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The global economy will soon be covered by a perfect storm, Belousov said
Material posted: Publication date: 21-11-2022
In the next few years, the world economy will find itself in a perfect storm, said First Deputy Prime Minister Andrei Belousov, who heads the Russian delegation at the Asia-Pacific Economic Cooperation summit. "Now we are just coming to understand the severity of the problems that are emerging in the world. The fact is that the next few years are a period of perfect storm, when negative trends that have been accumulating for a long time converge in a limited time interval," he said at a briefing on the sidelines of the forum.

As the first negative trend, Belousov highlighted the growth of protectionism in world trade and the blocking of WTO-related rules. In his opinion, this effectively paralyzed the work of the dispute resolution body. The second factor overlaying protectionism, the first Deputy Prime Minister called a huge debt overhang, which should have been resolved after the crisis of 2008-2009, but this did not happen. As a result, this overhang blocks the possibility of using such standard instruments of suppressing inflation as raising interest rates or tightening monetary policy.
"Because an increase in interest rates will lead to a sharp rise in the cost of debt servicing, debt repayment, and this may simply lead to a chain of bankruptcies of the largest banks," Belousov explained.
The third factor that Belousov highlighted is related to the price increase. According to him, this process is long-term and began at the end of last year. First, prices for metals rose, then for gas, which led to a reduction in the production of mineral fertilizers and their rise in price, which could not but affect grain markets.

"All this turbulence, which occurs in combination of these factors, has led to the fact that the markets have come into a very strong movement," the First Deputy Prime Minister recalled.
He noted that this movement is now chaotic and uncertain, which is why investors are losing their bearings.
"There is a strong gap between the scale of the problems and the tools that are currently being offered to solve them. And what is proposed — it is proposed to quickly stop the special operation on Ukraine. This, apparently, according to the authors, should return prices to their places. The second is an increase in interest rates by banks in order to contain inflation," Belousov said.
At the same time, he suggested focusing on those measures that would help overcome the global economic crisis. First of all, according to the First Deputy Prime Minister, it is the removal of barriers, which "have now spawned a lot" - both trade and financial, in the field of technology dissemination.

Another important and difficult moment is the restoration of trust, Belousov added.
"It will take a very long time, but no rules that we would come up with, they will not work if they do not rely on the mutual trust of partners," he stressed.

In third place, he put the climate agenda, which needs to be balanced in such a way that it does not hinder the recovery of economic growth.
"Today such attempts are being made, and we see it in a number of directions — the so-called carbon regulation is in fact a hidden, and sometimes open protectionism. Such attempts also do not add optimism, but this is another direction that needs to be solved," the First Deputy Prime Minister concluded.
The APEC Summit is being held on November 18 and 19 in Bangkok. The organization unites 21 economies of the Asia-Pacific region, including such large ones as the USA, China, Japan, South Korea, Australia, Indonesia. Russia has been a member of APEC since 1998.

Tags: economy , crisis

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