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Global economy gets COVID-19 shot from US stimulus, but pre-existing conditions worsen – UNCTAD

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New projections show stronger growth than expected in 2021, but the untackled problems of inequality, indebtedness and weak investment threaten hopes for a more resilient future.

The global economy is set to grow by 4.7% this year, faster than predicted in September (4.3%), 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, says a new UNCTAD report. 

But this will 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 (Figure 1) and with persistent worries about the reality behind the rhetoric of a more resilient future.

“A misguided return to austerity after a deep and destructive recession is the main risk to our global  outlook,” says the report, Out of the frying pan …Into the fire?, published on 18 March as an update to UNCTAD’s Trade and Development Report 2020.

Figure 1: (left) World output level, 2017-2021 (2019 = 100);
(right) Accumulated real income loss relative to pre-Covid-19 trend, 2020-2021 (% of GDP)

Source: UNCTAD secretariat calculations, based on official data and estimates generated by United Nations Global Policy Model.

 

“V” is for vulnerable

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. And while all regions will see a turnaround this year, potential downside health and economic risks could still produce slippages.

Looking further ahead, the report says outdated economic dogmas, weak multilateral cooperation and a widespread reluctance to tackle the problems of inequality, indebtedness and insufficient investment – all worsening thanks to COVID-19.

It suggests that, without a change of course, the new normal for many will be an unbalanced recovery, vulnerability to further shocks and persistent economic insecurity.

Describing 2020 as an “annus horribilis”, the report acknowledges that things could have been worse.

A combination of preemptive Central Bank action to avoid a financial meltdown, swift and sizeable relief packages in advanced countries, a bounce-back in capital flows and commodity prices and the unprecedented fast-tracking of vaccine development all helped to avoid an even more vicious deflationary spiral taking hold.

However, the impact of these actions has been uneven, with K-shaped recoveries emerging within and across countries. Developing countries have experienced some of the largest personal income drops relative to GDP.

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. The World Bank estimates a quarter of a billion more people will slide into poverty (on a $3.20 daily benchmark) as a result of the pandemic.

International cooperation wanting

Despite the scale of the global health and economic crisis, international cooperation has fallen well short of what is needed.

The report compares the $12 billion of suspended debt servicing (for the year June 2020 to June 2021) for the 46 countries participating in the G20’s Debt Service Suspension Initiative (DSSI) to the $80 billion in debt service payments in 2019 by the 73 eligible DSSI countries and over a trillion dollars for all developing countries.

Equally, the refusal by advanced countries to support a waiver on trade-related aspects of intellectual property rights (TRIPS) at the World Trade Organization to help boost vaccine availability has signalled a priority of profits over people in the fight against the pandemic.

The global recovery that began in the third quarter of 2020 is expected to continue through 2021, albeit with a good deal of unevenness and unpredictability, reflecting epidemiological, policy and coordination uncertainties.

The report sees a misguided return to austerity, after a deep and destructive recession, as the main risk to its global outlook, especially in the context of fractured labour markets and deregulated financial markets in advanced economies.

But even barring an immediate return of austerity, 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, however, that COVID-19 will likely have lasting economic, as well as health consequences, which will require continued government support.

Old habits die hard

The report sees signs that 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 US, and reliance on private capital inflows and commodity exports in Africa and Latin America. 

The $1.9 trillion stimulus package in the US 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.

More troubling, according to the report, is that other advanced countries are lagging far behind (Figure 2).

There are also signs that the new US administration is extending its efforts to the multilateral level, endorsing a $500 billion issuance of new special drawing rights to support global liquidity at the upcoming G20 meeting, previously blocked by the Trump administration.

This is a welcome move but, according to the report, the scale of the debt threat, particularly for developing countries, cannot be reduced without debt forgiveness and the adoption of a functioning debt workout mechanism.

Figure 2: Estimated fiscal stimulus measures, select advanced economies, third quarter 2020 through fourth quarter 2021 (% of GDP)

Source: UNCTAD secretariat calculations based on national sources.
Note: Fiscal estimates are based on above-the-line fiscal spending and tax stimulus measures. Accelerated spending and short-term deferral measures, i.e. tax payments deferred from one quarter or month to the next, are not included in these estimates.

The report concludes that tackling the mutually reinforcing trends of rising inequality, mounting debt distress, detached financial markets and growing market power of large corporations reluctant to reinvest their profits in building productive capacities will require more than a one-shot economic stimulus.

It calls for a more wholesale rewriting of the rules of the economic game if the mistakes of the 2009 financial crisis are not to be repeated and the goal of an inclusive, sustainable and resilient global economy realized by 2030.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

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FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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Canadian Coast Guard crew member lost at sea off Newfoundland

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ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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