United Nations Secretary-General Antonio Guterres offered a sobering outlook on the global economy at Davos 2023, warning the world is heading into the eye of a Category 5 economic hurricane.
“We are looking into the eye of a Category 5 hurricane. Our world is plagued by a perfect storm on a number of fronts,” Guterres said at the World Economic Forum Wednesday. “Start with the short term, the global economic crisis. The outlook, as we all know, is bleak. Many parts of the world face recession and the entire world faces a slowdown. And we see deepening inequalities and the rapidly unfolding cost of living crisis affecting women and girls the most. Supply chain disruptions and an energy crunch, soaring prices.”
Guterres further elaborated his fears over the “perfect storm” hitting the world on “Mornings with Maria” Wednesday.
“I’m worried with the fact that we have a combination of things that are all interlocked and that have negative synergies,” he said.
The war in Ukraine, skyrocketing food and energy prices, climate change and increased wealth inequality were some of the factors Guterres feared are “creating a situation” that provide a “clear recession perspective.”
In addition, Guterres pointed to economies beyond the U.S., Europe and Asia that are burdened with economic hardships.
“Interest rates are going up extremely in the global south. Countries are close to default. They have no resources because they couldn’t print money like the U.S. did, like Europe did during the COVID,” Guterres said. “They have no access to concessional funding because many of them are middle-income countries. Look at small island developing states, the Caribbean islands. They lived on tourism. The tourism has ended for two years, but as they are middle–income countries, they had no debt to live, they had no concessional funding. So we have in the Global South, a situation in which people are suffering and we need to understand that.”
Guterres called for increasing the “mechanisms of global solidarity” in light of the widespread economic suffering.
When asked what the U.N. can do to combat the economic hurricane, Guterres laid out a proposal from the United Nations that emphasizes a global stimulus to address economic woes as well as tools to oversea a “just transition” from fossil fuel dominance to clean energy.
“Our proposal is to have a global stimulus, a global stimulus able to redress the economies, and a global stimulus able to address the challenges of the poorest in the world, and at the same time to create the funds that are necessary for a just transition in relation to climate change,” Guterres told host Maria Bartiromo.
“We need to move from a dominance of fossil fuels to dominance of renewables. But we need to do that in a just way,” he added. “We just take into account the people that will be affected negatively in the areas that live with fossil fuel predominance. Looking into training, looking to new jobs, the regions need to be invested. This transition needs to be well managed, not like the rust belt of the past in which the transition from heavy industry in the United States, in Europe, in other parts of the world was not properly met as well.”
Guterres also explained the U.N. wants “higher commitments” from China to move more quickly in bringing down its domestic emissions to help the global effort to combat climate change. He noted, however, technological help may be needed to help China achieve faster emission reduction.
“We need to make sure that China reduces emissions. This is vital for the world,” Guterres said. “But China needs some technological support, I wouldn’t say financial, but technological support to be able to do it because they have a much more old-fashioned industry in a number of areas and much more reliance on coal.”
Given the global economic outlook and climate fears, Guterres added it is “absolutely essential” to have “serious” negotiations between the West and China.
“With climate, with the slowdown of the global economy, with the dramatic situation of the developing world, with the risks of a pandemic coming back, I think it is absolutely essential to have a serious negotiation on the table where everything is put very clearly between China and the Western world.”