The evaluation reports of the United Nations Conference on Trade and Development (UNCTAD) on the global economy are as famous in international economic circles as those of the International Monetary Fund (IMF). UNCTAD reports examine the monetary policy decisions of the leading actors of the global economy, such as the world's leading central banks, in their aspects that naturally affect development and quality of life. The IMF's global economy reports, on the other hand, discuss the proposed monetary and fiscal policy choices in terms of the fight against inflation, fiscal discipline, or current account balance, and the dimension of these decisions affecting the living standards of world citizens is not sufficiently highlighted. To explain with an example, UNCTAD's report published last week stated that "the structural change caused by the monetary policy and high-interest rates implemented in developed countries on the entire world economy, should be taken into account with regards to the damages it may cause in terms of debt sustainability for countries and the adaptation to the high-interest rate climate." I think this statement provides enough clues.
The IMF's latest global economic outlook report confirms that the growth expectation for 2023 is 3%, maintaining the forecast in the previous report. However, due to fluctuations caused by the global economy and geopolitical uncertainties, the IMF has reduced the 2024 growth from 3% to 2.9%. Pointing out that the global recovery continues to be slow and uneven due to the two "black swans," namely, the COVID-19 pandemic and the ongoing Russia-Ukraine War, reminds us that Germany in particular, which is experiencing the biggest energy shock in its history, is the only country among the G-7 countries expected to shrink this year. On the other hand, just as many international organizations made a forecast correction of 4% to 4.5% for Türkiye, whose 2023 growth forecasts were reduced to 2.5% after the devastating Feb. 6 earthquakes, the IMF also made a revision of its forecast for Türkiye’s 2023 growth to 4%, with an expectation for 2024 at 3.25%.
Sharing its 0.5% contraction forecast for the German economy, which is expected to be the only one to shrink among the G-7 countries this year, the IMF has revised its forecast for Germany downward for the second time. While the German economy, which grew by 1.8% in 2022, contributed positively to the growth of the eurozone last year, it has seriously deviated from the average growth of the eurozone, which is expected to grow by 0.7% this year, and will have performed much worse and will also reduce the eurozone growth average. The IMF's 2024 growth forecast for Germany is 0.9%. However, this 2024 expectation is 0.4 points lower than the IMF's previous July report.
One of the important topics stated by the IMF as the justification for the troubled outlook it revised for the German economy is the weakness observed in interest-sensitive sectors.
In addition, the negative impact of low demand from Germany's trading partners on Germany's export performance and, accordingly, the weakening of Germany's industrial production are also prominent reasons for negative forecasts. The German government has nothing to say to the IMF about these forecasts. Germany itself expects a 0.4% contraction due to the inflation-fighting route of the European Central Bank (ECB), which they support, and the problems in the global economy.
In its September report on the country's economy, the German Central Bank (Bundesbank) had already announced that economic production would shrink in the third quarter of 2023 and throughout the year, stating that the latest economic data did not promise much hope for the German economy in the short term. Germany also criticized being called the "sick man of Europe" in various international media publications, especially the Economist, and stated that it was unfair. Their criticisms are justified. However, I wish they had not waited until the issue touched them and wish they had not given credit to such "desk-based" perception operations that have been carried out in other countries for a long time.
UNCTAD offers three recommendations for this process. Firstly, it suggests that the world's leading central banks should place a stronger emphasis on addressing long-term financial issues and enhancing international cooperation. Furthermore, their focus should extend beyond mere price stability to encompass the cultivation of a sustainable economic environment for both the private and public sectors. UNCTAD's second recommendation is that policymakers should advocate for gradual and coordinated increases in real wages, accompanied by concrete commitments to bolster the well-being of the working class.
To achieve this objective, it becomes imperative to prioritize the development of a comprehensive social protection model. The third recommendation emphasizes on the need for a more active investment in the transition to clean energy within developing countries. To expedite this transition and foster robust multilateral cooperation, it is crucial for institutions such as the World Trade Organization (WTO), the IMF, and the World Bank to assume greater responsibility for facilitating long-term financing opportunities and fostering comprehensive multilateral agreements, while ensuring technology and finance are accessible and affordable.
