At the World Economic Forum Annual Meeting 2023, United Nations Secretary-General Antonio Guterres warned of an impending global economic crisis, suggesting that it would be severe.
"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. "Start with the short term, the global economic crisis. The outlook, as we all know, is bleak."
Guterres explained that the world was facing various issues at once. The supply chain disruption has caused prices to skyrocket, leading to a wave of inflation that many nations have been struggling with.
Asked about the UN's solution to combat the issue, Guterres said the international organization would focus on overseeing the transition from fossil fuel dominance to green energy. The UN also plans to provide a "global stimulus" for the lowest-income countries to help address their economic problems.
According to Guterres, transitioning to clean energy has never been more important than ever due to climate issues. The secretary-general, however, said that the transition should be managed properly due to the world's high dependence on fossil fuels.
All parties involved must consider the negative impacts of the transition to groups that rely on the fossil fuel industry. They need to receive training and assistance to find new jobs. Every region needs to engage in this transition project.
Guterres also requested China to show "higher commitments" in lowering the level of its carbon emissions to support the global effort to tackle climate change. He, however, acknowledged that China might require technical assistance to reduce its emissions because a large portion of Chinese industries relies on old-fashioned methods.
In his speech, Guterres also touched on the topic of the West's current tension with 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," Guterres said.
Crisis in global south
According to the UN official, the current economic situation has worsened inequalities, with women being the most affected. Guterres added that the world rarely brought up countries in the global south in the discussion of global economic crisis despite being especially vulnerable.
" 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. "
Antonio Guterres, Secretary-General of the United Nations
Central banks in the southern hemisphere also raise interest rates rapidly to curb inflation. Although this strategy has been used for decades, many economists say it is not appropriate in the current situation.
Economists also pointed out that global south countries also carry the brunt of interest rate hikes implemented by global north countries. The high-interest rates in the U.S. lead to a stronger dollar, which reduces low-income nations' ability to pay debts.
Unlike developed economies, these countries cannot re-introduce stabilization to their economy in a volatile situation. Guterres said that many countries in the global south were "close to default" due to a lack of economic resources.
It is difficult for countries in the Caribbean and surrounding regions to obtain concessional funding — lower-than-market-rate funding provided by large financial institutions like the IMF — because they are categorized as middle-income nations.
Most of these nations typically depend on tourism, which halted for nearly two years due to the COVID-19 pandemic. The inability to obtain debt has disrupted these countries' operations. Guterres said they were in a condition "in which people are suffering."
He urged nations to show solidarity and help these nations overcome their challenges.