The International Monetary Fund (IMF) had bad news for the global economy this past week. It lowered the global growth rate to 2.7% for next year, warned of sovereign defaults on debts, and forecast recession and gloom for markets.

“It is tough, but we can deal with these challenges,” Kristalina Georgieva, managing director of the IMF, told an audience at the weeklong annual meeting of the IMF and World Bank multilateral lenders in Washington.

“For many people, 2023 will feel like a recession,” IMF chief economist Pierre Olivier Gourinchas tweeted Tuesday as he laid out some gloomy numbers for the global economic outlook.

World Bank President David Malpass, the IMF’s Kristalina Georgieva and many leading economists counted several factors for the global economic slowdown. The war in Ukraine, the pandemic, inflation, China’s slow economy, climate change and the strong U.S. dollar, they said, had triggered the risk of a recession, with chances that the “worst is yet to come,” The Financial Times reported on the multilateral lender’s latest global outlook.

Growing high-cost debt

The economists consider high-cost debt and many countries’ increasing hardships in repaying their debts bitter realities. They feared sovereign defaults and expected more debt restructuring requests in the emerging and developing economies.

Gita Gopinath, IMF’s first deputy managing director, said that about 60% of low-income countries were either in debt stress or facing a high risk of debt stress.

Elena Duggar, chairperson of Moody’s Macroeconomic Board, predicted that sovereign default rates would pick up over the next couple of years.

“We already have six sovereign defaults this year in 2022,” Duggar said. In a typical year, she said, one or two sovereign defaults could be expected. A sovereign default happens when a country fails to repay its debts.

“We do have many countries, several of whom are from sub-Sahara, where it [sovereign default] is a challenge,” Gopinath said.

As she spoke, chanting could be heard from some members in the hall, saying “cancel all debts, reparations now.” Some protesters outside the bank’s building also were calling for transparency in debt mechanisms.

The high cost of borrowing is of significant concern. IMF chief Georgieva said at the outset of the annual event that rising interest rates would start becoming an issue.

The United Nations underscored the global debt crisis in its report Tuesday and called for debt relief for 54 countries around the world. Pakistan, Tunisia, Chad, Sri Lanka and Zambia are viewed as facing the most immediate risk of sinking into a deepening debt crisis.

The IMF said Saturday it reached a staff level agreement with Tunisia under the Extended Fund Facility (EFF) for a $1.9 billion rescue package.

The IMF also resumed its support program for Pakistan and approved $1.7 billion for Islamabad in August.

The country’s finance minister Ishaq Dar told Reuters Friday he would seek rescheduling of some $27 billion in non-Paris Club debt most of which is owed to China.

Impact on prices

Gourinchas has anticipated a 9.5% global inflation rate for the remaining months of 2022. He expects it to decrease to 4.1% in 2024.

However, his predictions for next year are gloomy, and he calls it a year of recession for many people in the world.

“Inflation remains the most immediate threat to current and future prosperity by squeezing real income and undermining macro stability,” he tweeted Monday.

The inflation rate in many developing countries, however, does not match what the fund’s chief economist forecast for the globe. In September, grocery prices in the U.K. climbed to 13.9%, the Financial Times reported Tuesday.

On Tuesday, Egypt recorded a 15% jump, the highest level of inflation in the last four years, according to the state-run central agency for public mobilization and census.

The World Bank expects the inflation rate will rise to 23% in Pakistan next year, a country with around $130 billion of debt. 
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Workers at an Apple store in Oklahoma City voted to unionize, marking the second unionized Apple store in the U.S. in a matter of months, according to the federal labor board.

The vote on Friday signaled another win for the labor movement, which has been gaining momentum since the pandemic.

Fifty-six workers at the store, located at Oklahoma City’s Penn Square Mall, voted to be represented by The Communications Workers of America, while 32 voted against it, according to a preliminary tally by the National Labor Relations Board. The approximate number of eligible voters was 95, the board said.

The labor board said Friday that both parties have five business days to file objections to the election. If no objections are filed, the results will be certified, and the employer must begin bargaining in good faith with the union.

The union victory follows a vote to unionize an Apple store in Towson, Maryland, in June. That effort was spearheaded by the International Association of Machinists and Aerospace Workers in Maryland, which is preparing to begin formal negotiations.

In a statement emailed to The Associated Press on Saturday, Apple said, “We believe the open, direct and collaborative relationship we have with our valued team members is the best way to provide an excellent experience for our customers, and for our teams.”

Apple also cited “strong compensation and exceptional benefits,” and noted that since 2018, it has increased starting rates in the U.S. by 45% and made significant improvements in other benefits, including new educational and family support programs.

The Communications Workers of America could not be immediately reached for comment.

Worker discontent has invigorated the labor movements at several major companies in the U.S. in the wake of the COVID-19 pandemic, which triggered tensions over sick leave policies, scheduling, and other issues.

In a surprise victory, Amazon workers at a Staten Island warehouse voted in favor of unionizing in April, though similar efforts at other warehouses so far have been unsuccessful. Voting for an Amazon facility near Albany, New York, began on Wednesday and is expected to go through Monday. Well over 200 U.S. Starbucks stores have voted to unionize over the past year, according to the NLRB.
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Saudi Arabia rejected as “not based on facts” criticism of an OPEC+ decision last week to cut its oil production target despite U.S. objections and said on Thursday that Washington’s request to delay the cut by a month would have had negative economic consequences.

The White House pushed back, saying it presented the Saudis with an analysis that showed the cuts could hurt the world economy, and alleging the Saudis pressured other OPEC members on a vote. Officials from both countries are expected to discuss the situation shortly.

The back-and-forth has added to what has been a frosty period of relations for the two countries, who have had an energy-for-security alliance for decades.

OPEC+, the producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) plus allies including Russia, last week announced a cut of 2 million barrels per day to its production target after weeks of lobbying by U.S. officials against such a move.

The move came even though fuel markets remain tight, with inventories in major economies at lower levels than when OPEC has cut output in the past.

The OPEC+ cut has raised concerns in Washington about the possibility of higher gasoline prices ahead of the November U.S. midterm elections, with the Democrats trying to retain their control of the House of Representatives and Senate.

U.S. President Joe Biden pledged earlier this week that “there will be consequences” for U.S. relations with Saudi Arabia after OPEC+’s move.

Asked on Thursday about the situation during a Los Angeles trip, Biden told reporters “We’re about to talk to them.”

The OPEC+ decision was adopted through consensus, took into account the balance of supply and demand and was aimed at curbing market volatility, the Saudi foreign ministry said in a statement on Thursday.

The Saudi foreign ministry statement referred to consultations with the United States before the October 5 OPEC+ meeting in which it was asked to delay the cuts by a month.

“The Kingdom clarified through its continuous consultations with the U.S. administration that all economic analyzes indicate that postponing the OPEC+ decision for a month, according to what has been suggested would have had negative economic consequences,” the Saudi foreign ministry statement said.

The United States accused Saudi Arabia of kowtowing to Moscow, which objects to a Western cap on the price of Russian oil in response to its invasion of Ukraine.

“We presented Saudi Arabia with analysis to show that there was no market basis to cut production targets, and that they could easily wait for the next OPEC meeting to see how things developed,” said White House spokesman Jack Kirby, in a statement, which added that other OPEC nations told the United States that they felt “coerced” to support the Saudi decision.

The Saudi foreign ministry statement, quoting an unnamed official, stressed the “purely economic context” of the oil cut. Oil demand has weakened worldwide, with OPEC, the U.S. Energy Department, and the International Energy Agency all lowering forecasts for 2023 demand this week.

However, the IEA on Thursday added that OPEC’s move could worsen demand, saying “higher oil prices may prove the tipping point for a global economy already on the brink of recession.”

The Saudi statement said the kingdom views its relationship with the United States as a “strategic one” and stressed the importance of mutual respect. The Gulf Cooperation Council (GCC) issued a statement in support of Saudi Arabia’s comments praising the kingdom’s efforts to protect the market from volatility.

In research last week, Goldman Sachs said in the last 25 years OPEC has never cut production when inventories in Organization for Economic Co-operation and Development countries, composed of 38 of the world’s richest economies, were so low. OECD stocks are 8% below their five-year average. However, they noted that OPEC reduced output during periods of weak demand. 
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