Geo-Economics and Politics

Developing countries need $1 trillion a year for climate action, and other economy stories you need to read this week

An island affected by the extreme weather caused by climate change.

Many countries need more funding to help cut emissions, boost resilience and deal with damage from climate change. Image: REUTERS/Adrees Latif

Stephen Hall
Writer, Forum Agenda
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  • This weekly round-up brings you key economic stories from the past seven days.
  • Top stories: Developing countries need $1 trillion a year in external financing for climate action; $100 oil price poses 'real risk' to global economy; Nigeria redesigns banknotes to battle inflation.

1. COP27: World’s developing nations need financial aid for climate action

Developing countries need to secure $1 trillion a year in external financing for climate action by 2030, and then match that with their own funds, according to a new report. It says the funding is required to cut emissions, boost resilience, deal with damage from climate change and restore nature and land.

A chart showing which economies gave their fair share of climate finance in 2020.
Many countries have failed to provide their 'fair share'. Image: Carbon Brief

African states have been using COP27 to call for more international funds for climate adaptation. And small island states facing increasingly violent ocean storms and sea-level rise have called on oil companies to shell out some of their huge recent profits to cover damage being inflicted on their economies.

UN experts have published a list of projects worth $120 billion that investors could back to help poorer countries cut emissions and adapt to the impacts of global warming, Reuters reports.

“We can now show that a meaningful pipeline of investible opportunities does exist across the economies that need finance most,” says UN Climate Change High-Level Champion Mahmoud Mohieldin.

2. IEA chief says $100 oil price poses 'real risk' to the global economy

Oil prices of near $100 per barrel are a real risk for the global economy, the head of the International Energy Agency (IEA) says.

Fatih Birol also said he was surprised by the OPEC+ decision to cut output at its 5 October meeting, adding that oil-producing nations had in the past taken decisions that calmed markets.

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OPEC and its allies – a group known collectively as OPEC+ – decided to lower targeted production by 2 million barrels per day in October, despite opposition to cuts from the United States and others.

"This decision may put further upward pressure on inflation and weaken the global economy," Birol told Reuters on the sidelines of the COP27 climate conference in Egypt.

He said that officials from developing countries attending the climate conference had pointed to high oil prices as a driver of inflation.

3. News in Brief: Stories on the economy from around the world

US consumer prices increased less than expected in October and underlying inflation appears to have peaked, potentially allowing the Federal Reserve to dial back its large interest rate hikes, Reuters reports.

China's exports and imports unexpectedly contracted in October – their first simultaneous slump since May 2020. Domestic COVID-19 restrictions and global recession risks dented demand and further darkened the outlook for the country's economy, Reuters says.

South Korea's economy is expected to remain in slowdown mode next year ,with annual GDP growth easing to 1.8%, below estimated potential growth of around 2%, according to government agency the Korea Development Institute. This would be a sharp downgrade from the 2.3% pace forecast six months ago.

The Bank of Canada is looking at using different inflation measures other than year-on-year comparisons. "Looking at monthly or three-month changes gives you a better idea of current price momentum and how inflation is responding to changes in interest rates," said Josh Nye, Senior Economist at the Royal Bank of Canada.

The International Monetary Fund (IMF) forecasts that Mexico's economy will grow by 2.1% in 2022 and 1.2% in 2023. "Economic growth is expected to slow in the near term reflecting weaker US growth and tighter global financial conditions," the IMF says.

Mexican President Andres Manuel Lopez Obrador is looking at a proposal to hike the minimum wage by 15%, to boost pay at a faster rate than inflation.

The Central Bank of Nigeria has redesigned its 100, 200, 500 and 1,000 naira currency notes, in an attempt to battle inflation. It believes that making people swap old notes for new ones will reduce the huge volumes of currency stored in private safes and therefore outside the banking system, Quartz reports.

Hungarian headline inflation rose to 21.1% in October from 20.1% in September, boosted by surging food and energy prices. It is expected to rise further in the coming months, despite government price caps on fuels, energy bills, mortgage rates and basic foodstuffs.

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India’s central bank has rolled out a pilot of its proposed digital rupee, enlisting nine private and state-owned banks to conduct interbank transactions with the currency.

COP27 is putting climate finance top of the agenda. What are debt-for-climate swaps and how can they help developing countries?

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