Source of Photo: https://en.wikipedia.org/wiki/2024_SCO_summit#; A group photo of the SCO heads of state at the 24th SCO Summit in Almata, Kazakhstan: (from left to right) Zhang Ming, secretary general of SCO; Mohammad Mokhber, acting President of Iran; Sadyr Japarov, president of Kyrgyzstan; Shehbaz Sharif, prime minister of Pakistan; Shavkat Mirziyoyev, president of Uzbekistan; Xi Jinping, President of China; Kassym-Jomart Tokayev, president of Kazakhstan; Vladimir Putin, president of Russia; Emomali Rahmon, president of Tajikistan; Alexander Lukashenko, president of Belarus; Subrahmanyam Jaishankar, minister of external affairs of India; and Ruslan Mirzaev, Regional Anti-Terrorist Structure (RATS) executive committee director.
At the beginning of July (3-4) 2024 Kazakhstan hosted the 24th edition of the Summit of the Council of Heads of State of the Shanghai Cooperation Organization (SCO), also attended by the Secretary General of the United Nations Organization, Antonio Guterres[1].
Founded by six countries back in 2001, SCO has 10 member states nowadays (Belarus joining in 2024) and contributes by around 20% to the global GDP, representing 40% of the world population.
The share of the GDP of SCO member countries in the global economy has been on an upward trend since the outbreak of the Great Financial Crisis and it may increase to 25% by the end of this decade, taking into account the forecasts of the International Monetary Fund (IMF, 2024)[2].
Figure 1. The share of SCO in the world economy (% of global GDP)
Source: Representation of the author, based on his estimates taking into account the statistics of the International Monetary Fund (IMF), 2024
The topic of the 2024 Summit was “Strengthening Multilateral Dialogue – Striving Towards a Sustainable Peace and Prosperity”, in the context of the unprecedented challenges the world has been recently confronted with.
From the macroeconomic perspective, there can be noticed the weak growth pace of the global economic activity, given the upward trend for the real financing costs and the geo-economic fragmentation, with consequences for the dynamics of the gross fixed capital formation.
At present, the short-term real interest rate in the United States (the largest economy in the world, with a nominal GDP of USD 28.6tn dollars[3]) is at the highest level since the Summer of 2007 (when the Great Financial Crisis started), as can be noticed in the following chart. The cost of financing in USA has always been a benchmark for the cost of financing in the global economy.
Figure 2. The short-term real interest rate in USA[4]
Source: Representation of the author, based on his estimates taking into account the statistics of the Federal Reserve (FED), 2024
On the other hand, the recent positive climate (euphoria) on the international financial markets is not sustainable, the risks for a severe adjustment in the coming quarters being on the upside, especially taking into account the challenges in terms of debt and the upward trend for the real financing costs.
In fact, the significant increase of the international prices of gold (to record high levels, as can be noticed in the following chart) is expressing a strong probability for the incidence of additional shocks at the world economy level in the future.
Figure 3. International prices of gold (USD/ounce)[5]
Source: Representation of the author, based on his estimates taking into account the statistics of Investing.com, 2024
As regards the economic activity of the largest member countries of SCO, there must be noticed the prospects for the persistence of the divergent dynamics in the mid-run, as reflected by the following chart.
Figure 4. The dynamics of the GDP (%, YoY)
Source: Representation of the author, based on his estimates taking into account the statistics of the International Monetary Fund (IMF), 2024
On the one hand, the economies of India and China would increase by average annual paces of 6.6% and 4.2% during 2024-2026, according to the forecasts of the International Monetary Fund (IMF).
At the same time, the economic activity may accelerate in Pakistan in the coming years, where the GDP may increase by an average annual rate of 3.3% for the period 2024-2026.
Last, by not least, the GDP of Kazakhstan would increase by an average annual pace of 3.6% during 2024-2026, according to IMF.
On the other hand, the economy of Russia is forecasted to advance by an average annual pace of only 2.1% in the period 2024-2026.
Furthermore, there can be noticed the divergences in terms of macroeconomic equilibria across the largest economies members of the SCO.
On the one hand, in Kazakhstan, India, and Pakistan the total investments outpace the gross national savings, a trend that may continue during 2024-2026, according to the forecasts of the International Monetary Fund (IMF) (2024), as can be noticed in the following chart.
On the other hand, in China, Russia, and Iran the level of the total investments is lower compared to the gross national savings, in other words, these countries invest less compared to the domestic resources.
Figure 5. Total investments (% GDP) – Gross national savings (% GDP)
Source: Representation of the author, based on his estimates taking into account the statistics of the International Monetary Fund (IMF), 2024
In this context, the economic component of the SCO Summit 2024 Statement focused on important issues, among which one can emphasize:
- Promoting global economic recovery by avoiding protectionism and unilateral sanctions and trade restrictions;
- DEEPENING cooperation within SCO;
- Implementing the SCO Economic Development Strategy to 2030;
- Supporting the Belt Road Initiative (BRI) – a project launched by China in 2013, with total investments of over USD 1tn since the inception;
- Accelerating of the United Nations 2030 Agenda for Sustainable Development.
Furthermore, the SCO Summit 2024 underlined the priorities in terms of economic sectors for the future:
- agriculture and food security;
- digital economy, including e-commerce;
- technological innovation;
- energy;
- entrepreneurship.
Last, but not least, the SCO Summit 2024 proposed the launch of the SCO Investment Fund at the initiative of Kazakhstan, and the establishment of the SCO Development Bank and SCO Development Fund.
[1] AstanaTimes (2024). Here’s What You Need to Know about SCO Summit in Astana – The Astana Times
[2] International Monetary Fund (2024). World Economic Outlook Database, April 2024 (imf.org)
[3] Bureau of Economic Analysis (2024). gdp2q24-adv.pdf (bea.gov)
[4] Federal Reserve (FED) (2024). 1-Year Real Interest Rate (REAINTRATREARAT1YE) | FRED | St. Louis Fed (stlouisfed.org)
[5] Indexmundi (2024). Gold – Monthly Price – Commodity Prices – Price Charts, Data, and News – IndexMundi
Disclaimer. The views and opinions expressed in this analysis are those of the author and do not necessarily reflect the official policy or position of MEPEI. Any content provided by our author is of his opinion and is not intended to malign any religion, ethnic group, club, organization, company, individual, or anyone or anything
About the author:
Andrei RĂDULESCU, Member of the Bretton Woods Committee (the only economist from Romania and Central and Eastern European countries), Senior Researcher, Institute of World Economy at the Romanian Academy and member of the Centre of Excellence in Foreign Trade (project launched by the Romanian Academy, the Bucharest University of Economic Studies and the National Institute of Statistics
