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It seems that the past decade is undoubtedly a decade of financial and economic instability at the global level, as the global economy has gone through very negative events, including: the collapse of oil prices in mid-2014, then the Corona virus pandemic at the end of 2019 and the beginning of 2020, then the negative repercussions of the Russian war. On Ukraine in February 2022, then Al-Aqsa floodAnd the Israeli attacks and war of genocide that followed Gaza.
The International Monetary Fund, in its expectations for global economic growth performance in its report “Global Economic Prospects…October 2023,” stated that current global economic growth is fragile, and will not exceed 3% in 2023, and only 2.9% in 2024.
The report also indicated that inflation will reach 5.9% in 2023, while it will decline to 4.8% in 2024.
One of the prominent signs in international economic relations is the continuation of the US-China conflict, despite the meeting of the presidents of the two countries in the United States during November 2023.
The negotiations did not reach anything regarding withholding American technology from Chinese companies, or those steps that China took in response to American decisions in this regard.
Here, an important note must be made regarding the American-Chinese conflict, as it is a conflict of interests in which ideology is absent. Both parties adhere to the capitalist economic approach, which means that the equation of the global economy’s bias in favor of the rich will not change, even if relations return to normal.
The world economy is dependent on US interest rate policy
During 2023, the global economy suffered from several economic problems, including the continued rise in interest rates, especially in the American market, which greatly affected financial markets and raised the cost of financing in many developing and emerging countries.
The roots of the crisis go back to the events of the Russian-Ukrainian war at the end of February 2022, and the subsequent significant rise in oil and gas prices, then a rise in the cost of food prices, which raised fears of a repeat of the energy and food crises that the global economy experienced in 2006 and 2007.
Inflation rates rose to unprecedented levels in the United States and Europe, where rates at that time reached 9.1%, which caused the financial policy maker to use the interest rate mechanism to absorb high inflation.
The interest rate took an upward path until it now reached the range of 5.25%-5.5%, before the US Federal Council decided to fix it at this level at its last meeting in December 2023.
The US Central Bank indicated in its recent meeting that the historical tightening of US monetary policy has reached its end, and that borrowing costs will decline in 2024.
The consequences of the rise in interest rates in America were several negative things at the American and global levels:
- On the American level, the matter led to the collapse of major American banks, due to a defect in their financing structure that was built on low interest rates, which forced depositors in these banks to withdraw their savings, and this caused a liquidity crisis for them, but the American government adopted a policy of supporting these banks. By providing the necessary liquidity to pass the American banking crisis and save them from bankruptcy.
- As for the rest of the world, the interest rate in the American market is still the one that drives the financial markets in the world, as well as the making of monetary policies related to the interest rate, and the subsequent problems related to public debt, and the increase in the deficit in public budgets, especially in countries whose economies are linked to… In dollars.
- In our Arab region, we found a state of complacency on the part of central banks, especially in the Gulf countries, to raise interest rates whenever the US Federal Council takes a decision to do so.
Mysterious oil rates
Since January 2023, oil markets have been experiencing frequent fluctuations, sometimes due to poor economic growth performance, and sometimes due to political events here and there, but what relates to economic data related to America or China has had a magical effect in moving oil prices up and down.
Although oil prices in the period from January to May 2023 were stable at an average of $85 per barrel, for Brent crude, the period from May to September of the same year witnessed a noticeable decline until it reached 72. $ per barrel.
At the beginning of September 2023, oil prices witnessed an improvement, as they rose above $90 per barrel, but this rise did not last long, as they declined again in December 2023. The markets tell us that Brent crude oil is fluctuating between $75 and $76. per barrel, compared to $71 for American crude, despite the coalition OPEC Plus Announced new cuts regarding the production ceiling.
On the other hand, the events that Gaza is experiencing due to the Israeli war, and the resulting negative economic events and repercussions on the region and the world, as well as the new reality imposed by the Houthi group on the movement of Israeli ships, did not lead to igniting oil prices, and from here the oil equation was described In the international market as ambiguous.
In Europe, oil and gas markets were dealt with during 2023, with what we might call absorbing the crisis, managing it collectively, and trying to impose a unified price for Russian oil, which reduced the financial burdens on European countries and created better conditions, but that does not mean the end of this crisis. Especially since the energy bill for Western countries after the “Russian-Ukrainian” war crisis was the highest over the past years.
The reality of the Arab economy
The economic reality of the Arab countries makes it difficult to describe it as a homogeneous economy, neither in terms of performance nor results. There are the oil-producing countries – the Gulf states, Iraq, Algeria, and Libya – that have their own economic and financial structure.
There are non-oil countries, but they have diversified economies, such as Egypt, Morocco, Jordan, Tunisia, and Lebanon, and very poor or less developed countries such as Sudan, Mauritania, Yemen, Djibouti, Somalia, and the Comoros.
As for the oil economies, their financial situation was better During 2023 Because of oil prices, which enabled most oil-producing countries to achieve financial surpluses and improve their foreign exchange balances, it also reduced the phenomenon of external debt, even though the problems of these economies are eternal, in terms of their significant dependence on crude oil.
As for countries with diversified economies, which are also classified as middle-income, most of them suffer from a financing crisis, which can be described as stifling in Egypt and Tunisia.
As for Lebanon, the matter is considered difficult to solve, despite the state of optimism after reaching an agreement on the maritime borders, and enabling Israel to explore for gas within the common borders, but so far Lebanon has not reached an agreement with the International Monetary Fund, and its general financial situation and the level of… People’s lives are very negative.
In Morocco and Jordan, we find that the two countries are going through economic problems, but they do not find difficulties in obtaining funding from international institutions, unlike the situation in Egypt, Tunisia, and Lebanon.
There is an important component of the Arab economies that suffered economic and social crises during the year 2023, due to armed conflicts, namely Libya, Syria, Yemen, Sudan, Somalia, and Iraq. Although the severity of the problem varies from one country to another.
What is new for Sudan is that it is heading towards the disintegration of the state, and the subjugation of its economic resources to the conflicting parties.
Türkiye and the faltering fruits of new economic trends
Since May 2023, when it was announced that President Recep Tayyip Erdogan and his political coalition had won the elections, there have been major changes in economic policies, such as a rise in the interest rate from 8.5% to 40%, and a continuous decline in the price of the lira against the dollar, as it is now approaching 29 lira. per dollar, and it is expected to reach $30 at the end of 2023.
As for inflation, it reached 62% by the end of November 2023, after it was around 38% in June 2023, which leaves negative effects on the standard of living of citizens, although Turkey still maintains good positive performance in the two areas. Merchandise exports and tourism.
There are no signs of improvement in Turkey’s financial and monetary indicators in 2024. Although Turkey’s foreign economic relations have witnessed a noticeable improvement with the Gulf region during the year 2023, especially with Saudi Arabia and the Emirates, whether on the commercial level, or seeking to bring the investments of these two countries to the Turkish market.
The Al-Aqsa flood and its economic repercussions
Some may read the negative economic repercussions of the Al-Aqsa flood, on the Israeli side, in the form of the cessation of some commercial and economic activities or the disruption of its financial situation due to the cost of the war, and its military losses in equipment and human resources.
The situation may also be interpreted in terms of the impact on the people of Gaza, in terms of the demolition of buildings, the destruction of infrastructure, or the loss of thousands of martyrs, especially scientific personnel, but the events of Israel’s attacks and war on Gaza have greater repercussions.
Although the numbers show the cessation of tourism in Israel and the departure of some of its residents to escape the war, Israel’s economic structure was severely damaged due to several things accomplished by Operation Al-Aqsa Flood, which was carried out on October 7, 2023, most notably the demolition of Israel’s technologically advanced image. Its security systems responsible for securing the Gaza Strip were hacked, and its security system for its governmental institutions was also hacked more than once.
This situation will make it lose its marketability as a producer and exporter of technological systems and equipment, and the consequent flight of current investments in this field will deprive it of attracting new foreign investments.
At the regional level, the Al-Aqsa Flood Operation and the Houthi attacks will have an impact on regional tourism Maritime navigation in the Red Sea, and securing global trade.
Forecasting economic conditions in 2024
The global economy enters the year 2024, amidst uncertainty regarding all the issues raised during the year 2023. No settlement has been reached between the major economic powers (America and China), and both countries have not gotten rid of their internal economic problems, which hinder the role of each of them in achieving a state of prosperity. Or a recovery in global economic growth, especially China, where the internal debt crisis is worsening.
America’s interest rate policy, and the possibility of it witnessing a downward trend, may help. In alleviating the burden of financing costs, which contributes in some way to alleviating the financial conditions of emerging and developing countries.
On the Arab level, there is no Arab economic cooperation on the horizon that could shift the state of dependency of the region as a whole on the outside, or lead to better investment of available economic resources.
The conflict countries in the Arab region, as well as the poorest countries, are waiting for external interventions, at a time when the internal will is not available to resolve the existing crises.
