Here’s what you need to know about the global economy in 10 articles from the Forum

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Tom Crowfoot, Senior Digital Marketing Apprentice, Formative Content

• This round-up explores 10 articles from the World Economic Forum on key economic terms and theories.
• As the effects of inflation are felt around the world, these articles will help you understand the driving forces behind the global economy and the impacts on your finances.

1. How to prepare for a new economic reality and protect the most vulnerable – experts explain

The Forum’s latest Chief Economists Outlook Report suggests a global recession is “somewhat likely”. The OECD in its recent report similarly warned that recent indicators have “taken a turn for the worse”.

Saadia Zahidi, Managing Director at the Forum, highlights “growing inequality between and within countries” as the “ongoing legacy of COVID-19, war and uncoordinated policy action”.

Find out what four chief economists think needs to be done to shield the most vulnerable.

2. Here’s how rising global interest rates could impact your life

With inflation on the rise globally, central banks are using interest rates — the amount you are charged for borrowing money — to try and slow rising prices. As mortgage and credit card repayments increase, rising levels of inflation are forcing central banks to take urgent action.

Learn more about interest rates and their impact on your finances.

3. Explainer: What is a recession?

The National Bureau of Economic Research defines the event as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”

Read more about recessions and their warning signs.

4. What are foreign currency reserves and can they help combat the global economic crisis?

Foreign currency or exchange reserves, otherwise known as forex reserves, are made up of cash and other assets such as gold that are held by central banks or other financial institutions such as the International Monetary Fund (IMF).

From maintaining liquidity in economic crises to diversifying a country’s financial portfolio, discover why these reserves are so important.

5. What are central bank digital currencies?

Digital currency is electronic, rather than physical money. Central bank digital currency is “a risk-free form of money that is guaranteed by the state”, according to the European Central Bank.

More than 100 countries are now exploring central bank digital currencies, find out why.

Discover

What is the Forum doing to improve the global banking system?

The World Economic Forum’s Centre for the Fourth Industrial Revolution Network has built a global community of central banks, international organizations and leading blockchain experts to identify and leverage innovations in distributed ledger technologies (DLT) that could help usher in a new age for the global banking system.

We are now helping central banks build, pilot and scale innovative policy frameworks for guiding the implementation of DLT, with a focus on central bank digital currencies (CBDCs). DLT has widespread implications for the financial and monetary systems of tomorrow, but decisions about its use require input from multiple sectors in order to realize the technology’s full potential.

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“Over the next four years, we should expect to see many central banks decide whether they will use blockchain and distributed ledger technologies to improve their processes and economic welfare. Given the systemic importance of central bank processes, and the relative freshness of blockchain technology, banks must carefully consider all known and unknown risks to implementation.”
”— Ashley Lannquist, Blockchain and Digital Assets Platform, World Economic Forum

Our Central Banks in the Age of Blockchain community is an initiative of the Platform for Shaping the Future of Technology Governance: Blockchain and Digital Assets.

Read more about our impact, and learn how you can join this first-of-its-kind initiative.

6. What is the gig economy and what’s the deal for gig workers?

The “gig economy involves the exchange of labour for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment-by-task basis,” according to the UK government.

Despite the benefit of freedom that the gig economy provides to workers, “issues such as benefits, income-security measures, and training and credentials offer room for policy-makers to provide solutions”, according to a McKinsey Global Institute report.

Read more on the gig economy and the challenges its workers face.

7. GDP is no longer an accurate measure of growth. So what can take its place?

Many economists feel GDP is an outdated measure of economic wellbeing, with even its inventor, US economist Simon Kuznets, advocating for a new measure. Therefore, in the Forum’s 2021 report on post-COVID recovery it has proposed a scorecard made up of four dimensions that need to be brought into balance: prosperity, the planet, people and the role of institutions.

Explore how the Forum envisions a post-COVID economic recovery.

8. What happens if a country defaults on its debts?

A default happens when governments are not able to – or don’t want to – meet some or all of their debt payments to creditors. This situation isn’t uncommon, with 147 governments having defaulted on debts since 1960. Credit rating agencies rate a debtor’s ability to repay debt, so when countries have a poor credit rating, it’s hard for them to raise debt.

Learn more about government debt.

9. Explainer: What is a yield curve and why does it matter right now?

A yield curve refers to the representation on a graph of the yield – or the return investors can expect – on bonds that mature at different times. “A yield curve can be used to help gauge the direction of the economy,” according to Fidelity Investments. Therefore, yield curves are often used as a visual representation of bond investors’ feelings about risk.

Read more about yield curves and why they are so relevant right now.

10. What is a bear market?

A bear market occurs when a market experiences prolonged price declines. Bear markets are often associated with declines in an overall market or index – such as the S&P 500 – but they can also be associated with recessions. The causes of bear markets can range from pandemics to wars.

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