2022 has been a year that presented the world economy with several crises to handle. At the onset of the year, supply issues that resulted from disruptions in global supply chains and increased oil prices due to postponed energy investments drove global inflation up; upon the realization that inflation is here to stay, global central banks quickly started implementing tightening monetary policies.
The Russia-Ukraine war triggered an upsurge in energy prices in Europe in particular, led by gas prices. The research conducted reveal that the toll of the energy crisis was as high as that of 1973 oil crisis. Furthermore, inability of “the breadbasket” Ukraine to export its grain and the accumulated effects of the global climate crisis caused a hike in food prices. China’s insistence on the zero-Covid policy prevented the alleviation of the pressures on global supply chain. All these developments boosted global inflation, bringing inflation rates in developed countries to their highest since the 1980s. Seeking to take inflation under control, central banks were compelled to implement the fastest rate hike of the past 45 years. The termination of the downtrend on 10-year bond rates in the US that has been ongoing since 1982 manifests the size of financial tightening.
Multiple crises experienced in global economy in 2022 instigated debates about recession for 2023. The World Bank revised its 2023 global growth projection downwards from 3% to 1.7%, which is the lowest growth rate in the past five decades excluding in 2009 and 2020. The topic at hand for 2023 is whether soft landing can be achieved in developed countries, and whether inflation can be taken under control and decreased to containable levels. Controlling global inflation before economies enter recession, thus bringing about partial loosening in monetary policies is considered as the most positive outcome.
On the other hand, numerous developing countries are anticipated to slip into recession as opposed to developed economies. The fact that total indebtedness of developing countries is at the peak of the past 50 years narrows down maneuvering space in fiscal policies in these countries. Tightened global financial conditions and absence of flexibility in fiscal policies cause repatriation of international funds. Hence, it is projected that investments in developing countries will increase by a mere 3.5% by 2024 . This rise in investment ratios corresponds to half of the rise in the past 20 years. Such a low increase in investments will expectedly deplete the existing capital stock in developing countries, and pull down potential GDP, average income and purchasing power, under which scenario per capita GDP in developing economies will increase by just 2.8% in 2023 and 2024.
As the way out of the restrained space in monetary and fiscal policies on the part of developing countries, policies for growing foreign trade volumes gain the foreground. Although the pressure on the global supply chain eases in connection with declined logistics costs, the stock level remains low as compared to the pre-pandemic period. The deceleration in global trade in the second half of 2022 is anticipated to persist also in 2023. The World Trade Organization projected global trade growth in 2023 at a low 1%. Amid such a conjuncture, pursuance of policies that will add to the competitive strength of developing countries in foreign trade is deemed important. Furthermore, as the events of 2022 highlight energy and supply security issues, the coming period will presumably see increased investments in alternative energy resources and continued trend towards regional supply chains.
Despite the challenging conditions tainting the world trade, Türkiye sustained the momentum it has captured in 2021 and broke record in exports. These developments indicate that our country has embarked upon the centennial of our Republic employing the right economy policies. The support Türk Eximbank, Türkiye’s official export credit agency, extended to our country’s exports in 2022 totaled USD 45 billion, comprised of USD 19.6 billion in loans and USD 25.3 billion in insurance/reinsurance. We are targeting to increase our Bank’s total support volume in 2023 to USD 50 billion in line with our country’s growing exports.
Murat ZAMAN
Chairman of the Board of Directors
