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We’re in a two-tier global economy, says BNP Paribas | Street Signs Asia

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Prashant Bhayani of BNP Paribas Wealth Management discusses the state of the global economy and Fed rate cuts.

He says Fed Chair Jerome Powell is “obviously” interested in extending both the economic and financial market cycle by lowering interest rates.

Why does BNP Paribas warn that the economic division between developed and developing countries may worsen in the future?

French bank BNP Paribas recently declared that we are living in a two-tier global economy, with the United States and Europe on one level and the rest of the world on another. This concept was unveiled in BNP Paribas’ latest Global Financial Markets report, which outlined the contrasting economic conditions between developed and developing economies. The report indicated that growth rates in developing countries are likely to be half those of developed countries over the next five years.

According to BNP Paribas, the two-tier economy is characterized by an uneven distribution of wealth and income. Developed nations enjoy a higher economic output per capita, higher standards of living, and better infrastructure, health, and education systems. On the other hand, developing nations struggle to create the same level of prosperity and maintain economic stability, resulting in lower living standards, widespread poverty, and poor public services.

This economic division is a natural result of globalization, with developed economies benefitting from international trade and investment, while developing economies struggle to compete, often relying on cheaper labor and less-stringent regulatory regimes. The COVID-19 pandemic has only served to exacerbate these inequalities, with developing countries bearing the brunt of the economic fallout.

BNP Paribas warns that this economic division could worsen in the years ahead unless governments and international institutions take action to address wealth disparities and support global economic growth. This could include increased investment in developing economies, improving education and healthcare systems, and promoting trade and financial integration.

The report also highlighted the importance of targeted interventions to support those most affected by the pandemic, including low-income workers, small and medium-sized enterprises, and vulnerable communities. Overall, BNP Paribas’ report serves as a stark reminder of the need to address the inequalities that persist in the global economy, to ensure sustainable and inclusive growth for all nations and peoples.