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    China’s Xi Jinping Draws Elon Musk, Tim Cook and other U.S. CEOs to Gala in San Francisco

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    Amid frosty U.S.-China relations, Xi Jinping emphasized friendship in an address to executives from Apple, Boeing, Nike and others.The streets outside the San Francisco hotel where Chinese leader Xi Jinping addressed a crowd of American business executives Wednesday night were chaotic, echoing with police sirens and the chants of protesters. A woman had strapped herself to a pole 25 feet in the air in front of the hotel, yelling “Free Tibet!” as a cold rain fell.But inside the ballroom of the Hyatt Regency, the atmosphere was warm and friendly. More than 300 executives and officials listened attentively as Mr. Xi — the leader of a country often considered America’s greatest rival — spoke for over half an hour about an enduring friendship between China and the United States that could not be diminished by recent turmoil.Mr. Xi spoke of pandas. He spoke of Ping-Pong. He spoke of Americans and Chinese working together during World War II to battle the Japanese. He addressed the tensions that have rocked U.S. and Chinese relations in the past year only briefly and obliquely, comparing the relationship to a giant ship that was trying to navigate through storms.“The number one question for us is: are we adversaries, or partners?” Mr. Xi asked. Seeing the other side as a competitor, he said, would only lead to misinformed policy and unwanted results. “China is ready to be a partner and friend of the United States.”Among those who paid thousands of dollars to attend the dinner and hear Mr. Xi’s message were Tim Cook, the chief executive of Apple, Larry Fink of BlackRock, and Jerry Brown, the former governor of California. They mingled with executives from Boeing, Pfizer, Nike and FedEx. Elon Musk popped by during the cocktail hour to greet Mr. Xi, but departed before dinner began.Mr. Xi’s tone was welcomed by many of those in attendance, who believe that more engagement between the United States and China will improve the lives of people in both countries, reduce misunderstandings and potentially even deter a war.“I think it’s important Americans and Chinese are meeting again face to face,” John L. Holden, managing director for China of McLarty Associates, a consultancy, said as he queued outside the hotel. “This is not a magic bullet, but it is something that can provide possibilities that wouldn’t exist otherwise.”President Biden met with Mr. Xi earlier in the day at the Filoli Estate outside of San Francisco.Doug Mills/The New York TimesMr. Xi’s positive tone, and the enthusiasm of some of the event’s attendees, struck a sharp contrast with much of the recent conversation in the United States about China, which has focused on potential economic and security threats.Republican lawmakers have blasted President Biden for his “zombie engagement” with China. Recent polls have shown that Americans are more concerned about the rise of China than at any point since the end of the Cold War.At a news conference Wednesday, Mr. Biden celebrated a successful meeting with Mr. Xi earlier that day, which had resulted in agreements to fight drug trafficking and increase communication between the countries’ militaries. But when asked if he still thought Mr. Xi was a dictator, Mr. Biden replied: “Well, look, he is.”China has for decades been an attractive market for American businesses because of its size and growth, but the country’s slowing economy and increasingly authoritarian bent have been cooling the enthusiasm executives feel toward China.Foreign companies say the Chinese government has been slowly squeezing them out in favor of local competitors. While some think Chinese leaders have been shaken by a recent drop-off in foreign investment in China and are motivated to mend ties, executives are still concerned about recent crackdowns in China on foreign business and strict regulations, including on how companies use Chinese data.For companies that manufacture in China, supply chain disruptions during the pandemic also sent a strong message that firms should not rely on a single country for their goods, and kicked off a trend toward “de-risking.” Still, some American businesses are still making a lot of money in China. “I don’t think that anybody thinks that one dinner, or one visit, or one conference is going to reverse all the hostility that has built up between the U.S. and China,” Michael Hart, the president of the American Chamber of Commerce in China, said in an interview on Tuesday. But he added that if Mr. Xi had a friendlier stance toward the United States, “that will hopefully mean a slightly more friendly operating environment toward U.S. business in China.”Supporters of Mr. Xi near his hotel in San Francisco on Tuesday.Jim Wilson/The New York TimesIn the ballroom, 34 tables were laid with roses and orchids. They were numbered 1 to 39, skipping any number with a four, which in Chinese sounds similar to death, as well as unlucky number 13. Guests chose between a coffee-crusted Black Angus steak and vegetable curry with jasmine rice and toasted pistachios.Gina Raimondo, the U.S. secretary of commerce who spoke at the dinner, thanked Mr. Xi for a productive meeting earlier that day, where Chinese officials had met with Mr. Biden and his deputies.“We all know that we have differences,” Ms. Raimondo said at the dinner. “I’m not going to pretend otherwise. That being said, President Biden has been very clear that while we compete with China and other countries, we do not seek conflict and we do not seek confrontation.”“We want robust trade with China,” Ms. Raimondo said. She said that many of the people in attendance remained keenly interested in doing business in China. “I know that because many of you come to see me and tell me that,” she said, to laughter.Mr. Xi, who has overseen China’s military modernization and increasingly robust projection of power abroad, emphasized China’s commitment to a rules-based international system, its efforts to eradicate poverty, and its peaceful nature. Mr. Xi also touted his personal connections to the United States, including the time he spent in Iowa in the 1980s and an old photo he said he keeps of himself in front of the Golden Gate Bridge.“China has no intention to challenge the United States or unseat it,” he said.Stephen A. Orlins, the president of the National Committee on United States-China Relations, one of the groups sponsoring the event, said he was there when the committee hosted previous Chinese leaders in the United States — Deng Xiaoping, Jiang Zemin and Hu Jintao — and that all had projected a friendly demeanor. He recalled Mr. Deng famously donning a cowboy hat during a U.S. visit in 1979.“When they stand in front of an American, they tend to be more constructive and pro-American. It’s just part of what happens,” Mr. Orlins said. “They’re not going to come to an event like this and put their thumb in the eye of us as the sponsors and the audience.”Mr. Xi touted his connections to the United States during his speech. Jeff Chiu/Associated PressMr. Orlins’ group and the other organizer of the event, the U.S.-China Business Council, went through a logistical Olympics to set up the dinner. Because of security concerns, the organizers could not reveal the location until the day before, and guests received an invitation to an event with an unnamed “senior Chinese leader.”Mr. Orlins said his group knew that Mr. Xi had attended every meeting of the international grouping known as the Asia-Pacific Economic Cooperation, and concluded that he would do the same when the meeting occurred in San Francisco this week. So they extended an invitation nine months ago to host Mr. Xi.Three or four weeks ago, Mr. Orlin said he was told that Mr. Xi’s presence was still uncertain, but that he should start preparations.The Chinese protocol office peered over every attendee; they were extremely sensitive about security, especially since someone had crashed a sedan into the Chinese consulate in San Francisco just weeks before. The White House insisted that the dinner happen after Mr. Biden’s meeting with Mr. Xi Wednesday, so as not to upstage that event.The groups had to hire copious security and staff, and even fly in translation equipment, since local supplies were already claimed by the Asia-Pacific conference. Even though far more people wanted to attend the event than there was capacity for, Mr. Orlin said the $40,000 the groups charged for some tables would only partially recoup the costs of the event.Mr. Orlins said the Chinese had prepared three versions of a speech Mr. Xi could deliver that night. After Wednesday’s events with Mr. Biden, Mr. Xi had picked the friendliest one. More

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    Las Vegas Unions and MGM Resorts Reach Tentative Labor Agreement

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    The deal, the second in two days with a major resort operator, was announced on the day before a strike deadline set by two major unions.Two unions representing hospitality workers announced on Thursday a tentative labor agreement with a second major Las Vegas hotel operator, MGM Resorts International, a day before a strike deadline set by the unions.Culinary Workers Union Local 226 and Bartenders Union Local 165 said a deal had been reached on a five-year contract covering 25,400 workers at MGM Resorts, which runs eight Las Vegas properties: the Aria, Bellagio, Excalibur, Luxor, Mandalay Bay, MGM Grand, New York-New York and Park MGM.The unions, which are affiliates of UNITE HERE, announced on Wednesday that they had struck a deal with Caesars Entertainment, another major resort operator in the city.The unions said last week that their members would go on strike if an agreement with the city’s three main resort operators was not reached by Friday. The unions are still negotiating with Wynn Resorts.The unions have been negotiating with the resorts since April. The agreement would avert a strike at MGM’s resorts, although the unions’ members still need to ratify the new contract.Ted Pappageorge, the head of Local 226, said in a statement that with the new deal, MGM workers “will be able to provide for their families and thrive in Las Vegas.” The unions said the agreement with MGM included the largest wage increases “ever negotiated in Culinary Union’s 88-year history,” a workload reduction for some members and increased safety protections, among other benefits.“We’re pleased to have reached a tentative agreement that averts a strike, gives our culinary union employees a well-earned boost to pay and benefits and reduces workloads,” Bill Hornbuckle, the chief executive of MGM Resorts, said in a statement.It’s not yet clear how big of a pay increase union members will receive, but Mr. Hornbuckle, told analysts on an earnings call Wednesday that a deal would result in “the largest pay increase in the history of our negotiations with the culinary union.” He added that the company would harness “technology and process improvements to help offset the incremental labor costs we expect.” The deal with the union includes some protections from new technologies that would affect their jobs.The deals with the resort operators were reached about a week before the Las Vegas Grand Prix, a Formula 1 race that winds through the Strip, where most of the resorts are. The event promises to be a major moneymaker for the city’s hospitality industry: Mr. Hornbuckle said his company had sold more than 10,000 tickets to the event and expected to attract $60 million in extra hotel revenue that weekend. More

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    Risk of a Wider Middle East War Threatens a ‘Fragile’ World Economy

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    After shocks from the pandemic and Russia’s invasion of Ukraine, there’s little cushion if the fighting between Hamas and Israel becomes a regional conflict.Fears that Israel’s expanding military operations in Gaza could escalate into a regional conflict are clouding the global economy’s outlook, threatening to dampen growth and reignite a rise in energy and food prices.Rich and poor nations were just beginning to catch their breath after a three-year string of economic shocks that included the Covid-19 pandemic and Russia’s invasion of Ukraine. Stinging inflation has been dropping, oil prices have stabilized and predicted recessions have been avoided.Now, some leading international financial institutions and private investors warn that the fragile recovery could turn bad.“This is the first time that we’ve had two energy shocks at the same time,” said Indermit Gill, chief economist at the World Bank, referring to the impact of the wars in Ukraine and the Middle East on oil and gas prices.Those price increases not only chip away at the buying power of families and companies but also push up the cost of food production, adding to high levels of food insecurity, particularly in developing countries like Egypt, Pakistan and Sri Lanka.As it is, nations are already struggling with unusually high levels of debt, limp private investment and the slowest recovery in trade in five decades, making it tougher for them to grow their way out of the crisis. Higher interest rates, the result of central bank efforts to tame inflation, have made it more difficult for governments and private companies to get access to credit and stave off default.Israeli soldiers surveying destruction in Kfar Azza, a community near the Gaza border that Hamas militants raided last month.Tamir Kalifa for The New York Times“All of these things are happening all at the same time,” Mr. Gill said. “We are in one of the most fragile junctures for the world economy.”Mr. Gill’s assessment echoes those of other analysts. Jamie Dimon, the chief executive of JPMorgan Chase, said last month that “this may be the most dangerous time the world has seen in decades,” and described the conflict in Gaza as “the highest and most important thing for the Western world.”The recent economic troubles have been fueled by deepening geopolitical conflicts that span continents. Tensions between the United States and China over technology transfers and security only complicate efforts to work together on other problems like climate change, debt relief or violent regional conflicts.The overriding political preoccupations also mean that traditional monetary and fiscal tools like adjusting interest rates or government spending may be less effective.The brutal fighting between Israel and Hamas has already taken the lives of thousands of civilians and inflicted wrenching misery on both sides. If the conflict stays contained, though, the ripple effects on the world economy are likely to remain limited, most analysts agree.Jerome H. Powell, the Federal Reserve chair, said on Wednesday that “it isn’t clear at this point that the conflict in the Middle East is on track to have significant economic effects” on the United States, but he added, “That doesn’t mean it isn’t incredibly important.”Mideast oil producers do not dominate the market the way they did in the 1970s, when Arab nations drastically cut production and imposed an embargo on the United States and some other countries after a coalition led by Egypt and Syria attacked Israel.At the moment, the United States is the world’s largest oil producer, and alternative and renewable energy sources make up a bit more of the world’s energy mix.“It’s a highly volatile, uncertain, scary situation,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. But there is “a recognition among most of the parties, the U.S., Europe, Iran, other gulf countries,” he continued, referring to the Persian Gulf, “that it’s in no one’s interest for this conflict to significantly expand beyond Israel and Gaza.”Mr. Bordoff added that missteps, poor communication and misunderstandings, however, could push countries to escalate even if they didn’t want to.And a significant and sustained drop in the global supply of oil — whatever the reasons — could simultaneously slow growth and inflame inflation, a cursed combination known as stagflation.Women buying and selling grain in Yola, Nigeria. The aftereffects of the pandemic have stunted growth in emerging markets like Nigeria.Finbarr O’Reilly for The New York TimesGregory Daco, chief economist at EY-Parthenon, said a worst-case scenario in which the war broadened could cause oil prices to spike to $150 a barrel, from about $85 currently. “The global economic consequences of this scenario are severe,” he warned, citing a mild recession, a plunge in stock prices and a loss of $2 trillion for the global economy.The prevailing mood now is uncertainty, which is weighing on investment decisions and could discourage businesses from expanding into emerging markets. Borrowing costs have soared, and companies in several countries, from Brazil to China, are expected to have trouble refinancing their debt.At the same time, emerging markets like Egypt, Nigeria and Hungary have experienced some of the worst scarring from the pandemic, according to Oxford Economics, a consulting firm, resulting in lower growth than had been projected.Conflict in the Middle East as well as economic strains could also increase the stream of migrants heading to Europe from that region and North Africa. The European Union, which is teetering on the brink of a recession, is in the middle of negotiations with Egypt over increasing financial aid and controlling migration.China, which gets half its oil imports from the Persian Gulf, is struggling with a collapse in the real estate market and its weakest growth is nearly three decades.By contrast, the United States has confounded forecasters with its strong growth. From July through September, the economy grew at an annual rate of just a shade under 5 percent, buoyed by slowing inflation, stockpiled savings and robust hiring.India, backed by enthusiastic consumers, is on track to perform well next, with estimated growth of 6.3 percent.A natural gas pipeline terminal in Ashkelon, Israel, in 2017. When it comes to energy markets, events in the Middle East “will not stay in the Middle East,” said M. Ayhan Kose, a World Bank economist.Tamir Kalifa for The New York TimesThe region with the gloomiest prospects is sub-Saharan Africa, where, even before fighting broke out in Israel and Gaza, total output this year was estimated to fall 3.3 percent. Incomes in the region have not increased since 2014, when oil prices crashed, said M. Ayhan Kose, who oversees the World Bank’s annual Global Economic Prospects report.“Sub-Saharan Africa has already experienced a lost decade,” Mr. Kose said in an interview. Now “think about another lost decade.”As far as energy markets are concerned, something that “happens in the Middle East will not stay in the Middle East,” he added. “It will have global implications.” More

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    Russia’s Central Bank Raises Rates to 15 Percent to Curb Inflation

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    The jump, from 13 percent, would bring a long period of “tight monetary conditions” in order to ease price pressures, the bank said. Russia’s Central Bank on Friday raised its key interest rate by two percentage points to 15 percent, a bigger increase than expected as the bank said it was trying to bring down stubbornly high inflation. The central bank, which said the annual inflation rate would range from 7 to 7.5 percent this year, predicted a long period of “tight monetary conditions” in order to bring the rate down close to its target of 4 percent.Driving the price pressures is “steadily rising domestic demand,” the bank said in its statement, spurred by the Kremlin’s decision to inject more money into the economy as it fights a war in Ukraine. The surge in spending “is increasingly exceeding the capabilities to expand the production of goods and the provision of services,” the bank said.At a news conference Friday, Elvira Nabiullina, the head of the Central Bank, said that increased government spending was one of the reasons for the interest rate increase. Russia’s defense budget has more than tripled since last year’s invasion of Ukraine, and it is scheduled to reach almost a third of the government’s spending next year.Russia was largely successful at weathering the immediate storm produced by sanctions aimed at punishing it for the invasion. The restrictions greatly curtailed its lucrative trade with Western countries and largely isolated it from the global financial system.But as Russia spends vast amounts on its war machine, its industrial production and labor markets are unable to keep up with the increased demand, translating into higher inflation and high levels of borrowing.GUM, a luxury shopping mall in Moscow, in August last year.Nanna Heitmann for The New York TimesYevgeny Nadorshin, the chief economist at the PF Capital consulting company in Moscow, said the central bank’s effort to slow the economy by raising interest rates could “suffocate the country’s growth.” “We are in the moment when growth is transforming into a recession,” Mr. Nadorshin said.He pointed to Russia’s mortgage and consumer borrowing markets, which have experienced rapid expansion. “People are still tense about the economy, but they feel that in the moment, things are much better than expected,” Mr. Nadorshin said in a phone interview. “People feel that this is a short period that they must take advantage of.”But Dmitri Polevoy, an economist in Moscow, said that despite high interest rates, he doesn’t see major risks with the Russian economy.“This story is exclusively about inflation,” Mr. Polevoy said in written comments to questions posed through a messaging service. “Under the current budgetary policy and with the same external conditions,” he said, “the risk of a recession is low.”After experiencing a nosedive following the invasion of Ukraine, the Russian economy has returned to growth. The International Monetary Fund recently estimated economic output would rise 2.2 percent this year, as oil exports have largely evaded Western sanctions and found new customers in India, China and other countries.The country has also been able to import Western goods from some former Soviet republics, as well as Turkey and Gulf States. Russian businesses, including banks, have adapted too, serving needs since the departure of many Western companies. More

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    Yellen Says U.S. Is Considering New Sanctions on Iran and Hamas

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    Treasury Secretary Janet L. Yellen said on Wednesday that the Israel-Gaza war was a potential concern for the global economy and signaled that additional U.S. sanctions could be coming in response to the attack on Israel by Hamas.Questions about the economic impact of the war were growing as Ms. Yellen offered a forceful defense of Israel and pushed back on the notion that U.S. sanctions against Iran — a key backer of Hamas — have become too lenient. Ms. Yellen said the Treasury Department continued to review its sanctions on Iran, Hamas and Hezbollah, the Lebanese militant group that is also a longtime adversary of Israel.“We have not in any way relaxed our sanctions on Iranian oil,” Ms. Yellen said at a news conference on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Marrakesh, Morocco. “We have sanctions on Hamas, on Hezbollah, and this is something that we have been constantly looking at and using information as it becomes available to tighten sanctions.”She added: “We will continue to do that.”The Treasury secretary also did not rule out reversing a decision made last month — to unfreeze $6 billion of Iranian funds in exchange for the release of American hostages — if it is determined that Iran was involved in the attack by Hamas.At the time of the exchange, the United States informed Iran that it had transferred about $6 billion in Iranian oil revenue from South Korea to a Qatari bank account. The money is supposed to be used only for food, medicine and other humanitarian goods.“These are funds that are sitting in Qatar that were made available purely for humanitarian purposes, and the funds have not been touched,” Ms. Yellen said, adding: “I wouldn’t take anything off the table in terms of future possible actions.”The crisis in Israel poses a new challenge for the world economy and the Biden administration, which has spent the last year working to combat inflation in the United States and to corral energy prices that have become volatile because of Russia’s war in Ukraine. Another war in the Middle East complicates those efforts by threatening to constrain oil supplies and send prices higher.Ms. Yellen said geopolitical “shocks” continued to pose risks to the world economic outlook.“Of course, the situation in Israel poses additional concerns,” she said.Economic officials across the Biden administration are closely tracking developments in global oil markets this week. Global oil prices jumped on Monday after the terrorist attacks in Israel but were falling slightly on Wednesday. Administration officials are concerned that a sustained increase in the cost of crude could hurt economic growth and dent Mr. Biden’s approval rating, by pushing up the price of gasoline for American drivers.Ms. Yellen said she continued to believe that the U.S. economy could achieve a so-called soft landing — where inflation eases without a recession — but was closely watching for any economic fallout from the new conflict in the Middle East.“While we’re monitoring potential economic impacts from the crisis, I’m not really thinking of that as a major driver of the global economic outlook,” Ms. Yellen said. “We will see what impact it has. Thus far, I don’t think we’ve seen anything suggesting it will be very significant.”International policymakers gathered in Morocco for a week of meetings, as the global economic recovery is losing momentum. The prospect of a new regional conflict gave other policymakers more reason to feel anxious about a sluggish world economy that has been battered by war, a pandemic and inflation in recent years. Central banks around the globe have been raising interest rates to tame rapid inflation, and investors had begun to hope that a recent slowdown in price gains could signal an end to those rate increases.“I think central bank governors are concerned about what might happen to energy prices if the Israel-Gaza conflict were to turn into a bigger regional conflict and have implications for supply of oil on markets,” Gita Gopinath, the first deputy managing director of the I.M.F., said in an interview on Wednesday.Ms. Gopinath added that higher oil prices could elevate prices more broadly, complicating interest rate decisions for central bankers. She suggested that it was too soon to say how the economic impact of the conflict in the Middle East might compare with the effects of the war in Ukraine, but that overlapping crises were a headwind.“The geopolitical risks are certainly piling up in Russia’s invasion of Ukraine and we’re seeing now in Israel and Gaza,” she said.That sentiment was echoed on Wednesday by Ajay Banga, the World Bank president, who said at a news conference that he now expected interest rates to be “higher for longer” despite signs that inflation was cooling.“I believe that wars are completely and extremely challenging for central banks who are trying to find their way out of a very difficult situation,” Mr. Banga said.It is not yet clear what steps the Biden administration would take to contain oil prices if the Israel-Gaza war intensifies or how that might affect its efforts to curb Russia’s oil revenues.Ms. Yellen suggested on Wednesday that the “price cap” policy that the Group of 7 devised last year, which forbids Russia to sell oil over $60 a barrel using Western banking and insurance services, had been successful.“Global energy prices have been largely unchanged while Russia has had to either sell oil at a significant discount or spend huge amounts on its alternative ecosystem,” she said.Jim Tankersley More

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    Fragile Global Economy Faces New Crisis in Israel-Gaza War

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    A war in the Middle East could complicate efforts to contain inflation at a time when world output is “limping along.”The International Monetary Fund said on Tuesday that the pace of the global economic recovery is slowing, a warning that came as a new war in the Middle East threatened to upend a world economy already reeling from several years of overlapping crises.The eruption of fighting between Israel and Hamas over the weekend, which could sow disruption across the region, reflects how challenging it has become to shield economies from increasingly frequent and unpredictable global shocks. The conflict has cast a cloud over a gathering of top economic policymakers in Morocco for the annual meetings of the I.M.F. and the World Bank.Officials who planned to grapple with the lingering economic effects of the pandemic and Russia’s war in Ukraine now face a new crisis.“Economies are at a delicate state,” Ajay Banga, the World Bank president, said in an interview on the sidelines of the annual meetings. “Having war is really not helpful for central banks who are finally trying to find their way to a soft landing,” he said. Mr. Banga was referring to efforts by policymakers in the West to try and cool rapid inflation without triggering a recession.Mr. Banga said that so far, the impact of the Middle East attacks on the world’s economy is more limited than the war in Ukraine. That conflict initially sent oil and food prices soaring, roiling global markets given Russia’s role as a top energy producer and Ukraine’s status as a major exporter of grain and fertilizer.“But if this were to spread in any way then it becomes dangerous,” Mr. Banga added, saying such a development would result in “a crisis of unimaginable proportion.”Oil markets are already jittery. Lucrezia Reichlin, a professor at the London Business School and a former director general of research at the European Central Bank, said, “the main question is what’s going to happen to energy prices.”Ms. Reichlin is concerned that another spike in oil prices would pressure the Federal Reserve and other central banks to further push up interest rates, which she said have risen too far too fast.As far as energy prices, Ms. Reichlin said, “we have two fronts, Russia and now the Middle East.”Smoke rising from bombings of Gaza City and its northern borders by Israeli planes.Samar Abu Elouf for The New York Times Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said it’s too early to assess whether the recent jump in oil prices would be sustained. If they were, he said, research shows that a 10 percent increase in oil prices would weigh down the global economy, reducing output by 0.15 percent and increasing inflation by 0.4 percent next year. In its latest World Economic Outlook, the I.M.F. underscored the fragility of the recovery. It maintained its global growth outlook for this year at 3 percent and slightly lowered its forecast for 2024 to 2.9 percent. Although the I.M.F. upgraded its projection for output in the United States for this year, it downgraded the euro area and China while warning that distress in that nation’s real estate sector is worsening.“We see a global economy that is limping along, and it’s not quite sprinting yet,” Mr. Gourinchas said. In the medium term, “the picture is darker,” he added, citing a series of risks including the likelihood of more large natural disasters caused by climate change.Europe’s economy, in particular, is caught in the middle of growing global tensions. Since Russia invaded Ukraine in February 2022, European governments have frantically scrambled to free themselves from an over-dependence on Russian natural gas.They have largely succeeded by turning, in part, to suppliers in the Middle East.Over the weekend, the European Union swiftly expressed solidarity with Israel and condemned the surprise attack from Hamas, which controls Gaza.Some oil suppliers may take a different view. Algeria, for example, which has increased its exports of natural gas to Italy, criticized Israel for responding with airstrikes on Gaza.Even before the weekend’s events, the energy transition had taken a toll on European economies. In the 20 countries that use the euro, the Fund predicts that growth will slow to just 0.7 percent this year from 3.3 percent in 2022. Germany, Europe’s largest economy, is expected to contract by 0.5 percent.High interest rates, persistent inflation and the aftershocks of spiraling energy prices are also expected to slow growth in Britain to 0.5 percent this year from 4.1 percent in 2022.Sub-Saharan Africa is also caught in the slowdown. Growth is projected to shrink this year by 3.3 percent, although next year’s outlook is brighter, when growth is forecast to be 4 percent.Staggering debt looms over many of these nations. The average debt now amounts to 60 percent of the region’s total output — double what it was a decade ago. Higher interest rates have contributed to soaring repayment costs.This next-generation of sovereign debt crises is playing out in a world that is coming to terms with a reappraisal of global supply chains in addition to growing geopolitical rivalries. Added to the complexities are estimates that within the next decade, trillions of dollars in new financing will be needed to mitigate devastating climate change in developing countries.One of the biggest questions facing policymakers is what impact China’s sluggish economy will have on the rest of the world. The I.M.F. has lowered its growth outlook for China twice this year and said on Tuesday that consumer confidence there is “subdued” and that industrial production is weakening. It warned that countries that are part of the Asian industrial supply chain could be exposed to this loss of momentum.In an interview on her flight to the meetings, Treasury Secretary Janet L. Yellen said that she believes China has the tools to address a “complex set of economic challenges” and that she does not expect its slowdown to weigh on the U.S. economy.“I think they face significant challenges that they have to address,” Ms. Yellen said. “I haven’t seen and don’t expect a spillover onto us.” More

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    Yellen May Face Questions in Morocco Over U.S. Dysfunction

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    Treasury Secretary Janet Yellen calls on Congress to authorize more economic support for Ukraine.As Treasury Secretary Janet L. Yellen arrives in Morocco this week to meet with her international counterparts, she will be representing a nation that has led the world’s post-pandemic economic recovery but is now struggling with potentially destabilizing political dysfunction.America came perilously close to defaulting on its debt over the summer and tiptoed toward a government shutdown last month as Republicans fought over the proper levels of federal spending and whether to bankroll more aid to Ukraine. Those events culminated in last week’s ouster of Representative Kevin McCarthy as House speaker, a development that is raising questions about whether the United States can actually govern itself, let alone lead the world.The political dynamic is expected to strain the credibility of the United States at the annual meetings of the International Monetary Fund and the World Bank, which begin on Monday in Marrakesh. Ms. Yellen is expected to press European governments to provide more funding for Ukraine and push creditors like China to relieve the debts of poor countries, including many African nations.The meetings are taking place amid heightened global uncertainty because of the weekend attacks that Hamas waged upon Israel, which threaten to spiral into a regional conflict. The possibility of a wider war could pose new economic challenges for policymakers by pushing oil prices higher, disrupting trade flows and inflaming tensions between other nations. As she traveled to Morocco, Ms. Yellen affirmed America’s support for Israel.“The United States stands with the people of Israel and condemns yesterday’s horrific attack against Israel by Hamas terrorists from Gaza,” Ms. Yellen said in a post on X, formerly Twitter, on Sunday. “Terrorism can never be justified and we support Israel’s right to defend itself and protect its citizens.”In an interview on Sunday during her flight to Marrakesh, Ms. Yellen acknowledged that other nations feel concerned and anxious about the political gridlock that has gripped the United States. However, she pointed out that other democracies face similar obstacles and that she believed America’s allies would continue to be supportive of the Biden administration’s efforts on issues such as protecting Ukraine and addressing climate change.“I think they have been delighted over the last two years to see the United States resume a very strong global leadership role and they want to work with us and they want us to be successful,” Ms. Yellen said.Yet America’s role as an economic bulwark against Russia’s war in Ukraine has been undercut by its own domestic politics, including Republican opposition to providing more economic support to Ukraine. The United States’s huge debt load and its inability to find a more sustainable fiscal path has also hurt its economic credibility.“The rest of the world can only look aghast with trepidation at our dysfunction — lurching from threats of default, to shutdowns, the adjournment of the House because there is no speaker,” said Mark Sobel, a former longtime Treasury Department official who is now the U.S. chairman of the Official Monetary and Financial Institutions Forum, a think tank. “While foreign governments have always expected a degree of hurly-burly U.S. behavior, the current level of dysfunction will surely erode trust in U.S. leadership, stability and reliance on the dollar’s global role.”Eswar Prasad, the former head of the I.M.F.’s China division, added that instability in the U.S. economy could be problematic for some of the world’s most vulnerable economies that rely on America to be a source of stability.“For countries that are already struggling to prop up their economies and financial markets, the added uncertainty from the political drama in Washington is most unwelcome,” Mr. Prasad said.The gathering comes at a delicate moment for the global economy. While the world appears poised to avoid a recession and achieve a so-called soft landing, the fight against inflation remains a challenge and output remains tepid. Economic weakness in China and Russia’s ongoing war in Ukraine continue to be headwinds.The higher borrowing costs that central banks have deployed to tame inflation have also made it more difficult for countries to manage their debt loads.That is a problem across the globe, including in the United States, where the gross national debt stands just above $33 trillion. Foreign appetite for government bonds has been weak in recent months and concerns about the sustainability of America’s debt have become more prevalent. That is making it somewhat more challenging for the United States to counsel other nations on how they should manage their finances.The most challenging task for Ms. Yellen will be persuading other nations to continue to provide robust economic aid to Ukraine as its war with Russia drags on. European nations are coping with economic stagnation, and with Congress in disarray, it is unclear how the U.S. will continue to help Ukraine prop up its economy.Ms. Yellen said she would tell her counterparts that supporting Ukraine remains a top priority. Explaining that the Biden administration lacks good options for providing assistance on its own, she called on Congress to authorize additional funding.“Fundamentally we have to get Congress to approve this,” Ms. Yellen said. “There’s no gigantic set of resources that we don’t need Congress for.”Dismissing concerns that the U.S. cannot afford to support Ukraine, Ms. Yellen argued that the cost of letting the country fall to Russia would ultimately be higher.“If you think about what the national security implications are for us if we allow a democratic country in Europe to be overrun by Russia and what that’s going to mean in the future for our own national defense needs and those of our neighbors, we can’t not afford it,” Ms. Yellen said. More

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    Russia’s Economy Is Increasingly Structured Around Its War in Ukraine

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    The nation’s finances have proven resilient, despite punishing sanctions, giving it leeway to pump money into its military machine.“Everything needed for the front,” Russia’s finance minister declared, echoing a Soviet slogan from World War II as he talked about the government’s latest spending plans.The government still calls its invasion of Ukraine a “special military operation,” but the new budget figures make clear that the economy is increasingly being restructured around war.Nearly a third of the country’s spending next year — roughly $109 billion — will be devoted to “national defense,” the government announced late last month, redirecting money that might otherwise have flowed to health care, education, roads and other sectors. More tellingly, 6 percent of the nation’s total output is being funneled toward Russia’s war machine, more than double what it was before the invasion.Since Russia sent soldiers across the border in February 2022, its economy has had to adapt to dramatic changes with astonishing speed. The European Union, its biggest trading partner, quickly broke economic relations, upending well-established supply chains and reliable sources of income from abroad. The United States used its financial might to freeze hundreds of billions of dollars in Russian assets and cut the country off from the global financial system.Nineteen months later, the economic picture is decidedly mixed. The Russian economy has proved to be much more resilient than many Western governments assumed after imposing a punishing string of sanctions.Moscow has found other buyers for its oil. It has pumped money into the economy at a rapid pace to finance its military machine, putting almost every available worker into a job and raising the size of weekly paychecks. Total output, which the Russian Central Bank estimates may rise as much as 2.5 percent this year, could outpace the European Union and possibly even the United States.Yet that is only part of the story. As Laura Solanko, a senior adviser at the Bank of Finland Institute for Economies in Transition, said: “When a country is at war, gross domestic product is a fairly poor measure of welfare.” Producing bullets adds to a country’s growth rate without necessarily improving the quality of life.The insistent demand for foreign currency — to pay for imported goods or provide a safe investment — has also caused the value of the ruble to sink at a precipitous pace. Last week, it fell to a symbolic break point of 100 to the dollar, further fueling inflation and raising anxiety levels among consumers.Shoppers buying meat at the central market in Rostov-on-Don, Russia, in 2021. Inflation in Russia has driven up the price of meat and other products since the start of the war in Ukraine.Sergey Ponomarev for The New York TimesThe spike in government spending and borrowing has seriously stressed an already overheated economy. The central bank rapidly raised interest rates to 13 percent over the summer, as annual inflation continued to climb. Higher rates, which make it more expensive for businesses to expand and consumers to buy on credit, is likely to slow growth.Consumers are also feeling the squeeze for daily purchases. “Dairy products, especially butter, meat and even bread have gone up in price,” said Lidia Adreevna as she shopped and examined prices at an Auchan supermarket in Moscow. She blamed the central bank.“Life changes,” she offered, “nothing stays forever, not love, or happiness.”Other pensioners at the store also spoke about increases in meat and poultry prices, something almost half of Russians have noticed in the past month, according to survey data from the Moscow-based Public Opinion Foundation published Friday. Respondents also noted increases in the price of medicine and construction materials.Moscow imposed a temporary ban on diesel and gasoline exports last month in an effort to ease shortages and slow rising energy prices, but the restrictions further reduced the amount of foreign currency coming into the country.The exodus of funds is so worrying that the government has warned of reinstating controls on money leaving the country.With a presidential election scheduled in March, President Vladimir V. Putin acknowledged last month that accelerating inflation fueled by a weakened ruble was a major cause of concern. Getting a handle on price increases may discourage the government from embarking on its usual pre-election social spending.Lower standards of living can be “uncomfortable even for an authoritarian government,” said Charles Lichfield, deputy director of the Atlantic Council’s Geoeconomics Center.Since Russia imports a wide range of goods — from telephones and washing machines to cars, medicine and coffee — he said a devalued ruble makes “it more difficult for consumers to buy what they’re used to buying.”A Karachi Port Trust security guard keeping watch over the Clyde Noble, a Russian crude oil tanker berthed at the Karachi Port in Pakistan in June. Pakistan received discounted Russian crude oil as part of a new deal between Islamabad and Moscow.Rehan Khan/EPA, via ShutterstockThe United States, the European Union and countries allied with Ukraine have doggedly tried to cripple Russia with sweeping sanctions.The impact was swift and sharp in the spring of 2022. The ruble tumbled, the central bank increased rates to 20 percent to attract investors, and the government imposed strict controls on capital to keep money inside the country.But the ruble has since bounced back and interest rates come down. Russia found eager buyers elsewhere for its oil, which was selling at vastly discounted prices; liquefied natural gas; and other raw materials. More recently, Russia has become adept at evading the $60 per barrel price cap on oil imposed by the Group of 7 nations as global oil prices have once again started to rise.China is among the nations that have stepped up to buy energy and sell goods to Russia that they previously might have exchanged with European nations. Trade with China rose at an annual rate of 32 percent in the first eight months of this year. Trade with India tripled in the first half of the year, and exports from Turkey rose nearly 89 percent over the same period.Meanwhile, the war is gobbling up other parts of Russia’s budget aside from direct military spending. An additional 9.2 percent of the budget is slated for “national security,” which includes law enforcement. There is money for injured soldiers and for families of those killed in battle, and for “integrating new regions,” a reference to occupied territory in Ukraine.Sergei Guriev, a Russian economist who fled the country in 2013 and is now provost at Sciences Po in Paris, said accurately assessing the Russian economy is difficult. The existing economic models were designed before the war and based on different assumptions, and the published budget figures are incomplete.What that means for Russian households on a daily basis is harder to discern.“Overall, it’s very hard to compare quality of life before and after the war,” Mr. Guriev said. “It’s hard to know what Russians think. People are afraid.”Valerie Hopkins More