingdomUnited States?17Global Trends and ProspectsTable 2 CPI inflation rates and contributio
177、ns,selected developed countries,20182023Annual CPI inflation(Year-on-year percentage change)Weight(%)Contribution to total inflation(%)200212022Q1-2022Q2-2022Q3-2022Q4-2022Jan.23Feb.232021/2220212022Jan.23Feb.23FranceAll items1.91.10.51.65.23.75.35.86.16.0*6.3Food 2.02.42.00.67.32.45.08.7
178、12.914.2*14.814.65.019.834.133.9Energy9.41.8-6.010.623.723.929.623.418.016.3*14.19.154.640.024.320.0Non-food non-energy1.10.80.91.02.81.82.73.33.33.2*3.876.440.440.141.146.0GermanyAll items1.71.40.13.16.94.86.77.48.68.78.7Food 2.31.22.13.112.55.310.115.519.219.220.711.912.121.826.528.5Energy4.61.4-4
179、.210.930.125.333.831.430.124.020.07.426.432.620.617.1Non-food non-energy1.31.50.32.33.92.93.74.05.05.75.980.761.446.152.954.7PolandAll items1.72.33.45.114.39.613.916.317.3*16.6*18.4Food 2.64.94.83.215.48.713.517.421.9*20.6*24.026.616.328.633.034.6Energy3.6-0.4-0.612.129.821.633.135.329.2.17.240.135.
180、8.Non-food non-energy0.72.03.94.19.16.68.410.011.3.56.244.335.6.United KingdomAll items2.31.71.02.57.95.57.98.79.48.8*9.2Food 2.11.40.70.310.95.18.413.516.616.8*18.29.41.112.217.218.8Energy6.92.1-6.69.446.724.553.952.955.250.7*41.2620.335.735.429.2Non-food non-energy1.91.71.52.35.34.55.35.65.85.3*5.
181、784.778.552.447.952.0United StatesAll items2.41.81.24.78.08.08.68.37.16.46.0Food 0.50.93.53.511.48.711.713.212.111.410.185.511.514.914.3Energy7.5-2.1-8.521.325.528.335.625.512.78.75.27.731.825.511.37.2Non-food non-energy2.12.21.73.66.26.36.06.36.05.65.584.463.362.674.078.4Source:OECD.Stat and nation
182、al sources.Note:Figures with asterisk(*)are filled from national sources.Weights are measured as percentage of the National CPI Total.2021 weights are used for 2021 contributions,2022 weights are used for 2022 and 2023 contributions.The table column shows the average of 2021/22 weights.TRADE AND DEV
183、ELOPMENT REPORT UPDATEApril 202318At the same time,the import component of the price deflator has begun a descent,which suggests that domestic pricing dynamics in the food and electricity retail sectors might persist.In Italy,for example,production costs are clearly rising less than consumer prices(
184、figure 4).Figure 4 Deflators for Germany,Italy and the United Kingdom,first quarter of 2019fourthquarter of 2022(Index numbers,2015=100)Source:OECD.Stat.The impact on the consumer price index of trends in input costs differs across countries depending on market structure and regulation.Most developi
185、ng countries were broadly affected by the Feds announcement,in June 2021,of future interest rate increases,which triggered a depreciation of many currencies against the dollar,and,in turn,raised the cost of their imports(table 3).The impact of different regulations is also evident,particularly in im
186、portant commodity exporting countries.Indonesia and Poland,for example,are both coal producers and exporters.Only the former,however,was able to limit the increase in the cost of living by controlling consumer prices,especially of electricity(figure 5).Poland only began implementing a price cap on e
187、lectricity for households and grants for energy intensive firms in 2023.Q1-2019Q2-2019Q3-2019Q4-2019Q1-2020Q2-2020Q3-2020Q4-2020Q1-2021Q2-2021Q3-2021Q4-2021Q1-2022Q2-2022Q3-2022Q4-2022900140150Q1-2019Q2-2019Q3-2019Q4-2019Q1-2020Q2-2020Q3-2020Q4-2020Q1-2021Q2-2021Q3-2021Q4-2021Q1-2022Q2-20
188、22Q3-2022Q4-2022United KingdomQ1-2019Q2-2019Q3-2019Q4-2019Q1-2020Q2-2020Q3-2020Q4-2020Q1-2021Q2-2021Q3-2021Q4-2021Q1-2022Q2-2022Q3-2022Q4-202290Deflator:Gross domestic productDeflator:Private final consumption expenditureDeflator:Imports of goods and services0140150GermanyItaly90100110120
189、Global Trends and ProspectsTable 3 CPI inflation rates and contributions,selected developing countries,20182023Annual CPI inflation(Year-on-year percentage change)Weight(%)Contribution to total inflation(%)200212022Q1-2022Q2-2022Q3-2022Q4-2022Jan.23Feb.232021/2220212022Jan.23Fe
190、b.23ChileAll items2.42.63.04.511.68.311.513.613.012.311.9Food 3.12.66.75.417.79.216.821.023.623.921.419.323.229.738.534.5Energy5.92.21.09.020.918.320.523.521.116.713.27.515.113.710.58.3Non-food non-energy1.92.62.33.89.07.19.110.59.18.69.173.262.156.952.555.4MexicoAll items4.93.63.45.77.97.37.88.58.0
191、7.97.6Food 4.84.46.67.213.312.513.014.313.212.812.325.832.742.742.241.7Energy13.02.4-3.613.75.35.76.16.42.92.61.61024.19.63.42.1Non-food non-energy3.73.53.23.96.05.35.86.36.56.66.564.243.448.154.255.0South AfricaAll items4.54.13.24.67.05.86.77.97.77.2.Food 3.13.54.46.19.36.17.511.112.313.6.17.122.72
192、2.732.3.Energy10.35.2-0.114.323.623.326.027.518.010.9.8.526.528.712.9.Non-food non-energy4.24.13.43.14.63.74.34.95.45.3.74.350.448.454.5.TrkiyeAll items16.315.212.319.672.354.874.181.177.457.755.2Food 18.019.513.824.385.663.691.692.692.371.069.325.431.429.431.132.1Energy19.313.67.821.7126.6102.4148.
193、6140.6116.047.242.211.411.920.79.99.3Non-food non-energy15.313.912.417.458.644.256.467.165.054.251.963.256.949.558.458.9Source and note:See table 2.TRADE AND DEVELOPMENT REPORT UPDATEApril 202320Figure 5 Deflators for Indonesia and Poland,first quarter of 2019fourth quarter of 2022(Index numbers,201
194、5=100)Source:OECD.Stat.In conclusion,inflation continues to be driven by international prices of energy and food commodities,with countries able to exert some degree of control over these pressures depending on their market structure and concentration and on their ability to administer consumer pric
195、es and the effects of the financial pressures on the currencies.Countries that have undergone rapid liberalization in these critical sectors and those with previous financial vulnerabilities,remain the most exposed.Under these circumstances,the choice by leading central banks to quickly raise intere
196、st rates has failed to tackle the main causes of inflation.In the case of many developing countries,it has reduced fiscal space further.Hence,a reconsideration of the policy-tools for price stability is in order,even if commodity prices begin to fall.In fact,extremely low prices can be just as damag
197、ing and should be avoided(TDR,2022).1.Hungry for profits:food prices and the cost-of-living crisis Rising food prices have been a major factor behind the recent episode of accelerating inflation(Barrett,2022).As the Global Crisis Response Group of the United Nations noted,even before the eruption of
198、 the war in Ukraine in February 2022,food import bills across developing countries had risen due to higher prices in global markets,with nearly two thirds of the increase of costs concentrated in developing countries(United Nations,2022a).The global food market is dominated by the big four“agripolie
199、s”,known by the abbreviation ABCD,2 which trade key food commodities,from soybeans to orange juice.Partly due to the recent breakdown in commodity supply chains,their control over the production chain and price volatility,these companies registered up to a threefold increase in profits in 2021(Publi
200、c Eye,2023).In the context of rising prices and heightened food insecurity around the world,the food trading sector warrants closer attention.2 Archer Daniels Midland Company(ADM),Bunge,Cargill,and Louis Dreyfus Company(LDC).Deflator:Gross domestic productDeflator:Private final consumption expenditu
201、reDeflator:Imports of goods and services0140150160Q1-2019Q2-2019Q3-2019Q4-2019Q1-2020Q2-2020Q3-2020Q4-2020Q1-2021Q2-2021Q3-2021Q4-2021Q1-2022Q2-2022Q3-2022Q4-2022Indonesia0140150160Q1-2019Q2-2019Q3-2019Q4-2019Q1-2020Q2-2020Q3-2020Q4-2020Q1-2021Q2-2021Q3-2021Q4-2021Q1-2022Q2-202
202、2Q3-2022Q4-2022Poland21Global Trends and ProspectsFood trading is part of the wider commodity trading sector,which is a notoriously complex,opaque and poorly regulated.These features are also pronounced in agricultural trade,with implications industry for the availability of data:only 8 out of 15 fo
203、od trading companies being examined in this section are publicly traded and therefore required to publish consolidated accounts.3The lack of transparency of the sector means that generalizations about profit trends for individual companies,as well as for the sector as whole,are difficult to make.To
204、get a clearer picture of what has been contributing to the sectors profitability during the period 20202022,it is necessary to distinguish between several profit indicators of which profit before tax overall profit after deducting operational costs and financial profits or losses is most useful for
205、gauging the impact of financial activities on the bottom line of companies.Several trends that have come to characterize the industry in recent years can be detected.First,the agriculture price index shows growth since mid-2020,reflecting the overall growth in commodity prices during this period.The
206、 largest spike in prices in the commodity sector has been in fertilizers,showing more than a threefold increase at its peak since the second half of 2020(figure 6).Figure 6 International price indices of fertilizer and food,January 2018January 2023(Index numbers,2016=100)Source:IMF Primary Commodity
207、 Prices database.3 Given the diversified nature of the trades engaged in by the largest agriculture corporations,coupled with a high level of opacity inherent in current reporting,we have pursued a pragmatic approach to sample selection based initially upon current membership by“agricultural”firms i
208、n a leading trade body for the commodities sectors,the Commodities Market Council.As of March 2023,agricultural firms participating in the CMC are attributable to 9 distinct corporate groups.This membership is overwhelming heavy with United States-centric firms.To help balance this bias out,we have
209、identified 6 other major players from groups organized around several other major agriculture economies.For all 15,we mapped out the current structure of the corporate groups to identify which entities,from which jurisdictions,were producing consolidated and audited accounts on behalf of the corpora
210、te group as a whole.We then assessed available financial reporting by those entities.Our information came from the Orbis dataset provided by the commercial data publisher,Bureau Van Dijk.This is both because Orbis is the only consolidated source of information on the activities of public as well as
211、private companies at a global level,but also because Orbis helps to standardize financial reporting to facilitate better comparisons for a global set of corporations.This also mean some firms,most notably Cargill Inc and Noble Group Limited,do not provide information at the standard required for our
212、 analysis.Groups like these provide some figures publicly on their website,but these represent unaudited and selectively presented information unsuited to our investigation.5003003502018M012018M032018M052018M072018M092018M112019M012019M032019M052019M072019M092019M112020M012020M032020M0520
213、20M072020M092020M112021M012021M032021M052021M072021M092021M112022M012022M032022M052022M072022M092022M112023M01FertilizersFoodTRADE AND DEVELOPMENT REPORT UPDATEApril 202322Second,FAO food price index increased by 14 per cent between 2021 and 2022.In contrast,both revenues and profits in the food tra
214、ding sector had grown by a multiple of that figure(figure 7).And it is profits before tax that has increased the most,especially when contrasted with operating profits a measure that excludes financial revenue highlighting the critical role that financial operations are playing in this sector and no
215、ticeably so since the second half of 2020.Figure 7 Median food traders profits and revenues,20182022(Index numbers,2019=100)Source:UNCTAD secretariat calculations based on Orbis database.Note:Based on available corporate data from Akira Holding Foundation,Andersons Inc.,Archer Daniels Midland Compan
216、y,Bunge Ltd.,Cargill Inc.,CGB Enterprises.,CHS Inc.,Glencore Plc.,Scoular Company,CMOC Group Ltd.,COFCO Corporation,GrainCorp Ltd.,OFI Group Ltd.,Noble Group Ltd.,Wilmar International Ltd.These findings raise two concerns.Why has this sectors income(and especially profit before tax)grown significant
217、ly faster than prices in recent years?The answer lies,to a significant extent,in the finance-enabled capacity of traders to ride the wave of market volatility.The financialization of commodity trading has been a strong trend in the world economy since the early 2000s,boosted by the spread of securit
218、ization and the introduction of financial market indices for particular commodities.Entry into these markets of hedge funds,banks and asset-backed traders,as well as the growing need for companies in the industry to manage risks associated with international market volatility,have made financial mar
219、kets the dominant influence on commodity trading.Gross profitProfit before taxOperating revenues708090000220230240200212022results*preliminary23Global Trends and ProspectsAs the profit trends presented in figures 7 and 8 indicate,during the past four years
220、 of global economic uncertainty,the ability of commodity traders generally,and of food trading companies in particular,to ride the wave of market volatility by relying on financial mechanisms such as derivatives trade,has been a key determinant of their profitability.Figure 8 Total global commodity
221、trading gross margin,20182022(Billions of dollars)Source:Oliver Wyman(2023).Note:2022 figures are estimates.According to the FSB(2023),commodities are the most concentrated segment of the derivatives markets.At the same time,commodity derivatives are the smallest component of the global derivatives
222、trading.This contrast suggests that the bulk of financialized trades in commodities and food take place over the counter(OTC),or in the shadow banking system.These two dimensions of opacity industrial and corporate complexity of commodity traders,as well as their historical reliance on unregulated f
223、inancial platforms raise serious political economy and regulatory issues.Gross margin by commodity2021/2022115Power,gas,and emissions90%Oil 55%Liquefied natural gas 40%Metals and minerals50%Agricultural and food products 45%2022e40%5%3%32%31%11%18%asset-backed asset-backed tradersHedge funds115Banks
224、4080The historic peak of 2009120201960%from tradersOtherTRADE AND DEVELOPMENT REPORT UPDATEApril 202324D.CHRONICLE OF A DISASTER FORETOLD:DEBT AND DEVELOPMENT DISTRESS IN 2023 AND BEYONDDebt has become a major obstacle to development efforts in many developing countries.The growing burden of debt,in
225、 a context of reduced fiscal space and unreliable liquidity access,is limiting the ability of these countries to respond to shocks and develop their economies.Altogether,these setbacks create a negative feedback loop,resulting in even higher debt burdens.Despite the severity of the situation,the mul
226、tilateral response to the debt and development crisis has been,and remains,too little-too late.The ongoing financial turbulence in developed countries is just one more external shock that developing countries have had to deal with in recent years,without adequate multilateral support.Additional unce
227、rtainty arises from flaws in the global financial safety net(GFSN)and international debt architecture.Financial safety mechanisms,such as swap lines between central banks,apply asymmetrically across the globe,neglecting economies in the Global South deemed to have low systemic impact.They also leave
228、 out many middle-income countries that are highly integrated into global financial markets,who end up depending on the goodwill of advanced countries central banks.1.Developing country debt dynamics under unfavourable monetary conditions In recent years,developing countries have seen public debt sur
229、ge.4 This can be attributed to the consequences of a series of global crises such as the COVID-19 pandemic,the war in Ukraine,and climate change as well as governance failures at the domestic and multilateral levels.Specifically,the combined stock of total public debt of low-and middle-income develo
230、ping countries,excluding China,increased$1.9 trillion within two years to reach$11.5 trillion in 2021(or 58.9 per cent of their combined GDP,worth$19.5 trillion).5 Rising interest rates and,unstable exchange rates and volatile capital flows are making it increasingly difficult for these countries to
231、 mobilize resources for development and meet their debt obligations.These difficulties are further compounded by the fact that,in many cases,foreign investors have been pulling out their capital,foreign reserves have declined and ultimately,external borrowing costs have increased.Developing countrie
232、s are particularly vulnerable to the volatility of private capital flows,which has increased in recent years as highlighted for instance in the net flow to emerging market(EM)funds(figure 9.A).In 2021,these rose sharply owing to a rebound of equity funds.The year after resulted in large net outflows
233、 of$94 billion,mostly from bond funds.In early 2023,EM fund flows have been very sensitive to changes in the outlook of monetary policy in the United States.In January,for instance,the expectation of a lower terminal Fed interest rate,following an easing of inflationary pressures in the United State
234、s,led to large inflows.However,since February 2023,there has been a resumption of bond outflows due to recent uncertainty regarding the path of Fed interest rates and growing signs of stress in financial institutions in Europe and the United States(figure 9.B).4 Developing countries in this section
235、refer to countries classified as low-and middle-income countries according to the World Bank classification of 2022.5 UNCTAD secretariat calculations,based on IMF(2022).Data refer to gross government debt.25Global Trends and ProspectsFigure 9 Bond and equity emerging market fund flows,20172023(Billi
236、ons of dollars)Source:JP Morgan(2023a).EM Flows Weekly.25 March.Note:Fund flows depict net flows into EM-dedicated investment funds.Data for 2023(panel A)and March 2023(panel B)are incomplete(see the source for further details about the countries,the time period and the types of financial flows that
237、 these data cover).Net outflows of capital translate to decumulation of official reserves if central banks defend the currency.Data on 81 developing countries show that international reserves decreased by$362 billion(5.3 per cent)in 2022,or$241 billion(7 per cent)if China is excluded.Nearly two thir
238、ds of these countries experienced a decline in reserves,with 22 countries losing 10 per cent or more of their reserves over the course of the year.6 Also,private capital outflows influence sovereign bond dynamics of developing countries(figure 10).Sovereign bond issuance over the past few years has
239、dropped from$232 billion in 2020 to$183 billion in 2021,and further to$97 billion in 2022(JP Morgan,2023b),while borrowing costs have increased,as signalled by two developments.First,sovereign bond yields have been rising since late 2021,particularly for African countries.(figure 10.A).Secondly,the
240、group facing bond spreads over Treasuries above one thousand basis points(or 10 percentage points),has grown from 4 to 19 countries in the past four years.With a total population of 836 million,these countries have little to no access to international financial markets(figure 10.C).Among them,sixtee
241、n are classified as middle-income countries,which excludes them from concessional financing and,of these,12 are not eligible to participate in the G20 Common Framework for Debt Treatments(CF).This group faces a heavy debt burden,but it has no access to market or multilateral finance to roll them ove
242、r.Access to international finance does not mean lower borrowing costs.Most countries now face the prospect of substantially higher borrowing costs compared to their existing interest rates,as shown by the widening gap between bond yields and coupon rates(figure 10.D).This is bound to exacerbate the
243、burden of public debt in most developing countries.6 UNCTAD secretariat calculations based on Refinitiv.Data for 81 low-and middle-income countries for the year ending in December of 2022.Data available as of March 2022.-150-0200201720182019Apr.22May.22June.22July.22Aug.22Sept.22Oct.22
244、Nov.22Dec.22Jan.23Feb.23Mar.23*2020202120222023*EM BondsEM EquityEM BondsEM Equity-30-20-A.Annual flowsB.Monthly flowsTRADE AND DEVELOPMENT REPORT UPDATEApril 202326Figure 10 Sovereign bond market indicators,1 January 201917 March 2023Source:UNCTAD secretariat calculations based on Refini
245、tiv and JP Morgan EMBI.Note:The right axis in panel B refers to the percentage of low-and middle-income countries with spreads over the United States Treasuries above 1,000 basis points with respect to the 59 low-and middle-income countries that are included in the JPM EMBI Diversified index.Panel C
246、 on country level spreads does not depict Lebanon and Belarus due to spreads above 10,000 basis points.05101520Number of countriesShare(right axis)B.Low-income and middle-income countries with spreads over the United States Treasuries above 1,000 basis points 05540Percentage of countriesA
247、.Yields on dollar-denominated bonds0246810121416Jan.19Apr.19Jul.19Oct.19Jan.20Apr.20Jul.20Oct.20Jan.21Apr.21Jul.21Oct.21Jan.22Apr.22Jul.22Oct.22Jan.23Jan.19Apr.19Jul.19Oct.19Jan.20Apr.20Jul.20Oct.20Jan.21Apr.21Jul.21Oct.21Jan.22Apr.22Jul.22Oct.22Jan.23Jan.19Apr.19Jul.19Oct.19Jan.20Apr.20Jul.20Oct.20
248、Jan.21Apr.21Jul.21Oct.21Jan.22Apr.22Jul.22Oct.22Jan.23PercentageEmerging MarketsAfricaAsiaLatin AmericaZambiaUkraineSri LankaRussian Federation(the)GhanaTunisiaPakistanEthiopiaArgentinaSurinameEcuadorEl SalvadorBelizeTajikistanMaldivesMozambiqueEgypt0246810PercentageDec-2021March-2023YieldCoupon01,0
249、00 2,000 3,000 4,000 5,000 6,000 7,000Basis pointsC.Evolution of the spreads over the United States Treasuries,selected countries,December 2021-March 2023D.Coupons and yields on dollar-denominated bonds in emerging markets 27Global Trends and Prospects2.From debt distress to development crisisNet tr
250、ansfers on external public debt are a useful indicator for measuring how debt flows affect government finances.This metric compares the amount of new external borrowing to the payments on principal and interest to external creditors.A positive figure indicates a net inflow of financial resources,whi
251、le a negative figure means a net outflow.A well-functioning international financial architecture should facilitate the transfer of resources to developing countries in a way that supports economic development.Apart from being insufficient,the provision of external financing under the current system
252、is procyclical.This can force countries to increase the transfer of resources to their creditors at times when they can least afford it,ultimately leading to debt distress(Kregel,2004).Recent trends in net transfers on external public debt reveal the strengths and weaknesses of the multilateral resp
253、onse to the crisis,as well as the potential dangers that lie ahead.Countries that are eligible for the G20 Debt Service Suspension Initiative(DSSI)and the Common Framework for Debt Treatments(CF)have continued to receive fresh resources following the COVID-19 pandemic(figure 11.A).Multilateral credi
254、tors,led by the World Bank,have helped offset a decline in bilateral and private flows and increasing debt servicing requirements(World Bank,2022a).On the other hand,the rest of middle-income countries face a different reality.These countries are not eligible for existing debt initiatives,have limit
255、ed or no access to official concessional financing,and are subject to rising IMF borrowing costs and procyclical surcharges(Munevar,2021).Without multilateral support to offset the pullback of external private creditors,net resource transfers had steadily deteriorated until 2021 for this group of co
256、untries.By all indications,this pattern is likely to have worsened.Furthermore,in 2021,39 countries experienced net negative transfers on external public debt,including 25 middle-income countries(figure 11.B).This highlights the need to advance the multilateral development banks(MDBs)reform agenda,a
257、s proposed by the UN SDG stimulus plan,to ensure that MDBs appropriately respond to the needs and challenges faced by middle-income countries(United Nations,2023a).TRADE AND DEVELOPMENT REPORT UPDATEApril 202328Figure 11 Net resource transfers on external public debt in low-and middle-income countri
258、es,20122021Source:UNCTAD secretariat calculations based on World Bank International Debt Report 2022.Lack of adequate access to finance and high debt service obligations,especially on foreign debt,can force countries to make difficult decisions.Debtors can either prioritize paying off their debts on
259、 time or fulfilling their obligations to their citizens.Most countries prioritize debt payments to avoid a default,even if it means sacrificing development.This trend can be seen in the evolution of government spending on education,health,and debt service relative to their revenues over the past dec
260、ade(figure 12).External debt service has consistently increased relative to education and health spending for both DSSI-CF eligible countries and other middle-income countries.This key link between debt and development distress highlights the systemic nature of the problem.As countries cut expenditu
261、res to free up resources to meet debt payments,pressure on specific public expenditure categories will continue to increase,unless a radically different policy attitude takes over(TDR,2022:chap.3).20200000132012DSSI-CF eligible countr
262、iesOther middle-income countries(excl.China)-34.66.8-8.85.3104,317.721.271.1124.0110.9B.Number of countries with negative transfersA.Billions of dollars2000021Other middle-income countries(excluding China)DSSI-CF eligible countries34.729.826.443.736.926.726.039.528.2
263、21.6323282625713151429Global Trends and ProspectsFigure 12 Change in public external debt service and other key public spending,20122014 and 20192021Source:UNCTAD secretariat calculations based on IMF(2022a),World Bank(2022)and World Bank World Development Indicators database.N
264、ote:Panels A and C.i consider 94 countries and panels B and C.ii 112 countries because the country selection depend on the availability of balanced panel data per expenditure category.A.Education(percentaje of total government revenues)B.Health(percentaje of total government revenues)C.Number of cou
265、ntries where external public debt service is higher than public education or health expendituresDSSI-CF eligible countries DSSI-CF eligible countries Other low-and middle-income countries(excluding China)Other low-and middle-income countries(excluding China)16.117.74.27.-202117.820.66.
266、715.-2021EducationExternal public debt serviceHealthExternal public debt service6.17.55.514.-202110.64.511.88.-2021DSSI-CF eligible countries i.Education ii.Health Other middle-income countries(excluding China)-20-20214
267、5TRADE AND DEVELOPMENT REPORT UPDATEApril 2023303.Towards a new debt architectureIn multilateral and international fora,there still is not a coherent response to the growing debt problem of developing countries.Worse yet,no timeline exists for finding such a response.In the meantime,external credito
268、rs continue to be paid while the balance due to meet the SDGs keeps rising.This is jeopardizing delivery of existing international commitments,including the 2030 Agenda and the Paris Climate Agreement.To achieve the SDGs and build a more prosperous and sustainable future,it is crucial to find better
269、 ways to address the debt crisis in developing countries.This will require a commitment to transform the global financial system by prioritizing the needs of developing countries(United Nations,2023b).The rapid response of developed countries to rising stress in their local financial institutions st
270、ands in stark contrast to the lack of urgency to address mounting debt distress in developing countries over the past three years.Liquidity support offered to banks in the United States in the aftermath of the collapse of Silicon Valley Bank exceeds the total of special drawing rights(SDRs)received
271、by developing countries from the recent allocation and those received by the 37 countries classified as high risk or in debt distress by the IMF by a factor of 32.7 While a handful of banks in developed countries have been able to secure virtually unlimited access to liquidity within a matter of day
272、s,the 500 million people living in these 37 countries are likely to continue suffering for years to come from the consequences of a global financial system unable to respond at the scale and at the speed needed to face the systemic shocks affecting the developing world.That is why UNCTAD and the GCR
273、G call for a new SDR allocation to provide liquidity support to developing countries.As part of the urgently required process of reform of global economic governance,UNCTAD has highlighted the need for an international debt architecture to provide timely and orderly debt crisis resolution,improve de
274、bt transparency and fully align with the 2030 Agenda(TDR,2011;2015 and 2019).This new architecture aims to accomplish three interrelated objectives.First,providing a framework for addressing debt crises that is fair to both debtor countries and creditors,and that considers the broader development ne
275、eds of the former.This can be accomplished through the establishment of a sovereign debt workout mechanism which would(UNCTAD,2020).engage with all relevant creditors and debtor interests,would provide an effective,efficient and equitable mechanism for debt restructuring as well as support for sound
276、 sovereign debt markets.Second,ensuring that debtor countries and creditors have the necessary tools and resources to manage debt effectively,including the use of open data standards and public exchange of information.This can be accomplished through the establishment of a public debt registry for d
277、eveloping countries(United Nations,2022b).The registry would allow the digitalization and reconciliation of debtor and creditor debt data,ensuring debt transparency,strengthening debt management and facilitating debt restructurings.Third,designing debt sustainability assessments(DSAs)that incorporat
278、e development and climate financing needs(TDR,2019).These assessments should be the basis for a multilateral debt relief initiative aligned with delivering on the SDGs and tackling climate change(United Nations,2023a).7 In the aftermath of the collapse of Silicon Valley Bank,the Fed extended$297 bil
279、lion in liquidity support to banks in the United States in the week ending on 17 March 2023(Wall Street Journal,2023).By contrast,developing countries,including China,received$232 billion in SDRs in 2021(ECLAC,2022).Meanwhile,based on UNCTAD secretariat calculations,37 countries classified at high r
280、isk or in debt distress by the IMF as of November of 2022,received$9.1 billion in 2021.31Global Trends and ProspectsE.LOSS AND DAMAGE IN A TIME OF POLYCRISISCascading and cumulative shocks are putting many countries particularly,but not only,in the developing world,under increasing economic stress.S
281、ince the GFC,the interaction of such shocks arising from global markets for food,fuel and finance have intensified.The war in Ukraine has,as documented by the GCRG,compounded the difficulties facing policymakers across the South.A more persistent threat comes from climatic shocks caused by warming g
282、lobal temperatures with evidence pointing to their intensification and to the growing economic damage they are causing.The recent floods in Pakistan have highlighted the development challenge posed by this“polycrisis”(Tooze,2022),and has exposed gaps in the international financial architecture to re
283、spond in a timely and appropriate manner.1.Pakistan:in the eye of the polycrisisPakistans external debt almost doubled between 2015 and 2020 and became the main driver of a more widespread economic crisis in 2022.Over the same period,its export earnings were falling or stagnant(figure 13).As a net w
284、heat and energy importer,exposure to rising prices in these markets was a concern even before the war in Ukraine.The sharp spike resulting from the conflict led to significant import costs,which persisted through much of 2022.The currency has also seen a sharp fall in value(over 40 per cent against
285、the dollar since the beginning of 2020)adding to inflationary pressures and depleting exchange reserves.Figure 13 Economy of Pakistan,selected indicators,20152022(Percentage of GDP)Source:IMF,Federal Reserve Bank of St.Louis and State Bank of Pakistan.Pakistans failure to raise tax revenues has been
286、 extensively researched.Efforts to address that problem are urgent and essential.However,the damage from the floods that hit the country in July and August 2022 is of an order of magnitude that even with a more robust fiscal base Pakistan would be facing severe financial stress.In the wake of COVID-
287、19,Pakistan was amongst the first to sign-up for the G20-backed Debt Service Suspension Initiative(DSSI),which allowed it to suspend payments to bilateral creditors 303540452000212022ExportsExternal debtTax revenueTRADE AND DEVELOPMENT REPORT UPDATEApril 202332betwee
288、n May 2020 and December 2021 and it is in ongoing negotiations with the IMF to secure new loans to avoid defaulting on its external debt in the short-run.Nearly$31 billion concessionary capital,which would help create the fiscal space needed to respond to any exogenous shock,is currently tied up in
289、ongoing negotiations over the programme(Nabi,2023).Over the next five years,the IMF estimates the annual external financing need of Pakistan at$35 billion(IMF,2022b).Against a worsening economic backdrop,last years monsoon rains were an estimated 50 per cent stronger than normal,flooding one third o
290、f the country and leaving 8 million people displaced(Nabi,2023).The loss and damage(LD)from the floods have been estimated by the World Bank(2022b)to amount to more than$30 billion,or 8 per cent of Pakistans GDP.This relative cost is about two times larger than extreme flooding events that hit Bangl
291、adesh and the Plurinational State of Bolivia over a decade ago,hinting at the rising cost from LD(World Bank,2010a;2010b).Bilateral and multilateral partners have pledged to extend$9 billion of funds to cover slightly more than half of the$16.3 billion reconstruction needs estimated by the World Ban
292、k(2022b).Though extended on favourable terms,these loans will increase Pakistans debt burden and weigh negatively on adaptation and other required social and productive investment.Unless more Loss and Damage finance is made available in the form of grants,the risk of a debt spiral will only intensif
293、y.2.The role of loss and damage financingEntangled in the development-climate double bind,least developed and climate-vulnerable countries do not have the financial means to cover existing loss and damage(LD)from climate shocks on their own,never mind meeting adaptation or mitigation costs.There is
294、an urgent need for a multilateral mechanism for rapid access to grants-based(and under some circumstances concessional)finance to cover LD for rapid and slow onset climate events in developing countries.Recognized as the breakthrough outcome at the 27th Conference of the Parties(COP27)in Sharm El-Sh
295、eikh in 2022,Parties mandated a timeline in 2023 towards establishing a new LD Finance Facility(LDFF)at COP28.The outcome acknowledged not only the necessity of a new funding mechanism,but also of a systemic alignment of economic institutions with the realities facing developing countries as they de
296、al with oncoming climate impacts.Squeezed by compounding crises,a step forward on this outcome in 2023 could have a dramatic effect on the stability of climate-vulnerable countries,filling a critical gap at the nexus of climate,development and humanitarian finance.While there is no common agreed def
297、inition within climate negotiations,LD is understood to be the economic and non-economic8 impacts from climate change,inclusive of rapid and slow onset events(the latter including,for example,desertification and rising sea levels).It is separate but connected to the other two pillars of the climate
298、regime:mitigation and adaptation.While the adoption of optimal mitigation and adaptation strategies in line with the latest IPCC(2022)assessments implies that some LD is still avoidable,even if these strategies materialize,existing projections anticipate significant unavoidable LD from the locked in
299、 impacts from global warming(Markandya and Gonzalez-Eguino,2018).LD costs are projected to be as much as$580 billion per year by 2030(Markandya and Gonzalez-Eguino,2018),by which time 32132 million people could be pushed into poverty by the impacts of climate change(Jafino et al.,2020).Currently,the
300、 mechanisms available under the UNFCCC are geared towards averting and minimizing LD through mitigation and adaptation.Unfortunately,the current schemes do not provide means for addressing LD to help people to recover from climate impacts.The current approach ensures that developing countries pay di
301、sproportionately for warming they did little to contribute to,at odds with the principle of common but differentiated responsibilities(CBDR).As 8 Including,for example,traditional and location-based livelihoods and cultural losses33Global Trends and Prospectssuch,providing new and additional Loss an
302、d Damage grant financing for developing countries is critical to address the missing third pillar of climate finance,and should be complemented with accelerated mitigation and adaptation to decrease potential LD.At the same time,concessional loans and ability to access capital markets on favourable
303、terms remain crucial for economic growth and transformation.3.Existing financing for loss and damage No specific percentage of international climate finance is assigned to LD within the UNFCCC framework and no mandate for financing LD had existed until COP27.The mandates,instruments and modalities o
304、f existing UNFCCC funds have also proven unsuitable for funding all LD activities,whether fast or slow onset(Schfer et al.,2021).With loan instruments,lengthy application timelines,and a focus on project-based finance,they cannot respond adequately to LD needs.Outside the UNFCCC,finance labelled as
305、LD has been committed by several governments and philanthropies,but the amounts fall far short of the scale of needs,amounting to around$300 million.While humanitarian assistance currently plays a crucial role in the immediate response to extreme climate events,those financial flows are also just a
306、fraction of what is needed(ICVA,2022).A recent report by Oxfam found that“funding requirements for UN humanitarian appeals linked to extreme weather are eight times higher than they were 20 years ago,and over the past five years nearly half of appeal requirements have gone unmet”(Carty and Walsh,202
307、2).Furthermore,humanitarian aid is aimed to meet the immediate needs of communities affected by a disaster,but not on longer-term support for rebuilding homes and infrastructure following a rapid-onset emergency,or indeed responding at all to slow-onset impacts.Development finance has a broader scop
308、e than humanitarian response,however a large share of this finance is provided as loans which could compound vulnerabilities for developing countries facing LD.In the aftermath of a climate disaster,borrowing increases to rebuild(IMF,2019a),but borrowing costs are hiked as creditors raise rates to r
309、eflect a higher risk premium(Buhr and Volz,2018).Comparative examples demonstrate the limited levers available to developing countries facing crisis.After Germany experienced extensive flooding in 2021 the Government quickly mobilized 30 billion to help pay for reconstruction(Reuters,2021).In contra
310、st,Mozambique had to rely on an IMF loan in the aftermath of Cyclone Idai in 2019(IMF,2019b).A recent report estimated that sub-Saharan African countries will need to take on an additional$1 trillion in debt in the next 10 years without support for LD and adaptation(Woolfenden and Sharma-Khushal,202
311、2).As debt distress squeezes public budgets across regions,a new LDFF could prevent further rollbacks in development and climate goals but must be supplemented by a broader range of mechanisms,instruments and institutional reforms that can address the systemic challenges facing countries in climate
312、and economic distress.Some stakeholders have proposed insurance mechanisms to support vulnerable countries,however the rising frequency and intensity of climate-induced impacts in the coming years renders insurance mechanisms increasingly risky and thus unviable.In Dominica,LD from Hurricane Maria i
313、n 2017 amounted to$1.37 billion(226 per cent of its GDP),though sovereign insurance under the Caribbean Catastrophe Risk Insurance Facility covered just 1.5 per cent of these costs(Sharma-Khushal et al.,2022).When Malawi suffered a drought in 2015 and 2016 with costs estimated at$395 million,the Afr
314、ican Risk Capacity(ARC)insurance payout was only$8.1 million,or 2.2 per cent.Worst,this limited amount was only delivered following significant pressure after ARC first refused the claim(Reeves,2017).These examples highlight the insufficiencies of an insurance-based approach for either rapid-or slow
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