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Global Economy on Precarious Footing Amid High Interest Rates

economic mapping Global supply strains that started to ease in early 2022 are worsening again as headwinds strengthen from the war in Ukraine and China’s economy

Global Economy on Precarious Footing Amid High Interest Rates

Global growth to slow to 2.1% in 2023, with prospects clouded by financial risks

Global growth has slowed sharply and the risk of financial stress in emerging market and developing economies (EMDEs) is intensifying amid elevated global interest rates, according to the World Bank’s latest Global Economic Prospects report.

Global growth is projected to decelerate from 3.1% in 2022 to 2.1% in 2023. In EMDEs other than China, growth is set to slow to 2.9% this year from 4.1% last year. These forecasts reflect broad-based downgrades: growth projections for 70 percent of EMDEs and nearly all advanced economies have been downgraded.

Most EMDEs have seen only limited harm from the recent banking stress in advanced economies so far, but they are now sailing in dangerous waters. With increasingly restrictive global credit conditions, one out of every four EMDEs has effectively lost access to international bond markets. The squeeze is especially acute for EMDEs with underlying vulnerabilities such as low creditworthiness. Growth projections for these economies for 2023 are less than half those from a year ago, making them highly vulnerable to additional shocks.

The latest forecasts indicate that the overlapping shocks of the pandemic, the Russian invasion of Ukraine, and the sharp slowdown amid tight global financial conditions have dealt an enduring setback to development in EMDEs, one that will persist for the foreseeable future. By the end of 2024, economic activity in these economies is expected be about 5% below levels projected on the eve of the pandemic. In low-income countries—especially the poorest—the damage is stark: in more than one-third of these countries, per capita incomes in 2024 will still be below 2019 levels. This feeble pace of income growth will entrench extreme poverty in many low-income countries.

In advanced economies, growth is set to decelerate from 2.6% in 2022 to 0.7% this year and remain weak in 2024, the report says. After growing 1.1% in 2023, the U.S. economy is set to decelerate to 0.8% in 2024, mainly because of the lingering impact of the sharp rise in interest rates over the past year and a half. In the euro area, growth is forecast to slow to 0.4% in 2023 from 3.5% in 2022, due to the lagged effect of monetary policy tightening and energy-price increases.

The report also offers an analysis of how increases in U.S. interest rates are affecting EMDEs. Most of the rise in two-year Treasury yields over the past year and a half has been driven by investor expectations of hawkish U.S. monetary policy to control inflation. According to the report, this particular type of interest rate increases is associated with adverse financial effects in EMDEs, including a higher probability of financial crisis. Moreover, these effects are more pronounced in countries with greater economic vulnerabilities. In particular, frontier markets—those with less developed financial markets and more limited access to international capital—tend to see outsized increases in borrowing costs; for instance, sovereign risk spreads in frontier markets tend to rise by more than three times as much as those in other EMDEs.

In addition, the report provides a comprehensive assessment of the fiscal policy challenges confronting low-income economies. These countries are in dire straits. Rising interest rates have compounded the deterioration in their fiscal positions over the past decade. Public debt now averages about 70% of GDP. Interest payments are eating up a rising share of limited government revenues. 14 low-income countries are already in, or at high risk of, debt distress. Spending pressures have risen in these economies. Adverse shocks such as extreme climate events and conflict are more likely to tip households into distress in low-income countries than anywhere else because of limited social safety nets. On average, these countries spend just 3% of GDP on their most vulnerable citizens—well below the 26% average for developing economies.

Logistics Strategies Imperative for Global Growth

Global Economics Prospects predicts a two-year plateau in overall global growth starting this year. That doesn’t mean development opportunities are not still very much alive and can be leveraged through a realistic, holistically charged strategy. E-commerce alone is shifting big businesses and their customer relationships, increasing product demand and reaching consumers beyond company regions. Alibaba Group announced its initiatives with the government of Rwanda in November and claimed they will utilize the digital economy to support exporters and local producers and their relationship with Chinese consumers.

Global agreements spur economic development and e-commerce success.

“We have already seen tremendous attention from Chinese consumers on Alibaba’s platforms in high-quality Rwandan products such as our top-tier single estate coffee, and we are confident that local products and travel experiences will continue to receive interest and support from the more than half a billion consumers on Alibaba’s platforms,” states RDB Chief Executive Officer Clare Akamanzi.

“Alibaba’s travel services platform, Fliggy, and the RDB will also work together to promote Rwanda as a tourist destination through a Rwanda Tourism Store for booking flights, hotels and travel experiences and a Destination Pavilion where Chinese consumers can learn about visiting the country.”

With Amazon-standard expectations, it’s imperative that during the development and planning periods companies incorporate logistics solutions that tie together all modes of the supply chain, eliminating the possibility of leaving out a vital piece to the supply-chain puzzle.

5 Tips For Going From Bench Player To Star In The Business World

Sports history is filled with the heroics of substitute players coming off the bench and playing a big role in a victory.

Likewise, in the working world, being a dedicated and consistent role player can prepare someone for a promotion that entails bigger responsibilities. The key, as in sports, is being ready when called upon.

“Understanding and fulfilling your role as you await your opportunity is a critical aspect of truly growing so you are prepared to make good on that opportunity when it happens,” says Grant Parr (www.gameperformance.com), a mental sports performance coach and the author of The Next One Up Mindset: How To Prepare For The Unknown.

“Athletics is filled with role players ready to meet the demands and the game speed of competition. The mental preparation is equally important in the workplace for those aspiring to climb the ladder and be continually successful.”

Parr offers five ways to spend time wisely while waiting in the wings and how to be well-prepared for the next, bigger opportunity:

Maximize your role. The path to promotion, Parr says, starts with the right mindset in lower positions. “Training the mind for success is essential,”  Parr says. “It begins with fully understanding and embracing your role. Doing that consistently gets you ready for the next one. Your role will be what you make of it — a launchpad for future success and a support to others while you learn, or a holding pattern leading toward stagnation and frozen development.”

Set achievable goals and commit. “How you approach your goals matters,” Parr says. “You need to write them down, including all the tasks required to accomplish them, and you need to visualize the feeling of reaching them.”

Remove negatives. “These invariably come up,” Parr says. “Be aware of the obstacles, people, and thought processes that can derail you, demotivate and distract you from making the most of your opportunity. That way, when those things appear, you are prepared to manage them and stay on track.”

Lead and set an example. “In sports, always being one of the first to practice and among the last to leave, and being the one who always encourages others — all those qualities stick in your teammates’ minds as a disciplined, winning example they can count on,” Parr says. “In the business world, your chances of reaching the next level are greatly enhanced when you exemplify a team-first, cheerful attitude on a daily basis, always being helpful to the levels above you as well as your own team, and going the extra mile.”

Study good examples/role models. It certainly helps in sports, and the corporate office is no different, Parr says, when it comes to the benefits of learning from mentors or reading up on achievers who had humble beginnings. “Watch, listen to, read, and learn from the advice and experiences of those who have excelled,” Parr says.

“Moving up in the world entails lots of things that can knock you down,” Parr says. “Embracing your role, whatever it is, means embracing the struggle to get where you want to go. You are working toward something higher, preparing for the unknown, and it requires diligence and commitment.”

Grant Parr (www.gameperformance.com) is a mental sports performance coach and the author of The Next One Up Mindset: How To Prepare For The Unknown. Parr owns and runs GAMEFACE PERFORMANCE, a consulting firm that enhances mental skills for athletes and coaches. A recruiter and sales leader in the corporate world for 17 years, he now works with a wide variety of athletes including Olympians, professionals, collegians and high school athletes. His podcast, 90% Mental, provides a window into a broad range of athletes’ and coaches’ mental games and shares their insights around mental performance. 

Kerry Coffee Establishes Position in Hong Kong, Macau

Kerry Logistics will fulfill its vision of deepening its two-year partnership with illycaffè through the launch of sole distributor, Kerry Coffee Limited, which will oversee and distribute the illycaffè’s iperEspresso coffee machines, capsules, coffee beans, and more throughout Hong Kong and
Macau.

“The establishment of Kerry Coffee and the consolidation of illycaffè’s full product range under the new company will enhance the cost-efficiency of the sales and distribution operation, and enable illycaffè to increase its market share and brand recognition in Hong Kong and Macau,” commented
Robert Berger, Executive Director – Fashion & Lifestyle of Kerry Logistics (Hong Kong) in response to the news.

Kerry Coffee will create a full consolidation of illycaffè’s products under a single operator, further establishing its position in the coffee market and competitor in the region, ultimately meeting increased demand in the growing coffee culture.

Additionally, Kerry Logistics confirmed it will continue its original role of providing logistics support along with sales and marketing for the global coffee company. Marketing initiatives include brand recognition and increasing market shares.

“The development also enriches Kerry Logistics’ food services business and allows greater product diversification to serve HORECA and club customers in Hong Kong and Macau,” Berger added in the release.

Source: Kerry Logistics