A latest analysis report by the United Nation Conference on Trade and Development (UNCTAD) now says that the global economy is expected to grow by 4.7 per cent this year. – By Ramadhan Kambi.
This is faster than predicted in September last year (4.3 per cent), thanks, in part, to a stronger recovery in the United States, where progress in distributing vaccines and a fresh fiscal stimulus of $1.9 trillion are expected to boost consumer spending.
The UN report dubbed “Out of the frying pan …Into the fire” which was released on Thursday said this will however still leave the global economy over $10 trillion short of where it could have been by the end of 2021 if it had stayed on the pre-pandemic trend and with persistent worries about the reality behind the rhetoric of a more resilient future.
“The brunt of the hit to the global economy is being felt in developing countries with limited fiscal space, tightening balance of payments constraints and inadequate international support,” according to UNCTAD.
“While all regions will see a turnaround this year, potential downside health and economic risks could still produce slippages,” the report further says.
The report says ancestral economic beliefs, weak multilateral cooperation and a widespread reluctance to tackle the problems of inequality, indebtedness and insufficient investment – all worsening thanks to COVID-19 – suggest that, without a change of course, an unbalanced recovery, vulnerability to further shocks and persistent economic insecurity will become the new normal for many.
“In countries where poverty levels are already high and large parts of the labour force are working in informal jobs, the immediate impact of even a small downturn in economic activity can be devastating, with the World Bank estimating a quarter of a billion more people sliding into poverty (on a $3.20 daily benchmark) as a result of the pandemic,” the analysis points.
It further says that even barring an immediate return of strictness, the report notes, it will take more than one year for output and employment to return to their pre-COVID-19 levels in most countries with employment, income inequality, and public welfare over the medium term depending on the evolution of policy responses.
The report warns that COVID-19 will likely have lasting economic, as well as health consequences, which will require continued government support.
“Emerging growth strategies post COVID-19 across the world are reverting to their pre-crisis norm, with an undue emphasis on exports in parts of East Asia and Western Europe, loose monetary policy and asset-fuelled consumption in the United States, and reliance on private capital inflows and commodity exports in Africa and Latin America,” the report notes.
It further says that the $1.9 trillion stimulus package in the United States is grounds for encouragement. However, while the package contains large cash transfers, there is much less direct spending on consumption and investment, which would offer the safest route to aggregate demand expansion and a green transition. This makes the full effect of the package uncertain.
