With Covid 19 pandemie hitting a heavy blow on the economy and devastating life the world over, the United Nations body dealing with trade, investment and development issues said that it is time to hammer out a plan for global recovery that could return even the most vulnerable countries to a stronger position.
In its Trade and Development Report 2020, the United Nations Conference on Trade and Development (UNCTAD) said that the key to success will be to tackle a series of pre-existing conditions that were threatening the health of the global economy even before the pandemic hit. It included hyper-inequality, weak investment, unsustainable levels of debt, wage stagnation in the developed world and insufficient formal sector jobs in the developing world.
Noting that building a better world required smart actions now, UNCTAD Secretary General Mukhisa Kituyi said the lives of future generations will depend on the choices that are made over the coming months. The UNCTAD said in the report that recovery and reforms (national as well as international levels), must go hand in hand if building back better is to move beyond sloganeering and become the lodestar of a more resilient future. The report argued that a big public investment push with effective international support and coordination would help in doubling global growth rate over the next decade along with improved debt sustainability and a fairer distribution of income.
The report mentioned that global economy would contract this year by over four per cent with an estimated swing of 6.8 percentage points leaving a shortfall in global output by year’s end of over six trillion dollars. It also predicted that trade will shrink by around one fifth this year, foreign direct investment by up to 40 per cent and remittances by over 100 billion dollars.
The UNCTAD said that the developed world would record the biggest fall in output, with some of them set to register a double-digit decline over the year. It also said that the developing countries would also see one of the greatest economic and social damage. The report also noted that 90 million to 120 million people will be pushed into extreme poverty in the developing world, with close to 300 million facing food insecurity. Latin American countries are likely to be hard hit with a drop in output of 7.6 per cent. However, the report points out that growth will remain in positive territory in East Asia.
The Trade and Development Report 2020 said that employment will not fully recover, income gaps would widen and several countries will remain in debt distress. It noted that income gaps would widen even if economic activity continues to bounce back and governments continue with the current mix of fiscal and monetary measures. In the absence of a radical policy shift and effective coordination at the international level, a return to austerity will become the winning policy mindset with success measured in terms of higher share prices, lower wage costs and fiscal prudence, the report said.
Changes to be made
The UNCTAD in the report said that inclusive and sustained recovery will only happen if governments in the advanced countries spent for as long as it takes for their own private sector to regain the confidence to spend themselves and also extend financial support to help developing countries tackle the underlying stresses and fractures that are holding back their recovery and growth prospects. It called for a bold and comprehensive global recovery plan, built around a coordinated macroeconomic expansion focused on job creation and higher wages and supported by a big public investment push into cleaner energy, environmental protection, sustainable transport systems and the care economy.