UNCTAD: TIMID POLICY, OR WORSE BACKSLIDING, COULD PULL DOWN GROWTH

“Across the world, but particularly in developing regions, the damage from the COVID-19 crisis has been greater than that from the global financial crisis (GFC), most notably in Africa and South Asia.

“Even barring significant setbacks, global output will only resume its 2016-19 trend by 2030. This fact conceals the deeper problem that the pre-COVID-19 income growth trend was itself unsatisfactory; average annual global growth in the decade after the GFC was the slowest since 1945.”

 Looking to the immediate future, UNCTAD states that in 2022 global growth will slow to 3.6%, “leaving world income still 3.7% below where its pre-pandemic trend would have put it; an expected cumulative income loss of about $13 trillion in 2020-22. “Timid policy or, even worse, backsliding,” UNCTAD emphasises, “could pull growth down further.”

FOUR MAIN LESSONS
The Report goes on to highlight, in frank style, four main lessons that are apparent from the experience of the pandemic:

1. “The resolve to rebalance the global economy and reform the international economic architecture is still missing.” And that: “Over the coming years, pressures on external debt sustainability will persist because many developing countries face a wall of upcoming sovereign debt repayments in international bond markets.”
2. “The pandemic has seen an emergent consensus around the need for significant public sector intervention, but there is less agreement on what this will involve beyond countercyclical measures.”
3. “Third, delivering the necessary support to build back better will require much greater policy coordination across systemically important economies; reforms to the international economic architecture that were promised after the 2008-09 crisis but were quickly abandoned in the face of resistance from the rentier class.”
4. “The reluctance of other advanced economies to follow the US lead on the vaccine waiver is not only a worrying sign of disjointed obduracy in the North; it is a particularly costly one for already financially constrained economies. On one recent estimate, the cumulative cost of delayed vaccination will, by 2025, amount to US$2.3 trillion with the developing world shouldering the bulk of that cost.”

Unusually tough words from UNCTAD, providing plenty to reflect on and to factor into future strategy