Key Trends for Understanding the New Global Economic System

To discuss the main trends of the new international economic system, we will address several issues, most notably the progress made on global sustainable development goals, the current international economic environment and the structural and geopolitical challenges it faces, along with other economic issues that we will clarify in the following points:

Four Levels for Understanding Economic Phenomena: Analyzing and better understanding current economic phenomena requires relying on four integrated levels of analysis: international, regional, national, and local. Traditionally, economic circles have focused on analyzing economic phenomena from international and national perspectives, often neglecting the other two dimensions. However, linking these four levels of analysis provides a better understanding of current economic challenges, leading to the formulation of appropriate solutions to address and manage them.

Inclusivity in Global Decision-Making: It is crucial for various economic stakeholders—the government, the private sector, civil society organizations, and the cooperative sector—to collaborate in achieving global sustainable development goals. Currently, international economic platforms do not necessarily reflect the interests of all four parties or the diverse economic activities. It is no surprise that discussions in some economic forums reflect the interests of one party over others; hence, there is a need to create a global economic platform that discusses pressing developmental issues in a comprehensive participatory framework.

Gaps in Global Sustainable Development Goals: The world is about five years away from 2030 and is still struggling to achieve the Sustainable Development Goals (SDGs). The past two years have seen the world waste strong opportunities to meet developmental goals due to geopolitical conflicts, the COVID-19 pandemic, and the challenges these developments imposed on the global economy. Nonetheless, some countries, like China, have made strides in sustainable development goals, having succeeded in eradicating extreme poverty by 2020. The “Progress on the Sustainable Development Goals 2023” report by the United Nations states that the world is still far from achieving the 2030 Agenda for Sustainable Development, reporting progress on only 17% of SDG targets.

Global Trust Crisis: There is currently an international trust crisis due to an excess of crises. The world is facing numerous complex challenges, including climate change, threats to international peace and security, and restrictions on trade and investment flows. All these factors have led to fragmentation and disintegration of the global economy, widening the development gaps between developing and developed economies, as well as among developing and emerging economies. Thus, we can label the past decade as “another lost decade for sustainable development,” and all we hope for is that the world can avoid these challenges in the next decade.

Disparities in Global Economic Performance: The global economic climate has worsened in the past two years due to unexpected events such as pandemics, geopolitical conflicts like the Russia-Ukraine war, and international trade disputes. This has disrupted the growth trajectory of the global economy and international trade. Economic performance and growth have fluctuated significantly across different geographical regions, except for some developed countries. In this context, the United States is experiencing decent economic growth, while the European Union is facing significant economic slowdown, with growth expected this year to be between 0.5% and 1%. Meanwhile, Asian countries like India are at the peak of their economic performance, while China is striving to return to its previous record growth rates. South American economies are also facing fluctuating economic performance due to commodity price volatility, but they are in better shape than African countries.

Silent Debt Crisis: African economies are suffering from a “silent debt crisis,” which will negatively affect economic development paths in the region over the next two decades. This situation arises because both debtors and creditors are unwilling to disclose the true level of debt. Some African governments try to conceal their real debt levels, even when they are dangerous, to maintain their access to international financing markets. Meanwhile, some international creditors, including pension funds and international investment funds, are also hesitant to show their exposure to high-risk financing markets.

Shift in Economic Gravity: Despite various economic disruptions, the economic situation is significantly evolving and deepening in Asia, as the global economic center of gravity is shifting from areas near the Atlantic Ocean towards China and India due to demographic changes and growth in GDP in these countries.

Seeking an Alternative Monetary System: Global geopolitical tensions have driven some countries to seek alternatives to the US dollar for settling financial and trade transactions. Although there are some economic benefits to such a shift and the new financial options it provides, the dollar remains the most stable and widely tradable currency globally, considering various advantages enjoyed by the US market and economy, such as the rule of law, deep capital markets, high liquidity of the dollar, and swift settlement capabilities of US currency.

Improving Global Economic Conditions: Developing and emerging countries need continuous investment to enhance human capital, support technological empowerment and infrastructure, and strengthen institutional capacity to handle economic shocks. These factors will dictate their economic development paths and those of the world in the future. However, achieving this will require finding unconventional financing solutions amid budget constraints in many developing countries and competing for borrowing from traditional financing channels.

In conclusion, the future of the global economic system depends on the progress achieved in several areas: sustainable development and its financing, international peace and security, youth empowerment, education and technological empowerment, and global governance. Although there are some clear positive signals regarding sustainable development and technological empowerment, improvements in other areas remain relatively modest; thus, one might borrow the phrase that “the outcomes are better than expected, but less than hoped for.”