Challenges of global economy

July 10. Kazpravda

By Vyacheslav Dodonov, PhD, Chief Scientific Officer of KISR under RK President

Challenges of global economyIn recent years, the global economy is increasingly facing tremendous challenges and shocks that gradually change the global economic landscape and the picture of the world economic system.

Crisis of 2007-2009, continuing financial problems in the Eurozone, growing like a snowball U.S. national debt – all this makes us think about fundamental shifts taking place before our eyes in the global financial and economic architecture.

The main challenges and threats to the world economic stability in the coming decades are conditioned by negative trends of global imbalances. The most dangerous of them may be the following.

First of all, it is the collapse of the world’s reserve currencies because of default in developed countries.

Second is the possibility of loss of accumulated foreign exchange reserves in developing countries and the disappearance of the foundation of their economic stability. This could include reform of the global financial system with new principles of exchange rates.

Finally, it’s the end of the era of high commodity prices conditioned by change of principles of operation of the world markets.

It is obvious that the current global financial system needs urgent reform. This can be achieved as a result of systematic coordinated efforts of the international community. And the leadership of Kazakhstan calls for that. Otherwise, these reforms will become a forced spontaneous result of the next strongest crisis which we can face in a few years in the event of default in the developed countries. Anyway, the fundamental change in the current global financial system is inevitable, and this process will be, perhaps, the strongest challenge in perspective-2050.

Kazakhstan also needs reform of its economic system, the weakening of commodity dependence, and in the long term – all-out technological upgrading and innovative model of development. The corresponding goals are implemented in the framework of the State program of accelerated industrial and innovative development, and the same tasks are set by the President in the Strategy “Kazakhstan-2050”: “The State must encourage development of economy of the future, which takes into account sectors that will appear in the result of the Third Industrial Revolution.”