Global Economic Trends - Topics 7-12 PDF

GLOBAL ECONOMIC TRENDS LECTURES AGENDA History: the development and structure of the world economy from the past to the present Typology of economies, transformation models. The proces of transformation, globalization, internationalization Determining trends of globalization (liberaliza...

GLOBAL ECONOMIC TRENDS LECTURES AGENDA History: the development and structure of the world economy from the past to the present Typology of economies, transformation models. The proces of transformation, globalization, internationalization Determining trends of globalization (liberalization, FDI, migration, demography) Economic development / structural changes Disparities in the world economy Determinants/trends in the light of global challenges Trends expressed using selected indices The role of debt in the context of economic development Significant activities influencing global economic trends Models of economic growth – economic imbalance Periodicity of economic and financial crises World trade: the changing role of trade in society and the economy PLANNED TIMETABLE 24H IN TOTAL MONDAY-THURSDAY, 09-12.12.2024 09:00-10:15 10:30-11:45 13:15-14:45 FRIDAY, 13.12.2023 09:00-10:15 10:30-11:30  TOPIC 7 Trends expressed using selected indices Introduction to indices and rankings in economics Economic indices and rankings are tools used to quantify and compare various aspects of economies, such as development, competitiveness, and quality of life. These tools are crucial for understanding complex economic phenomena, comparing countries or regions, and guiding policy decisions. The lecture will cover a range of indices including the Human Development Index, Big Mac Index, Global Competitiveness Index, and others, each providing unique insights into global economic trends. Understanding economic indices and rankings Economic indices aggregate and analyze multiple data points to provide a snapshot of a particular economic aspect, Economic rankings order countries or entities based on specific criteria. These tools often use a combination of statistical data and expert assessments. Methodologies vary, with some focusing on quantitative data and others incorporating qualitative judgments. Indices and rankings simplify complex data, making it easier to understand and compare economic trends and performance across different contexts. While useful, these tools have limitations, including potential biases in data selection, oversimplification of complex realities, and the influence of subjective judgments in methodology. Human Development Index (HDI) The Human Development Index (HDI), developed by the United Nations, measures countries' social and economic development based on life expectancy, education, and per capita income. HDI is a composite index that provides a broader view of development than GDP alone, considering health, knowledge, and standard of living. HDI reveals global and regional development trends, highlighting progress and disparities in human development. Despite its comprehensive approach, HDI has been critiqued for not accounting for factors like inequality, environmental degradation, and cultural differences. Ranking of countries with the highest Human Development Index (HDI) value in 2022 (in parts per 1,000) Countries with the highest Human Development Index value 2022 1 200 Human Development Index (value in parts per 1 000 967 959 952 950 949 946 942 940 937 929 927 926 915 911 907 800 thousand) 600 400 200 0 Note(s): Worldwide Further information regarding this statistic can be found on page 8. 4 Source(s): UNDP; ID 264630 Ranking of countries with the lowest Human Development Index (HDI) value in 2022 Countries with the lowest Human Development Index value 2022 0,6 0,53 0,54 0,52 0,52 0,49 0,49 0,5 Human Development Index (0-1) 0,5 0,47 0,48 0,46 0,44 0,42 0,38 0,39 0,39 0,4 0,3 0,2 0,1 0,0 Note(s): Worldwide Further information regarding this statistic can be found on page 8. Source(s): UNDP; ID 1462381 Global Competitiveness Index The Global Competitiveness Index, compiled by the World Economic Forum, assesses the competitiveness landscape of countries, based on factors like infrastructure, macroeconomic stability, and health. The index provides insights into factors that drive productivity and prosperity, helping to understand why some countries are more successful than others in economic terms. It highlights global trends in economic performance, innovation capacity, and business dynamism. The index serves as a benchmarking tool for policymakers to identify challenges and opportunities for economic improvement. Index of the 30 most competitive countries in 2024 Index of the 25 most competitive countries in 2024 120 100 100 97,07 91,49 89,75 86,94 85,33 81,86 80,26 78,93 77,69 80 75,27 73,7 72,51 71,52 70,21 Index Value 60 40 20 0 Note(s): Worldwide; 2023 Further information regarding this statistic can be found on page 8. 4 Source(s): IMD; ID 273072 IT competitiveness index in Central and Eastern Europe (CEE) in 2024, by selected country IT competitiveness index in CEE 2024, by country 70 63,83 60,46 59,26 60 54,62 53,28 52,85 52,67 52,22 51,52 Competitiveness index score 50,31 49,6 50 46,49 45,97 45,03 44,07 42,33 41,95 39,19 40 36,37 32,9 30 20 10 0 Note(s): CEE; 2024 Further information regarding this statistic can be found on page 8. 4 Source(s): Emerging Europe; ID 1388270 Big Mac Index Introduced by The Economist, the Big Mac Index compares the price of a McDonald's Big Mac burger in different countries to assess purchasing power parity. The index is a lighthearted tool to make exchange-rate theory more digestible, indicating whether currencies are under or overvalued against the US dollar. Beyond currency valuation, it also offers a simplistic view of the cost of living in different countries. The Big Mac Index, while popular, is limited by its focus on a single product and does not consider broader economic factors like local consumption patterns or production costs. https://www.economist.com/big-mac-index 4 Average price in U.S. dollars 0 1 2 3 4 5 6 7 9 8 Switzerland 8,07 Uruguay Norway Argentina 6,55 Euro area Britain Sri Lanka 5,69 United States Denmark Costa Rica 5,62 Note(s): Worldwide; July 2024; GDP-adjusted Sweden Canada Big Mac index worldwide 2024 Poland 5,27 Mexico Australia Saudi Arabia 5,06 Further information regarding this statistic can be found on page 8. New Zealand Singapore Source(s): IMF; McDonald's; Thomson Reuters; The Economist; ID 274326 Colombia 4,9 United Arab Emirates Turkey Czechia 4,63 Kuwait Peru Chile 4,54 Israel Bahrain Nicaragua 4,34 Brazil Honduras 4 Guatemala South Korea Oman Hungary 3,9 Qatar Pakistan Thailand 3,79 Oman Azerbaijan Moldova 3,57 China Jordan Romania 3,53 Japan Vietnam Hong Kong SAR 2,94 Ukraine Malaysia Philippines 2,86 South Africa India Egypt 2,47 Global price of a Big Mac as of July 2024, by country (in U.S. dollars) Indonesia Taiwan Working time required to buy one Big Mac in selected cities around the world in 2018 (in minutes) Working time required to buy a Big Mac in cities worldwide 2018 160 140 133,8 120 1 Big Mac in minutes 100 90,5 82,9 80 61,9 60 55,6 53,1 51 48 43,9 40,2 40 36,3 32,6 28,7 27,1 24,9 23,5 23 21,7 19,4 17,9 16,9 20 15,4 15 13,9 13,3 12 0 Note(s): Worldwide; January to April, 2018 Further information regarding this statistic can be found on page 8. Source(s): UBS; ID 275235 Ease of Doing Business Index The Ease of Doing Business Index, published by the World Bank, ranks countries based on the ease of doing business, considering factors like starting a business, dealing with construction permits, getting electricity, and registering property. The index evaluates regulations and the protection of property rights to assess the business environment in each country. It provides insights into the business climate worldwide, identifying both business-friendly countries and those with challenges. The index is a valuable tool for investors and policymakers, guiding reforms to improve the business climate and attract investment. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. https://archive.doingbusiness.org/en/scores Ease of doing business in the Middle East and North Africa in 2019, by country* Ease of doing business in MENA by country 2019 90 80,9 80 76 73,4 71,6 70 69 68,7 68,7 67,4 Ease of doing business score 70 60,5 60,1 60 60 54,3 56,5 51,1 48,6 47,9 50 44,8 44,7 42 40 32,7 31,8 30 20 20 10 0 Note(s): MENA; 2019 Further information regarding this statistic can be found on page 8. 4 Source(s): World Bank; ID 882029 Environmental Performance Index The Environmental Performance Index, developed by Yale and Columbia Universities, assesses countries' environmental health and ecosystem vitality, using indicators like air quality, water resources, and biodiversity. The index provides a comprehensive assessment of environmental performance and sustainability practices of countries. It highlights global environmental challenges and successes, showing how different countries are performing in terms of environmental protection. The index serves as a guide for environmental policy and sustainable development, emphasizing the need for effective environmental governance. An economy’s EPI score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. https://epi.yale.edu/ Environmental Performance Index https://epi.yale.edu/ Global Innovation Index The Global Innovation Index ranks countries based on their innovation capabilities and outputs, considering factors like institutions, human capital, research, infrastructure, and market sophistication. The index underscores the importance of innovation in driving economic growth and competitiveness. It provides insights into global innovation trends, identifying leaders in innovation and regions with emerging innovation capabilities. The index highlights the need for policies that foster innovation ecosystems, supporting research and development, and encouraging creativity and entrepreneurship. https://www.wipo.int/global_innovation_index/en/ https://www.wipo.int/web-publications/global-innovation-index- 2024/assets/67729/2000%20Global%20Innovation%20Index%202024_WEB3lite.pdf https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2020.pdf Top 3 innovation economies by region (2020) Top 3 innovation economies by region (2022) 10 best-ranked economies by income group (rank) - 2020 Global Innovation Index 2024 Gini Coefficient The Gini Coefficient is a measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality). It is calculated based on the distribution of income or consumption among individuals or households in an economy. The Gini Coefficient reveals significant variations in income inequality across different countries and regions. High Gini coefficients are often associated with social unrest and economic instability, highlighting the importance of addressing income inequality. 20 countries with the biggest inequality in income distribution worldwide in 2023, based on the Gini index Gini Index - countries with the biggest inequality in income distribution 2023 70 63 59,1 60 54,8 54,6 53,3 52 51,5 51,3 50,5 50,3 49,8 48,9 50 48,3 48,2 47,2 46,2 45,5 45,3 45,1 44,9 Gini coefficient (0-100) 40 30 20 10 0 Note(s): Worldwide; 2010 to 2023*; Top 20 Further information regarding this statistic can be found on page 8. 4 Source(s): World Bank; ID 264627 Corruption Perceptions Index The Corruption Perceptions Index, compiled by Transparency International, ranks countries based on perceived levels of public sector corruption, using various assessment and survey data. The index uses a scale from 0 (highly corrupt) to 100 (very clean) to rank countries, providing a comparative measure of corruption worldwide. It highlights trends in corruption, identifying both improvements and deteriorations in different regions and countries. The index underscores the impact of corruption on economic development, governance, and foreign investment, emphasizing the need for transparency and accountability in the public sector. Most corrupt countries worldwide 2023, according to the Corruption perception index Corruption perception index - most corrupt countries 2023 25 Corruption perception index score 21 20 20 20 20 20 20 20 20 20 18 18 17 17 17 17 16 15 13 13 13 11 10 5 0 Country Note(s): Worldwide; 2023 Further information regarding this statistic can be found on page 8. 4 Source(s): Transparency International; ID 235847 Networked Readiness Index Networked Readiness Index, measures the propensity of countries to exploit the opportunities offered by information and communications technology (ICT). The index evaluates ICT readiness, usage, and impacts, considering factors like technology infrastructure, digital content availability, and government's ICT vision. It provides insights into the digital divide, showing how countries are progressing in terms of digital connectivity and readiness. The index underscores the importance of ICT for economic growth and social development, highlighting areas where countries need to improve to harness the benefits of digitalization. Network readiness index in the Asia-Pacific region in 2021, by country Network readiness index APAC 2021, by country 90 80,01 80 75,56 74,96 73,92 72 70 65,62 64,91 61,26 60 55,31 Index points (0-100) 51,08 50,37 49,74 50 46,94 45,27 43,21 40,93 40,25 40 36,39 35,64 32,36 30 20 10 0 Note(s): Asia, APAC; 2021 Further information regarding this statistic can be found on page 8. Source(s): Portulans Institute; ID 1265515 Government artificial intelligence (AI) readiness index rankings worldwide in 2023, by country Government AI readiness index rankings worldwide 2023, by country 90 84,8 81,97 78,57 77,37 77,07 80 76,07 75,65 75,26 75,08 74,47 73,91 73,89 72,71 72,55 72,37 70,94 70,86 70,42 70,25 69,82 69,59 69,41 68,71 68,57 68,28 70 AI readiness index score 60 50 40 30 20 10 0 Note(s): Worldwide; 2023 Further information regarding this statistic can be found on page 8. Source(s): Oxford Insights; International Development Research Centre; ID 1231685 Global Food Security Index Global Food Security Index, developed by The Economist Intelligence Unit, evaluates the core issues of food security – affordability, availability, quality, and safety – in countries worldwide. The index considers factors like food consumption as a share of household expenditure, agricultural infrastructure, and the presence of food safety net programs. It reveals how different regions and countries fare in ensuring food security, highlighting areas of concern and progress. The insights from the index are vital for guiding policies and investments in agriculture, food distribution, and nutrition, aiming to improve global food security. Countries that are most affected by hunger and malnutrition according to the Global Hunger Index 2024 Global Hunger Index 2024 countries most affected by hunger 50 44,1 45 40 36,4 34,9 34,1 35 31,5 31,2 30,7 30,3 28,8 27,9 30 27,5 27,3 Index value 26,6 25,2 24,7 25 20 15 10 5 0 Note(s): Worldwide; 2024 Further information regarding this statistic can be found on page 8. Source(s): Welthungerhilfe; International Food Policy Research Institute; Concern Worldwide; ID 269924 Travel and Tourism Competitiveness Index The Travel and Tourism Competitiveness Index, compiled by the World Economic Forum, assesses the factors and policies that make countries attractive and competitive travel destinations. It evaluates aspects like business environment, safety and security, health and hygiene, cultural resources, and environmental sustainability. The index provides a comprehensive picture of the strengths and weaknesses of countries' travel and tourism sectors, identifying leaders and laggards in tourism competitiveness. The index highlights the importance of the travel and tourism industry for economic development and job creation, emphasizing the need for sustainable and inclusive tourism policies. Travel and tourism competitiveness index in selected countries in the Asia Pacific region in 2019, by country or region Travel and tourism competitiveness index APAC 2019 by country or region 6 5,4 5,1 4,9 4,8 4,8 4,8 5 4,7 4,5 4,5 4,4 4 Index score 3 2 1 0 Japan Australia China Singapore Hong Kong South Korea New Zealand Thailand Malaysia India Note(s): APAC; 2019 Further information regarding this statistic can be found on page 8. Source(s): World Economic Forum; ID 186679 Global Financial Centres Index The Global Financial Centres Index ranks the competitiveness of financial centers based on factors such as business environment, financial sector development, infrastructure, and human capital. The index considers quantitative measures like market access and qualitative assessments from international financial professionals. It identifies the leading financial centers globally, providing insights into the dynamics of international finance and the factors driving financial center development. The index is a valuable tool for understanding the role of financial centers in the global economy, influencing investment decisions and policy-making in the financial sector. https://www.longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/ Global Financial Centres Index: Top 20 centres Leading financial centers globally as of March 2024 Leading financial centers worldwide 2024 (numer of points) 900 800 764 Points on the Global Financial Centres Index 747 742 741 740 739 738 737 736 735 734 733 732 731 730 700 600 500 400 300 200 100 0 Note(s): Worldwide; March 2024; 8,494 respondents; Financial services professionals Further information regarding this statistic can be found on page 8. 4 Source(s): Z/Yen; ID 270228 Global Wealth Report The Global Wealth Report, published so far by Credit Suisse, analyzes wealth distribution and accumulation globally, offering insights into the economic health of nations. The report provides a comprehensive picture of global wealth trends, including the distribution of wealth among individuals and countries. It sheds light on issues like wealth inequality, the growth of the middle class, and the concentration of wealth in the hands of a few. The findings of the report have significant implications for economic policy, financial stability, and development strategies, highlighting the need for addressing wealth disparities. https://www.ubs.com/global/en/family-office-uhnw/reports/global-wealth-report-2023.html Market rankings by mean and median wealth per adult, 2022 World Wealth Map 2022 World Happiness Report The World Happiness Report ranks countries by their citizens' self-reported well-being, considering factors like GDP per capita, social support, life expectancy, freedom to make life choices, generosity, and perceptions of corruption. The report provides a comprehensive measure of happiness, going beyond economic indicators to include social and individual factors. It reveals interesting trends in global happiness, highlighting the happiest and least happy countries, and the factors contributing to these rankings. The findings of the report have implications for understanding the impact of policy on well-being and guiding governments in creating happier societies. https://worldhappiness.report/ed/2023/world-happiness-trust-and-social-connections-in-times-of- crisis/#ranking-of-happiness-2020-2022 https://happiness-report.s3.amazonaws.com/2024/WHR+24.pdf Ranking of happiest countries worldwide in 2023, by score Ranking of happiest countries worldwide 2023, by score 9 8 7,74 7,53 7,34 7,3 7,06 7,03 6,95 6,9 6,84 6,82 6,74 6,73 6,68 7 6,61 6,56 Average score (0-10) 6 5 4 3 2 1 0 Note(s): Worldwide; 2021 to 2023; top 30, three-year-average Further information regarding this statistic can be found on page 8. 4 Source(s): United Nations (Sustainable Development Solutions Network); Gallup; ID 1225047 World Happiness Report 2024 World Happiness Report 2024 Leading stock market indices Stock market index is a barometer of economy. Stock market indices measure the value of a section of a country’s stock market via a weighted average of selected stocks. These indices help investors and analysts describe the market and compare different investments. Five well-known stock market indices worldwide: Standard & Poor's 500 Index (S&P 500) Dow Jones Industrial Average (DJIA) NASDAQ Composite Financial Times Stock Exchange 100 Index (FTSE 100) Nikkei 225 Five well-known global stock market indices: MSCI World Index FTSE All-World Index, S&P Global 100 Index, S&P Global 1200 Index, Dow Jones Global Titans 50 Largest stock exchange operators worldwide as of September 2024, by market capitalization of listed companies (in trillion U.S. dollars) Largest stock exchange operators worldwide 2024, by market capitalization 35 30,15 28,9 Market cap in trillion U.S. dollars 30 25 20 15 10 7,41 6,68 5,66 5,62 4,75 4,61 3,74 5 3,49 2,7 2,24 2,21 1,95 1,91 1,89 1,85 1,56 1,13 0 Note(s): Worldwide; September 2024 Further information regarding this statistic can be found on page 8. 4 Source(s): WFE; ID 270126  The 100 largest companies in the world by market capitalization in 2023 (in billion U.S. dollars) Biggest companies in the world by market value 2023 Market capitalization in billion U.S. dollars 0 500 1 000 1 500 2 000 2 500 3 000 3 500 Microsoft (U.S.) 3 123,13 Apple (U.S.) 2 911,49 Ranking of the companies from 1 to 100 NVIDIA (U.S.) 2 311,97 Alphabet (U.S.) 2 177,68 Amazon (U.S.) 1 922,1 Saudi Arabian Oil Company (Saudi Aramco, Saudi Arabia) 1 919,26 Meta Platforms (U.S.) 1 197,02 Eli Lilly (U.S.) 731,81 Taiwan Semiconductor (Taiwan) 672,02 Broadcom (U.S.) 646,61 JP Morgan Chase (United States) 588,09 Novo Nordisk (Denmark) 581,08 Tesla (U.S.) 565,96 Visa (U.S.) 560,48 ExxonMobil (U.S.) 536,7 Note(s): Worldwide; May 17, 2024 Further information regarding this statistic can be found on page 8. 2 Source(s): Forbes; ID 263264 Standard & Poor's 500 Index (S&P 500) The S&P 500 tracks 500 large-cap U.S. stocks, providing a broader representation of the U.S. market than the DJIA. It's considered one of the best reflections of the U.S. stock market and a reliable indicator of U.S. economic health. The index offers insights into the performance of the broader U.S. economy across various sectors. Its focus on large-cap stocks means it may not fully represent the smaller segments of the market. Annual development of the S&P 500 Index from 1986 to 2023 Annual development S&P 500 Index 1986-2023 6 000 5 000 4 000 Index value 3 000 2 000 1 000 0 Note(s): United States; 1986 to 2023; year-end closing values. Further information regarding this statistic can be found on page 8. 2 Source(s): S&P Global; ID 261713 Dow Jones Industrial Average (DJIA) The DJIA is one of the oldest and most widely recognized stock market indices, representing 30 large, publicly-owned companies based in the United States. It serves as a barometer for the general condition of the U.S. stock market, focusing on industrial sector performance. The DJIA provides insights into the economic health of the industrial sector and, by extension, the U.S. economy. Critiqued for its limited scope, representing only 30 companies, and for its price-weighted index method, which may not accurately reflect market capitalization. Annual development of the Dow Jones Industrial Average Index from 1986 to 2023 Annual development Dow Jones Industrial Average Index 1986-2023 40 000 35 000 30 000 25 000 Index value 20 000 15 000 10 000 5 000 0 Note(s): United States; 1986 to 2023; year-end closing values. Further information regarding this statistic can be found on page 8. 2 Source(s): 1Stock1.com; Dow Jones; ID 262889 NASDAQ Composite The NASDAQ Composite includes over 3,000 stocks listed on the NASDAQ stock exchange, known for its high concentration of technology companies. It is heavily weighted towards the technology sector, making it a significant indicator of tech industry performance. The index is a valuable tool for tracking the performance and trends within the tech sector and growth-oriented stocks. The index's tech-heavy composition means it may not accurately reflect the broader market trends. Financial Times Stock Exchange 100 Index (FTSE 100) The Financial Times Stock Exchange 100 Index, or FTSE 100, tracks the 100 largest companies by market capitalization listed on the London Stock Exchange. It is a major indicator of the economic health of the UK and is used by investors globally to understand the UK market. Reflects the performance of major UK companies and, by extension, the UK economy. As it focuses on the largest companies, it may not fully represent the smaller businesses or the broader UK economy. Annual development of the FTSE 100 Index from 1995 to 2023 Annual development of FTSE 100 Index 1995-2023 9 000 8 000 7 000 6 000 Index value 5 000 4 000 3 000 2 000 1 000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Note(s): United Kingdom; 1995 to 2023 Further information regarding this statistic can be found on page 8. Source(s): London Stock Exchange; ID 261764 Nikkei 225 The Nikkei 225 is a stock market index for the Tokyo Stock Exchange, representing 225 top-rated Japanese companies. It is a leading indicator of the Japanese stock market and is watched as a gauge of Japan's economic health. Offers insights into the performance of Japan's major corporations and economic trends. The index is price-weighted, which can skew the representation of companies based on their share price rather than their actual size or market value. Annual performance of Nikkei 225 index from 1980 to 2023 Annual Nikkei 225 performance 1980-2023 45 000 40 000 35 000 30 000 Index points 25 000 20 000 15 000 10 000 5 000 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Note(s): Japan; 1980 to 2023 Further information regarding this statistic can be found on page 8. 4 Source(s): Minkabu; ID 261724 MSCI World Index The MSCI World Index tracks large and mid-cap equity performance across 23 developed market countries, covering approximately 85% of the free float-adjusted market capitalization in each country. It offers a broad global equity benchmark, representing major trends in developed markets worldwide. It is useful for assessing global market performance and for investors looking to capture a comprehensive view of global stock markets. It excludes emerging markets, which can be a significant part of the global economic landscape. 2 Index points 1 000 1 500 2 500 3 000 3 500 4 000 2 000 Jan 5, 2020 Feb 9, 2020 Mar 15, 2020 Apr 19, 2020 May 24, 2020 Jun 28, 2020 Aug 2, 2020 Sep 6, 2020 Oct 11, 2020 Source(s): MSCI; Investing.com; ID 1253899 Nov 15, 2020 Dec 20, 2020 Jan 24, 2021 Note(s): Worldwide; January 5, 2020 to October 13, 2024 Feb 28, 2021 Apr 4, 2021 Further information regarding this statistic can be found on page 8. May 9, 2021 Jun 13, 2021 Jul 18, 2021 Aug 22, 2021 Sep 26, 2021 Oct 31, 2021 Dec 5, 2021 Weekly value of MSCI World Index (USD) 2020-2024 Jan 09, 2022 Feb 13, 2022 Mar 20, 2022 Apr 24, 2022 May 29, 2022 Jul 03, 2022 Aug 7, 2022 Sep 11, 2022 Oct 16, 2022 Nov 20, 2022 Dec 25, 2022 Jan 29, 2023 Mar 5, 2023 Apr 9, 2023 May 14, 2023 Jun 18, 2023 Jul 23, 2023 Aug 27, 2023 Oct 1, 2023 Nov 5, 2023 Dec 10, 2023 Jan 14, 2024 Feb 18, 2024 Mar 24, 2024 Apr 28, 2024 Jun 2, 2024 Weekly development of the MSCI World Index (USD) from January 2020 to October 2024 July 07, 2024 Aug 11, 2024 Sep 15, 2024 FTSE All-World Index The FTSE All-World Index is a market-capitalization weighted index representing the performance of large and mid-cap stocks from developed and emerging markets. It includes a wide range of stocks, providing a detailed snapshot of global market trends. It offers insights into both developed and emerging market performances, useful for investors seeking diversified global exposure. The index’s broad scope may dilute focus from specific market segments, and its market-cap weighting can skew representation towards larger companies. S&P Global 100 Index Overview: The S&P Global 100 Index measures the performance of 100 multinational, blue-chip companies of major importance in the global markets. It is focused on Multinational Giants: Represents some of the largest and most established companies in the world. It reflects the performance of leading companies with global operations, often used as a benchmark for global blue-chip stocks. Concentration on large multinationals means it may not accurately represent smaller or emerging market trends. S&P Global 1200 Index Overview: The S&P Global 1200 captures approximately 70% of global stock market capitalization, combining seven leading indices, including the S&P 500 and the S&P Europe 350. It provides a comprehensive snapshot of global stock market performance. It is useful for investors seeking a global perspective, combining developed and emerging market exposure. The dominance of U.S. stocks in the index may overshadow other global market trends. Dow Jones Global Titans 50 Index The Dow Jones Global Titans 50 Index tracks 50 of the largest multinational corporations in the Dow Jones Global Total Stock Market Index. It is focused on the highest-ranking companies in terms of revenue, profit, and market capitalization. It offers insights into the performance of the world’s leading and most influential companies. The index’s focus on only the largest companies means it may miss broader market movements and emerging trends. Black Swan event (1) A black swan event is a term used to describe an unpredictable occurrence that has severe consequences and is often rationalized in hindsight as if it could have been expected. This concept was popularized by Nassim Nicholas Taleb, who identified three primary characteristics of black swan events: Rarity (They are extremely rare and unforeseen, making them difficult to predict.) Severe impact (They result in significant consequences that are disproportionate to their likelihood.) Retrospective predictability (After the event occurs, people tend to create explanations that make it seem predictable, despite its unexpected nature.) The term "black swan" originates from a historical belief that all swans were white until black swans were discovered in Australia in the 17th century. This metaphor illustrates how an unexpected event can challenge established beliefs and assumptions. Black Swan event (2) Examples: The September 11 attacks A sudden and devastating event that had profound global implications. The 2008 financial crisis Triggered by the collapse of Lehman Brothers, this crisis revealed vulnerabilities within the global financial system and led to widespread economic downturns. The COVID-19 pandemic An unforeseen global health crisis that disrupted economies and daily life worldwide. In finance, black swan events can lead to market crashes, significant fluctuations in asset prices, and long-term changes in economic landscapes. Their unpredictable nature often exposes the limitations of existing risk management models and forecasting tools, which typically rely on historical data that may not account for such rare occurrences Black Swan event (3) Gray Rhino event (1) The concept of Gray Rhino events refers to highly probable and impactful risks that are often ignored despite being obvious. Coined by Michele Wucker in her 2016 book "The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore," this metaphor contrasts sharply with the Black Swan concept, which describes unpredictable events with severe consequences. Characteristics of Gray Rhino Events High Probability and Impact Gray Rhinos are risks that are likely to occur and can have significant consequences if they do. Examples include climate change, pandemics, and geopolitical conflicts. Obviousness Unlike Black Swans, which are unexpected, Gray Rhinos are visible and can be anticipated. However, they are frequently overlooked or underestimated until it is too late. Stages of Response: Denial (Recognizing the risk but refusing to acknowledge its potential impact.) Muddling (Delaying action while attempting to push the problem into the future.) Squabbling (Acknowledging the threat but failing to agree on a course of action.) Panic (Realizing action is necessary but being constrained by time or options.) Action (Taking measures either before or after being affected by the event.) Gray Rhino event (2) Examples of Gray Rhino Events COVID-19 Pandemic Initially labeled a Black Swan event, many experts argue it should have been recognized as a Gray Rhino due to historical precedents and warnings from health organizations. Climate Change A slow-moving crisis that has been widely acknowledged yet inadequately addressed by policymakers despite clear evidence of its impending impacts. Importance of Recognizing Gray Rhinos Understanding and preparing for Gray Rhino events is crucial for effective risk management. Organizations that fail to recognize these threats may find themselves unprepared when such events materialize, leading to significant operational disruptions and losses. By implementing proactive strategies and maintaining awareness of potential Gray Rhinos, stakeholders can mitigate risks before they escalate into crises. Black Swan vs. Gray Rhino event Black Swan vs. Gray Rhino event  TOPIC 8 The role of debt in the context of economic development Introduction to debt and economic development Debt is an obligation owed by one party (the debtor) to a second party (the creditor). In economics, it's a tool used for financing various activities, from government projects to personal expenditures. Debt plays a crucial role in economic development by providing necessary capital for investment, stimulating spending, and facilitating growth. However, it also carries risks such as financial instability if not managed properly. The concept of debt Debt can be categorized into public (government debt), private (corporate and individual debt), external (owed to foreign creditors), and domestic (owed within a country). Debt involves borrowing funds, which are to be repaid with interest. It can be used for various purposes, including infrastructure development, business expansion, or consumer spending. The concept of debt is ancient, with its role and perception evolving over time. From early barter systems to modern complex financial instruments, debt has always been a part of economic systems. Global debt overview Global debt has reached unprecedented levels in recent years, accelerated by factors such as economic crises and fiscal stimulus measures. Institutions like the IMF and World Bank play a significant role in global debt dynamics, offering loans and debt relief programs. The IMF primarily focuses on stabilizing the international monetary system, offering financial assistance through loans to countries facing balance of payments problems, and providing policy advice and technical assistance to support economic stability and growth. The World Bank's primary role is in providing long-term loans and grants for development projects and programs aimed at reducing poverty and promoting economic development in developing countries, often focusing on infrastructure, health, and education sectors. Public debt and economic development Public debt is used by governments to finance economic growth, especially when tax revenues are insufficient. It can fund public services, infrastructure, and social programs. Governments often incur debt to stimulate economic activity, especially during downturns, by investing in projects that can boost productivity and employment. The sustainability of public debt depends on a country's ability to repay. Excessive public debt can lead to economic instability and reduced growth prospects. External debt in developing countries Developing countries often rely on external debt to finance development due to limited domestic resources. This debt is borrowed from foreign lenders, including governments, international organizations, and private creditors. Managing external debt sustainability is crucial for developing countries to avoid debt distress, which can lead to economic crises and hinder development. The Heavily Indebted Poor Countries (HIPC) initiative The Heavily Indebted Poor Countries (HIPC) initiative is a significant program aimed at addressing the challenges faced by the world's poorest and most heavily indebted countries. Its key characteristics: The HIPC initiative is designed to ensure that the poorest countries in the world are not overwhelmed by unmanageable or unsustainable debt burdens. It provides comprehensive debt relief to eligible countries to help them achieve sustainable levels of debt. The initiative was launched in 1996 by the International Monetary Fund (IMF) and the World Bank. It represents a coordinated approach by the international financial community, including multilateral organizations, governments, and private creditors Private sector debt Corporate debt can drive economic development by allowing businesses to invest, expand, and innovate. Similarly, individual or household debt can stimulate consumption and economic activity. Corporate debt dynamics involve balancing the benefits of leveraging (using borrowed funds) against the risks of over-indebtedness, which can lead to financial distress. Household debt, including mortgages and consumer credit, can reflect economic confidence but also poses risks if it leads to unsustainable financial burdens. Debt in developed economies Developed economies typically have high levels of both public and private debt. Their debt is often driven by advanced financial markets, high consumer spending, and significant government expenditures. In these economies, debt can fuel economic growth and development but also poses risks such as financial crises if not managed properly. The 2008 financial crisis is a prime example of the repercussions of mismanaged debt. Strategies for managing debt in developed economies often involve balancing fiscal policies, controlling inflation, and ensuring sustainable borrowing practices. Debt in emerging economies Emerging economies often experience rapid growth, leading to increased borrowing to finance development. This includes both domestic and external debt. While debt can support growth and development, it also poses challenges such as vulnerability to global financial conditions and the risk of debt distress. Countries like Brazil, India, and South Africa provide examples of how emerging economies manage debt in the context of economic development, balancing growth aspirations with financial stability. Regional perspectives of debt Debt levels and dynamics vary significantly across regions. For instance, African countries may face challenges with external debt, while European countries might grapple with high public debt levels. Access to credit and debt sustainability can differ greatly between regions, influenced by economic development, financial systems, and political stability. Initiatives like the European Stability Mechanism (ESM) in Europe or the African Development Bank’s efforts in Africa showcase regional approaches to managing debt and fostering economic stability. Role of credit rating agencies Credit rating agencies assess the creditworthiness of debt issuers, including nations and corporations. Their ratings influence borrowing costs and the perceived risk of debt instruments. Higher credit ratings generally lead to lower borrowing costs, while lower ratings can increase the cost of debt and limit access to capital. Credit rating agencies have faced criticism for their role in financial crises, potential conflicts of interest, and the impact of their ratings on global financial stability. The Big Three credit rating agencies are S&P Global Ratings (S&P), Moody's, and Fitch Group. Credit rating scales by the Big Three Sovereign debt and international relations Sovereign debt is debt issued by the government of an independent political entity, usually in the form of securities. Sovereign debt can significantly influence international relations, affecting everything from foreign aid to geopolitical strategies. Some countries use debt as a tool of diplomacy or influence, as seen in debt-for-nature swaps or strategic lending practices. Instances of sovereign debt restructuring and forgiveness, such as the Paris Club agreements, demonstrate the interplay between debt and international relations. Paris Club is a group of officials from major creditor countries whose role is to find co-ordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilize and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment. Debt financing and borrowing Many countries use debt financing to fund large-scale development projects in sectors like infrastructure, energy, and education. Institutions like the World Bank and regional development banks provide loans for development projects, playing a crucial role in financing economic growth in developing countries. BUT: While debt financing can drive development, it also needs to be managed carefully to avoid creating unsustainable debt burdens. Debt and infrastructure development Infrastructure projects, often large-scale and capital-intensive, are commonly financed through debt, given their long-term benefits and substantial upfront costs. The challenge lies in balancing the immediate benefits of infrastructure development with the long-term debt obligations it creates. Effective project assessment and financial planning are crucial. Debt and social development Debt financing is also used for social development projects like education, healthcare, and housing. These investments, though not always directly profitable, have long-term social and economic returns. High debt levels can lead to underfunding in critical social sectors, as governments prioritize debt repayment over social spending. The key is to balance economic growth objectives with the need for social development, ensuring that debt financing does not overshadow critical social investments. Debt market and investors The debt market, comprising various debt instruments like bonds and loans, is a crucial platform for governments and corporations to raise capital. Debt instruments offer investors different levels of risk and return, making them attractive for portfolio diversification. Government bonds, for instance, are often seen as safe investments. Investors play a significant role in determining the terms and conditions of debt, influencing interest rates, maturity periods, and overall borrowing costs. Debt and monetary policy Central banks use monetary policy tools, like interest rates and open market operations, to influence national debt levels and economic activity. Changes in interest rates directly impact the cost of debt servicing for both governments and private borrowers, influencing economic decisions and debt sustainability. Effective monetary policy can help stabilize economies, manage inflation, and create conducive environments for sustainable debt levels. Debt and fiscal policy Fiscal policy, involving government spending and taxation, is closely linked to public debt management. Government spending decisions often directly influence the level of public debt. Governments must balance fiscal responsibilities, like providing public services and maintaining infrastructure, with the need to manage debt levels effectively. Sound fiscal policy can stimulate economic growth, increase tax revenues, and thereby improve a country's ability to manage and repay its debt. Expansionary fiscal policy is used by the government when trying to balance the contraction phase in the business cycle. It involves government spending exceeding tax revenue by more than it has tended to, and is usually undertaken during recessions. Contractionary fiscal policy, on the other hand, is a measure to increase tax rates and decrease government spending. It occurs when government deficit spending is lower than usual. This has the potential to slow economic growth if inflation, which was caused by a significant increase in aggregate demand and the supply of money, is excessive. Debt and financial crises Excessive or mismanaged debt has been a central factor in many financial crises, including the global financial crisis of 2008. Examining past crises reveals common patterns, such as unsustainable borrowing, speculative lending, and lack of transparency, leading to economic downturns. These crises underscore the importance of prudent debt management, regulatory oversight, and the need for mechanisms to prevent and mitigate the impact of debt-induced financial crises. Debt sustainability Debt sustainability refers to the ability of a country or entity to manage its debt obligations without external assistance or defaulting. Key factors include economic growth, interest rates, fiscal policies, and external economic conditions. Maintaining sustainable debt levels involves effective economic management, balanced budgeting, and regular monitoring of debt ratios and economic indicators. The impact of globalization on debt dynamics Globalization has significantly influenced debt markets, affecting borrowing practices, interest rates, and access to international capital. The integration of global economies has led to increased borrowing opportunities but also heightened exposure to global financial shocks and crises. Globalization can facilitate the rapid spread of debt crises from one country to others, as seen in contagion effects during financial turmoil. Debt and inequality High levels of debt, especially in developing countries, can exacerbate economic inequality, impacting growth and social stability. Debt can deepen income and wealth disparities, with poorer segments often facing higher borrowing costs and limited access to credit. Strategies to address inequality in the context of rising debt levels include progressive fiscal policies, targeted social spending, and inclusive financial services. The ethics of debt and lending The practice of lending and incurring debt raises ethical questions, particularly regarding responsible lending practices, interest rates, and the treatment of debtors. Ethical lending involves transparency, fairness, and consideration of the borrower's ability to repay. Similarly, ethical borrowing entails responsible use of debt and intention to repay. The moral implications of debt forgiveness, especially for heavily indebted poor countries, highlight the need for balance between financial obligations and humanitarian considerations.  Global debt Global debt remained above pre-pandemic levels in 2021 even after posting the steepest decline in 70 years, underscoring the challenges for policymakers. Total public and private debt decreased in 2021 to the equivalent of 247 percent of global gross domestic product, falling by 10 percentage points from its peak level in 2020, according to the latest update of the IMF’s Global Debt Database. Expressed in dollar terms, however, global debt continued to rise, although at a much slower rate, reaching a record $235 trillion last year. Private debt, which includes non-financial corporate and household obligations, drove the overall reduction, decreasing by 6 percentage points to 153 percent of GDP, according to our unique tally, which has been published annually since 2016. The decline of 4 percentage points for public debt, to 96 percent of GDP, was the largest such drop in decades, our database shows. The unusually large swings in debt ratios are caused by the economic rebound from COVID- 19 and the swift rise in inflation that has followed. Nevertheless, global debt remained nearly 19 percent of GDP above pre-pandemic levels at the end of 2021, posing challenges for policymakers all over the world. Global public and private debt ratios (debt as a percent of GDP) Indetedness variation across countries Debt dynamics varied significantly across country groups, however. The fall in debt was largest in advanced economies, where both private and public debt fell by 5 percent of GDP in 2021, reversing almost one-third of the surge recorded in 2020. In emerging markets (excluding China), the fall in debt ratios in 2021 was equivalent to almost 60 percent of the 2020 increase, with private debt falling more than public debt. In low-income developing countries, total debt ratios continued to increase in 2021, driven by higher private debt. Public and private debt ratios in selected countries (debt as a percent of GDP)  Factors behind the global debt swings Three main drivers explain these unusually large movements in both private and public debt around the world: Large fluctuations in economic growth. The economic recession at the onset of the pandemic contributed to a pronounced drop in GDP, which was reflected in the sharp rise in debt-to-GDP ratios in 2020. As economies moved on from the worst of the pandemic, the strong rebound in GDP helped the 2021 fall in debt ratios. High and more volatile inflation. Likewise, inflation rates fell significantly in the first year of the pandemic. This trend was reversed in 2021 as prices rose sharply in many countries. During 2020 and 2021, economic activity and inflation moved together: inflation fell and then rose with output. These factors induced large swings in nominal GDP that contributed to the changes in debt ratios. Effects of economic shocks on the budgets of governments, firms, and households. The volatile economic conditions also had a considerable impact on debt dynamics through budgets. Debt and deficits increased significantly in 2020 because of the economic recession and the sizable support extended to individuals and businesses. In 2021, fiscal deficits declined but remained above their pre-pandemic levels (see October 2022 Fiscal Monitor). Debt drivers: growth and inflation (change in debt stocks, in percent of GDP) Governments responsibility The weaker growth outlook and tighter monetary policy calls for prudence in managing debt and conducting fiscal policy. Recent developments in bond markets show investors’ heightened sensitivity to deteriorating macroeconomic fundamentals and limited fiscal buffers. Governments should adopt fiscal strategies that help reduce inflationary pressures now and debt vulnerabilities over the medium term, including by containing expenditure growth—while protecting priority areas, including support to those hardest hit by the cost-of-living crisis. This would also facilitate the work of central banks and allow for smaller increases in interest rates than would otherwise be the case. In times of turbulence and turmoil, confidence in long-run stability is a precious asset. Value of global debt from 1st quarter 2013 to 1st quarter 2024 (in trillion U.S. dollars) Value of debt worldwide 2013-2024 330 313 305 310 296 285 290 276,5 Debt in trillion U.S. dollars 270 257,4 250,2 245,4 250 238,3 230 218,8 220,1 220,4 217,3 210,5 213,6 210 190 170 150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20 '20 '20 '21 '21 '21 '21 '22 '22 '22 '23 '23 '23 '23 '24 Note(s): Worldwide; Q1 2013 to Q1 2024 Further information regarding this statistic can be found on page 8. 2 Source(s): IIF; ID 1236040 Global public debt from 2010 to 2023 (in trillion U.S. dollars) Global public debt 2010-2023 120 100 97,21 91,54 91,6 84,44 Public debt in trillion U.S. dollars 80 73,39 71,03 66,78 62,13 63,7 59,47 60,24 59,67 60 57,12 50,8 40 20 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Note(s): Worldwide; 2010 to 2023 Further information regarding this statistic can be found on page 8. Source(s): UNCTAD; IMF; UN Global Crisis Response Group; ID 1475527 Global public debt as a share of gross domestic product in developed and developing countries from 2010 to 2023 Global public debt rate 2010-2023, by development region Developing countries Developed countries 130% 119,7% 120% 113,15% 107,68% 107,92% 110% 103,8% 101,51% 100,05% 100,34% 101,22% 100,91% 100,28% 101,08% 97,66% Public debt as a share of GDP 100% 94,38% 90% 80% 72,15% 68,09% 67,71% 68,36% 70% 58,49% 60% 53,93% 55,53% 51,17% 50% 45,37% 40,09% 41,63% 39,62% 39,03% 39,01% 40% 30% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Note(s): Worldwide; 2010 to 2023 Further information regarding this statistic can be found on page 8. Source(s): UNCTAD; UN Global Crisis Response Group; IMF; ID 1475600 The 20 countries with the highest public debt in 2022 in relation to the gross domestic product (GDP) Countries with the highest public debt 2022