Tag: global economy

COVID-19 and geopolitics over a global superpower
Geopolitics

COVID-19 and geopolitics over a global superpower

COVID-19 and geopolitics: Amid the ongoing fight against COVID-19 pandemic, geopolitics over a global superpower is changing 

At a time when countries across the world is struggling to contain the spread of COVID-19 pandemic, the Chinese economy is growing in a bid to help the country attain the status of a superpower over the United States. While the US and Eurozone economies are projected to face declining growth, China is among those countries projected to grow at 1.9 percent. With US’ influence gradually fading away, China is taking over a strategic superpower after transforming its economy and bolstering its political structure. 

Countries across the world are expressing concerns over China’s increased influence and participation in various regions and sectors such as information and communication. As per a recent survey by Nikkei, China’s cross-border data flow in 2019 outstripped that of 10 countries examined including the United States. As of now, China accounts for 23% of cross-border data flows, while the US ranks at second with 12%.

Over the last six years, China’s Belt and Road Initiative has expanded exponentially. As of April 2020, around 138 countries and 30 international institutions are a part of the initiative. As per the World Bank, China has the world’s largest economy and is the world’s largest exporter. It is one of the biggest infrastructural giants in the world. 

The United States is finding itself in the middle of changing global forces where it sees China as a peer competitor and Russia as its main key adversary. Both China and Russia are in direct contest in the international order to wield greater influence across the world. However, as Beijing’s influence and economic grows, Russia is also grappling with increased competition. Burdened by the COVID-19 pandemic, Russia is likely to remain financially stable due to several reasons including its National Wealth Fund. However, the economic shock is likely to put millions into extreme poverty and hamper Moscow’s plan to improve people’s welfare. At the same time, China is overtaking Russia in terms of development and mobilisation of high technology. 

Taking note of these developments, Efforts are being made to rethink economic interactions with Beijing and reduce Chinese-dominated supply chains. European Union is accelerating efforts to cut Chinese takeovers and technology and pharmaceutical dependence on Beijing. A number of countries including Australia, Japan and India are investing in projects to support local manufacturing and reduce their reliance on global supply chains. 

With the changing equation of global superpower, the COVID-19 pandemic has started a new era of geopolitics.

MENA region to attract increasing foreign capital inflows
Middle East & Africa

MENA region to attract increasing foreign capital inflows

IIF projects GCC nations to drive external capital inflows in MENA region amid demand for hard bonds

COVID-19 has presented multiple shocks for emerging markets with collapsing capital inflows and domestic and external demand. Amid ongoing efforts to recover from pandemic repercussions, the Institute of International Finance (IIF) has stated that capital inflows in the Middle East region are anticipated to remain high. Speaking to Gulf News, IIF Chief Economist for MENA region Garbis Iradian said that the institution is expecting non-resident capital inflows to the MENA countries to increase up to $177 billion in 2021, which is significantly equivalent to 6.6 percent of the GDP of the region. 

As per the report, hard currency bond issuance of GCC countries is playing a significant role in increasing the capital inflows, adding that countries like the UAE, Saudi Arabi, Oman, Bahrain and Qatar have issued hard currency bond worth $91 billion so far in 2020, as compared to a total of $99 billion in 2019. 

At the same time, GCC’s funding needs are also projected to increase in 2021 even as fiscal deficits have narrowed. Gulf countries are driving the requirements for high-quality assets which will result in the growth of gross public external financing of the region to approximately $100 billion by next year.

Meanwhile, Foreign Direct Investment (FDI) continues to remain low in MENA countries in the backdrop of economic repercussions of the COVID-19 pandemic. It is prominently concentrated in the oil and gas sectors in the region, with the UAE and Egypt standing high as the highest FDI recipient in the MENA region.

As per an IMF report in January 2020, the Middle East and North Africa region has been witnessing high and stable gross capital inflows in the last years compared to other emerging markets, providing a boost to investment and job creation in the countries. 

After MENA countries integrated into the global capital markets, their capital inflows surged to over $155 during 2016-2018.

However, the UN organization has also raised concerns about the increasing global economic risks that would put MENA countries in a vulnerable position due to shifts in fiscal deficits, debt burdens and financial buffers. The IMF had recommended MENA countries to improve their policy framework in a bid to strengthen their resilience to volatile capital flows and mitigate the risk of outflows. 

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