Press conference: UNCTAD's Trade and Development Report 2022

Introduction

The Secretary General of Wongtan, Rebecca Greenspan, introduces the annual trade and development report for 2022.

Annual Trade and Development Report

• Kosur Wright is the lead author of the report.

• The world is facing cascading and interconnected crises such as climate change, COVID-19, and the war in Ukraine.

• The report outlines actions that can be taken to avoid a global recession induced by policy choices.

• Global growth is projected to slow down from 2.5% in 2022 to 2.2% in 2023, causing a cumulative shortfall of more than $70 trillion.

• Developing countries will be hit hardest by this synchronized slowdown.

Global Slowdown

This section discusses how the global slowdown is affecting different regions and countries.

Developing Countries Hit Hardest

• Average growth rate in developing countries will grow below three percent.

• Middle-income countries in Latin America and low-income countries in Africa will register some of the sharpest slowdowns this year compared with other regions.

• East and Southeast Asia are set to register growth rates significantly below those observed before COVID-19 pandemic.

• In Africa, an additional 58 million people will fall into extreme poverty in 2022.

Policy Choices

This section discusses monetary and fiscal policy choices that can help mitigate the effects of the global slowdown.

Monetary Policy Choices

• Excessive monetary tightening could bring a period of stagnation and economic instability for many developing countries.

• Interest rate hikes are estimated to cut $360 billion of future income for developing countries excluding China.

• A one-point increase in FED policy rate reduces developing country GDP by 0.8% over a three-year period.

• Developing countries are facing alarming levels of debt distress and underinvestment.

Fiscal Policy Choices

• The policy moves that we have seen in advanced economies are affecting economic, social, and climate goals.

• They could inflict more damage than the financial crisis in 2008.

• Falling real wages, fiscal tightening, financial turbulence, and insufficient coordination are some of the challenges faced by developing countries.

Conclusion

This section concludes the press conference with a final statement from the Secretary General.

Final Statement

• Excessive monetary tightening could bring a period of stagnation and economic instability for many developing countries.

• Interest rate hikes are estimated to cut $360 billion of future income for developing countries excluding China.

• A one-point increase in FED policy rate reduces developing country GDP by 0.8% over a three-year period.

• Developing countries are facing alarming levels of debt distress and underinvestment.

Net Capital Flows to Developing Countries

The speaker discusses the negative net capital flows to developing countries due to the deterioration of financial conditions since Q4 2021.

Negative Capital Flows

• Net capital flows to developing countries have turned negative.

• 90 developing countries have seen their currencies weakened against the dollar this year, with over a third of them experiencing more than a 10% devaluation.

• Developing countries have lost an estimated $379 billion in reserves while trying to defend their currency this year due to capital outflows.

Recommendations

• Increase official development assistance (ODA).

• Urgently provide increased liquidity for developing countries through a new issuing of special drawing rights (SDRs).

• Deploy the IMF's footstock window for balance of payment support as soon as possible with minimum conditionality.

• Prioritize progress on a multilateral legal framework for handling debt restructuring, including all official and private creditors.

• Call for new arrangements to support closer regional trade investment and financial ties.

Inflation Challenge and Distributional Crisis

The speaker discusses inflation challenges faced by developed and developing countries, highlighting that it is also a distributional crisis.

Causes of Inflation

• Today's inflation challenge is a distributional crisis.

• In developed countries, inflation has been mostly driven by commodity prices and persistent bottlenecks in supply chain rooted in insufficient investment since the global financial crisis.

• In many developing countries, inflation has been largely driven by energy and food prices and exchange rate depreciation, which has made imports more expensive.

• Large corporations with considerable market power have taken undue advantage of the current context, and financial speculation has also played an important role.

Recommendations

• Correct policy measures targeting price spikes in energy, food, and other vital areas directly.

• Increase support for vulnerable groups, including lower-wage workers and households in financial distress through targeted social protection programs.

Policy Agenda for Economic Stability and Investment

The European Union is promoting a policy agenda that includes managing action, taxing windfall profits, and sheltering consumers from rising fuel prices. The report outlines better regulation and calls for windfall taxes to be part of the policy mix governments deploy to curb price spikes.

New Policy Agenda

• A new policy agenda is needed to deliver economic stability and boost investments public and private.

• Warning signs are flashing across a range of economic and environmental indicators.

• We must reclaim our future with innovative, ambitious policies, political will, and private/public support.

Impact on Developing Countries

• Vulnerable people everywhere are being hurt by the current course of action, especially in developing countries.

• The cost to developing countries could amount to a loss of income over the next two to three years of $510 billion dollars due to rising interest rates.

Global Growth Rate Concerns

There is concern about the global growth rate as it has dropped below 2.5%, which is considered a growth recession. It's estimated that it will drop further next year due to financial pressures and fragilities in the global economy.

Monetary Policy Concerns

• Central banks don't have a great record in advanced countries of achieving soft landings.

• Two conditions make for difficult soft landings:

• Very low interest rates

• Coming out of a period of very high levels of debt

• Both conditions are currently in place.

The Concept of a Perfect Storm is More Relevant Today

In this section, the speakers discuss how the concept of a perfect storm is more relevant today than it was following the COVID-19 shock. They highlight that economies are weaker now than they were in 2019, and there is a period of rising interest rates and falling reserves.

The Perfect Storm

• The concept of a perfect storm captures the anxiety that many policymakers in developing countries are facing.

• There is a long-standing concern about an investment crisis that is not only present in advanced economies but also in developing countries.

• Investment rates have not been sufficient to meet increasing demands on countries from economic and climate pressures.

• We should not look to the 1970s for policy solutions as we have much higher levels of indebtedness, both public and private, and a much more fragile financial system than we had in the past.

Long-Standing Concern About Investment Crisis

This section continues discussing the long-standing concern about an investment crisis. It highlights that trade and development reports have insisted on this issue.

Investment Crisis

• Trade and development reports have insisted on an investment crisis.

• The notion of an investment crisis has received insufficient attention in analyzing global economy fragilities.

Update on UN Initiative Grain

In this section, the speakers provide an update on UN initiative Grain. They discuss its effects on grain markets, pre-war levels of prices, fertilizer prices, affordability crisis, availability crisis, sowing season coming into friction.

UN Initiative Grain Update

• Over 5 million metric tons of grain came out of Ukrainian ports due to UN initiative Grain.

• This has had an effect on grain markets, and for the fifth consecutive month, there has been a decline in the FAO food index.

• Prices can come down even further if the situation continues to stabilize.

• Fertilizer prices are very high and pricing down small farmers around the world.

• The demand for fertilizers has dramatically come down, and we are worried about the sowing season coming into friction in the months of October onwards.

• If fertilizer prices do not come down, affordability crisis today will be an availability crisis tomorrow.

Bringing Liquidity to Developing Countries

In this section, Catherine discusses the issue of food insecurity in developing countries and the need to bring prices down. However, she notes that the depreciation of currencies has caused domestic prices to go up despite international prices going down. She emphasizes the need for liquidity and support from international financial institutions to stabilize currencies and bring fiscal liquidity.

Need for Liquidity in Developing Countries

• Depreciation of currencies has caused domestic prices to rise despite international prices going down.

• International financial institutions need to provide necessary funding in balance of payments, special drawing rights, multilateral loans, and emergency windows.

• The objective is to stabilize currencies and bring liquidity for fiscal purposes in developing countries.

Importance of Supporting Developing Countries

• Without support, developing countries will continue to suffer from cost-of-living crises.

• There is a sense of anxiety among finance ministers from developing countries due to the current economic climate.

Unusually Forthright Comments on Economic Policy

In this section, Emma asks Catherine about her comments on economic policy being unusually forthright. Catherine responds by saying that these are unusual times and it's time for policymakers to seriously come together with a real package of policies that will avoid a recession. She also discusses the UK economy's heavy dependence on its financial sector and how losing trust in it can lead to trouble.

Unusual Times Call for Serious Discussion

• These are unusual times that require serious discussion among policymakers.

• A real package of policies is needed to avoid a recession.

Dependence on Financial Sector

• The UK economy is heavily dependent on its financial sector.

• Losing trust in the financial sector can lead to trouble.

Investment Crisis in the UK

In this section, Catherine discusses the investment crisis in the UK and how it has been particularly acute since the Global Financial Credit. She notes that the U-turn on tax policy is welcome but not enough to solve the problem.

Investment Crisis in the UK

• The UK has a serious investment crisis.

• This crisis has been particularly acute since the Global Financial Credit.

U-Turn on Tax Policy

• The U-turn on tax policy is welcome.

• However, it's not enough to solve the investment crisis.

Introduction

The speaker says "um yes" and "TV" before the start of the interview.

Grain Distribution

The speaker discusses the percentage of grain going to developed and developing countries, as well as the importance of following the end destination of transported grains. They also mention that Ukraine is an important supplier of grain for humanitarian purposes.

• More or less 52% of grain is going to developed countries, while 48% is going to developing countries.

• The end destination of transported grains needs to be followed.

• Ukraine is an important supplier of grain for humanitarian purposes.

• Lowering prices is necessary to help households suffering from food insecurity crisis.

Recession and Policy Makers

The speaker talks about whether or not we are in a recession, defining a recession, and what policy makers can do to prevent a global recession.

• Economists define a technical recession as two quarters of negative growth.

• Policymakers' actions over the next four to six months will determine if we experience a full-blown global recession.

• Some countries are trying to use their national currencies as an alternative to the US dollar for bilateral trade.

Fertilizer Prices and Food Insecurity

The speaker discusses the issue of high fertilizer prices and its impact on small farmers around the world. They emphasize the need to stabilize markets in order to bring down prices and prevent a future crisis of affordability and availability.

High Fertilizer Prices

• Fertilizer prices are very high, which is a problem for small farmers.

• Demand for fertilizers has come down dramatically, especially in West Africa.

• If fertilizer prices don't come down, there will be a crisis of availability tomorrow.

• Depreciation of currencies in developing countries has meant that even if international prices have gone down, domestic prices have gone up.

Preventing a Future Crisis

• To prevent a future crisis, liquidity needs to be brought up and developing countries need support to help their poor.

• International financial institutions need to provide necessary funding through multilateral loans with emergency windows.

• The TDR report emphasizes the need to bring fertilizer prices down as it affects households all over the world.

Direct Message to Policy Makers

The speaker talks about how these are unusual times that require serious discussion among policy makers. They emphasize the importance of coming together with real policies that can avoid a recession and deeper crisis globally.

Unusual Times Require Serious Discussion

• These are unusual times that require serious discussion among policy makers.

• It's time for policy makers to seriously consider not just individual small steps but real packages of policies that can avoid a recession and deeper crisis globally.

U-Turns Are Not Bad

• The speaker acknowledges that u-turns are not bad if they are necessary and the reality shows it's a good thing to do.

• Whether the British economic policy is enough to steady the ship remains to be seen.

UK Economy and Investment Crisis

The UK economy heavily depends on its financial sector, and losing the trust of this sector can lead to trouble. There is a serious investment crisis in the UK since the Global Financial Crisis, which cannot be resolved by making a U-turn on tax questions.

Dependence on Financial Sector

• The UK economy is heavily dependent on its financial sector.

• Losing the trust of the financial sector can lead to trouble.

Investment Crisis

• There is a serious investment crisis in the UK since the Global Financial Crisis.

• The rate of investment has not been raised to meet all problems that came out of the global financial crisis and climate crime.

• This problem cannot be resolved by making a U-turn on tax questions.

Grain Transportation and Humanitarian Aid

More or less 52% of grain transportation goes to developed countries, while 48% goes to developing countries. However, it's unclear what their end destination is. Lowering prices for households suffering from food insecurity crisis is crucial for humanitarian aid.

Grain Transportation

• More or less 52% of grain transportation goes to developed countries, while 48% goes to developing countries.

• It's unclear what their end destination is because some developed countries are distributional hubs for other countries.

• Ukraine is an important supplier of grain for humanitarian purposes.

Humanitarian Aid

• Lowering prices for households suffering from food insecurity crisis is crucial for humanitarian aid.

• The main objective of the initiative is to lower prices to avoid more wfps helping countries handling food that they would have otherwise been able to buy.

• Social protection support programs in each country can help households and businesses go out of this cost of living crisis.

Technical Recession

The global economy is not yet in a recession, but it's heading towards one. Defining a recession is not simply a technical question; it requires mastering a broad stretch of data.

Technical Recession

• The global economy is not yet in a recession, but it's heading towards one.

• Defining a recession requires mastering a broad stretch of data.

The Role of the US in the Global Economy

In this section, the Secretary General is asked about the use of national currencies as an alternative to the US dollar and its impact on global recession and inflation. Mr. Wright is also asked about the relationship between rising interest rates in rich countries and their impact on GDP in developing countries.

National Currencies as an Alternative to USD

• Some countries are trying to use their national currencies as an alternative to the US dollar for bilateral trade.

• It's not a realistic solution to avoid global recession or inflation.

Relationship Between Rising Interest Rates and GDP

• What is the relationship between rising interest rates in rich countries and its impact on GDP in developing countries?

• There is a certain political instability that we are seeing now.

Shadow Banking System

This section discusses shadow banking systems, their growing importance, and how they are being addressed by U.S policy initiatives.

Importance of Shadow Banking System

• The shadow banking system is not unique to the United States but a feature of financialization of the global economy.

• Similar problems have been seen in China with its growing shadow banking system.

Addressing Shadow Banking System

• After the global financial crisis, there was a lot of promise for regulating shadow banking systems but it has not happened to the degree promised.

• Fragilities in international financial systems have resulted from this lack of regulation.

U.S Industrial Policy

This section discusses U.S industrial policy and its implications for other countries and international trading systems.

Positive Implications of U.S Industrial Policy

• The shift towards active industrial policy is a trend that should be welcomed and has important implications for other countries and international trading systems.

• Other countries can learn from the recent U.S experience.

Need for Title Regulation on Commodity Speculation

John asks the Secretary General about the need for title regulation on commodity speculation and if he is looking to put limitations on big financial groups or agribusiness conglomerates.

Elaborating on Title Regulation

• John asks the Secretary General to elaborate on title regulation and what he is looking at.

• The Secretary General mentions that antitrust measures should be thought of again because there is market concentration in terms of windfall profits on corporations tied to regulations. Regulations on commodity speculation are possible, as seen during the 2008-2009 crisis food crisis when regulations were introduced in the Chicago stock a grain market that helped control speculation. Sensible regulations can be introduced to curtail speculation, such as limiting financialization of the grain market.

Controlling Speculation

• The Black Sea grain initiative showed how speculation was playing an important role in controlling prices in the food markets. Negotiations were going forward, and prices started to go down because it sent a signal that they had speculated too much and needed to correct course.

• Sensible regulation has proven right before, and it can help with display price speculation in food markets.

Changing Policy Mix for Inflation Control

Nicole from CNN asks if central banks have been unsuccessful so far in bringing down inflation through interest rate hikes.

Interest Rates Alone Not Enough

• The Secretary General says that interest rates alone cannot bring down inflation without causing a recession. A different policy mix is needed, including price controls, windfall tax profits on corporations, better regulation, and solving bottlenecks.

The Need for Comprehensive Policy Measures

In this section, the speaker discusses the need for comprehensive policy measures to address the economic challenges faced by developing countries.

Importance of Comprehensive Policy Measures

• Shock policies cannot be implemented with a single instrument without bearing consequences.

• Developing countries are being hurt due to the lack of appropriate response at the scale needed in the International Financial system.

• Systemically important economies must understand that their actions will have consequences beyond their immediate constituencies and should take those into consideration when undertaking significant changes in policy direction.

Coordination Among Systemically Important Countries

• There needs to be much better coordination among systemically important countries when they are taking significant policy changes.

• The G20 and IMF should be platforms for strengthening policy coordination.

• Strengthening policy coordination is more important today than ever before given the fragilities facing the global economy.

Conclusion

The speaker concludes by inviting further questions and clarifications from reporters. They also remind reporters that press kits are available in seven languages on their website, and that interviews can be conducted with the team who produced this report over phone.