Wang Wen: The global economy will be in a long-time downturn

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Wang Wen: The global economy will be in a long-time downturn

2021-09-01



Script as follows:


I estimate that such isolated international exchanges under the pandemic may last longer, and the global economy will be in a long-time downturn.


Some people will say that since 2021, the world economy has obviously got rid of the "darkest hour". Yes, according to the estimates of most institutions, the world economy will grow by about 5% in 2021, including about 8.5% in China, about 7% in the United States, about 5% in the euro zone, about 7% in the United Kingdom and about 6% in emerging economies. From the growth data, it is quite good. But don't forget that this is only compared to 2020. The world economy shrink by about 5% in 2020, which means that it is likely that it will not return to its pre pandemic level in 2021.


In my opinion, in the foreseeable future, the world economy will be in a worrying downturn in 2022、2023,、2024 or even longer. It can be called "three low and three high".


"Low growth": due to the general lack of growth momentum of the world economy, the lag of technological innovation, the serious aging of developed economies and the insufficient potential of emerging economies, the world economy will be in a long-term low growth. China is still optimistic about the economic growth of all countries in the world, but it is generally predicted that China's economic growth will only maintain about 5% in the next 10 years. In the future, more and more countries will maintain economic growth of 1% and 2%. I am afraid it will be difficult for the world to return to the era of an average growth rate of 4% or 4.5% at the beginning of the 21st century.


"Low employment": according to the United Nations report, in 2020, the world lost about 255 million full-time jobs, the extreme poverty rate rised to 9.5% from 8.4% in 2019, and the number of hungry people may increase by 83 million to 132 million. The employment rate is rising in 2021, but most of them are semi employment and temporary employment. Investment, trade, tourism, entertainment, sports and other industries will not return to the prosperous era in the foreseeable future. I'm afraid the UN 2030 sustainable development goal will not be achieved.


"Low yield": the total negative yield of Global Treasury bonds in 2020 has reached US $18 trillion. Although the US 10-year Treasury bond has turned negative to positive in 2021, it is still a real negative yield due to the impact of inflation. In China, the principal guaranteed income of financial management is also declining. It can be predicted that the expectation of low income will usher in the "low desire era" of the world economy.


In addition to "three low", there are "three high":

"High risk": at present, the pandemic hasn't past, the number of infected persons in Europe and the United States has entered the fourth wave. But some countries are fully open. The impact of the pandemic on the economy still exists. In addition, there are populism, extremism and terrorism. The risks of the world economy will be much higher than in the past, such as food risk, debt risk, financial risk, energy risk and so on.


"High inflation": since 2020, due to the quantitative stimulus policy of the United States, the inflation rate has been maintained at 4% or even more than 5%, increasing the risk of the world economy and boosting the global financial turmoil. China has always been worried about inflation.


"High debt": at present, the debt of the United States has reached about $30 trillion. Over the past 100 years, the ratio of U.S. debt to GDP has increased well, and now it has reached about 150%. The same is true in Europe, Japan and emerging countries. In China, there has been a struggle for deleveraging for many years.


In short, I am worried about the future of the global economy. Of course, I still have confidence. That is due to cooperation.

First of all, we should cooperate to fight the pandemic, especially with major countries, and let the pandemic crisis pass as soon as possible.

The second is innovation. Science and technology is the primary productive force. With continuous innovation and cost reduction, there will be a new future for economic growth.

Finally, development. Help lift 1 billion people out of poverty, and help more than 6 billion people in the world who still live in developing countries. These are the hope for the future of the world economy and the future of multilateralism.


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