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The global economy won't recover if we don't get vaccines to developing countries, too – CNN

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The International Monetary Fund recently projected global GDP growth at 5.5% this year and 4.2% in 2022. But it is going to be a long and uncertain ascent. Most of the world is facing a slow rollout of vaccines even as new virus mutations are spreading — and the prospects for recovery are diverging dangerously across countries and regions.
Indeed, the global economy is at a fork in the road. The question is: Will policymakers take action to prevent this Great Divergence?
As our note to the recent G20 meeting of finance ministers and central bank governors points out, there is a major risk that as advanced economies and a few emerging markets recover faster, most developing countries will languish for years to come. This would not only worsen the human tragedy of the pandemic, but also the economic suffering of the most vulnerable.
We estimate that, by the end of 2022, cumulative per capita income will be 13% below pre-crisis projections in advanced economies — compared with 18% for low-income countries and 22% for emerging and developing countries, excluding China. This projected hit to per capita income will increase by millions the number of extremely poor people in the developing world.
In other words, the convergence between countries can no longer be taken for granted. Before the crisis, we forecast that income gaps between advanced economies and 110 emerging and developing countries would narrow between 2020 and 2022. But we now estimate that only 52 economies will be catching up during that period, while 58 are set to fall behind.
This is partly because of the uneven access to vaccines. Even in the best-case scenario, most developing economies are expected to reach widespread vaccine coverage only by the end of 2022 or beyond. Some are especially exposed to hard-hit sectors, such as tourism and oil exports, and most of them are held back by the limited room in their budgets.
Last year, advanced economies on average deployed about 24% of GDP in fiscal measures, compared with only 6% in emerging markets and less than 2% in low-income countries. Cross-country comparisons also show how more sizable crisis support was often associated with a smaller loss in employment.
And it is not just divergence across countries. We also see an accelerated divergence within countries: the young, the low-skilled, women and informal workers have been disproportionately affected by job losses. And millions of children are still facing disruptions in their educations. Allowing them to become a lost generation would be an unforgiveable mistake.
It would also deepen the long-term economic scars of the crisis, which would make it even more difficult to reduce inequality and boost growth and jobs. Think of the challenges ahead: For G20 economies alone (excluding India and Saudi Arabia due to data limitations), total employment losses are projected at more than 25 million this year and close to 20 million in 2022, relative to pre-crisis projections.
So again, we stand at a fork in the road — and if we are to reverse this dangerous divergence between and within countries, we must take strong policy actions now. I see three priorities:

First, step up efforts to end the health crisis

We know that the pandemic is not over anywhere until it is over everywhere. While new infections worldwide have recently declined, we are concerned that multiple rounds of vaccinations may be needed to preserve immunity against new variants.
That is why we need much stronger international collaboration to accelerate the vaccine rollout in poorer countries. Additional financing to secure doses and pay for logistics is critical. So, too, is timely reallocation of excess vaccines from surplus to deficit countries, and a significant scaling up of vaccine production capacity for 2022 and beyond. Insuring vaccine producers against the downside risks of overproduction may be an option worth considering.
We also need to ensure greater access to therapies and testing, including virus sequencing, while steering clear of restrictions on exports of medical supplies. The economic arguments for coordinated action are overwhelming. Faster progress in ending the health crisis could raise global income cumulatively by $9 trillion between 2020 and 2025. That would benefit all countries, including around $4 trillion for advanced economies — which beats by far any measure of vaccine-related costs.

Second, step up the fight against the economic crisis

Led by G20 countries, the world has taken unprecedented and synchronized measures, including nearly $14 trillion in fiscal actions. Governments need to build on these efforts by continuing to provide fiscal support.
The key is to help maintain livelihoods, while seeking to ensure that otherwise viable companies do not go under. This requires not just fiscal measures, but also maintaining favorable financial conditions through accommodative monetary and financial policies, which support the flow of credit to households and firms.
The considerable monetary easing by major central banks has also enabled several developing economies to regain access to global capital markets and borrow at record-low rates to support spending, despite their historic recessions. Given the gravity of the crisis, there is no alternative to continued monetary policy support. But there are legitimate concerns around unintended consequences, including excessive risk-taking and market exuberance.
One risk going forward — especially in the face of diverging recoveries — is the potential for market volatility in response to changing financial conditions. Major central banks will need to carefully communicate their monetary policy plans to prevent excess volatility in financial markets, both at home and in the rest of the world.

Third, step up support to vulnerable countries

Given their limited resources and policy space, many emerging market and low-income nations could soon be faced with an excruciating choice between maintaining macroeconomic stability, tackling the health crisis and meeting peoples’ basic needs.
Their increased vulnerability not only affects their own prospects for recovery from the crisis, but also the speed and scale of the global recovery; and it can be a destabilizing force in a number of already fragile areas. Vulnerable countries will need substantial support as part of a comprehensive effort.
The first step begins at home, with governments raising more domestic revenue, making public spending more efficient, and improving the business environment. At the same time, international efforts are critical to further scale up concessional financing and leverage private finance, including through stronger risk-sharing instruments.
For its part, the IMF has stepped up in an unprecedented manner by providing over $105 billion in new financing to 85 countries and debt service relief for our poorest members. We aim to do even more to support our 190 member countries in 2021 and beyond.
That includes supporting efforts to modernize international corporate taxation. We need a system that is truly fit for the digital economy and that is more attuned to the needs of developing countries. Here multilateral efforts will be essential to help ensure that highly profitable firms pay tax in markets where they do business.
It is vital that poorer countries have the support they need. The alternative — to leave poorer countries behind — would only entrench abject inequality. Even worse, it would represent a major threat to global economic and social stability. And it would rank as a historic missed opportunity.

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Economy

Canada’s budget to include pandemic and childcare supports, luxury tax

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By Steve Scherer

OTTAWA (Reuters) – Canada will present a budget on Monday with billions of dollars for pandemic recovery measures as COVID-19 infections skyrocket, C$2 billion ($1.6 billion) toward national childcare, and new taxes on luxury goods.

Liberal Prime Minister Justin Trudeau’s first budget in two years will also set aside C$12 billion ($9.6 billion) to extend wage and rent subsidy programs to the autumn, the Toronto Star reported on Sunday.

Finance Minister Chrystia Freeland is due to present the budget at about 4 p.m. (2000 GMT).

The document promises in excess of C$2 billion as a “starting point” for a national childcare program, the Canadian Broadcasting Corp said, adding that the 2020-2021 federal deficit had come in under C$400 billion.

In November, the government forecast a deficit of C$381.6 billion, which would be its highest level since World War Two. [https://tmsnrt.rs/3wSJPcm]

The budget will also include a luxury tax effective from 2022 on new cars and private aircraft valued at more than C$100,000 ($79,970), and boats worth over C$250,000, government sources familiar with the document told Reuters.

There will be a sales tax for online platforms and e-commerce warehouses from July, and a digital services tax for Web giants like Alphabet Inc’s Google and Facebook Inc from 2022.

Freeland promised in November up to C$100 billion in stimulus over three years to “jump-start” an economic recovery during what is likely to be an election year, and the government so far not backed away from that commitment.

Environment Minister Jonathan Wilkinson, speaking to the CBC, confirmed that the budget would be “ambitious” and that the government would “invest for jobs and growth to rebuild this economy,” although he added there would be “fiscal guardrails” to put spending on a “sustainable track.”

Amid a spiking third wave of infections, Ontario, Canada‘s most-populous province, announced new public health restrictions on Friday, including closing the province’s borders to non-essential domestic travel.

Canada has been ramping up its vaccination campaign but still has a smaller percentage of its population inoculated than dozens of other countries, including the United States and Britain.

($1 = 1.2514 Canadian dollars)

 

(Reporting by Steve Scherer; Editing by Nick Zieminski and Peter Cooney)

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TSX extends gains as gold prices rise, set to rise for third week

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(Reuters) -Canada’s main stock index extended its rise on Friday after hitting a record high a day earlier as gold prices advanced, and was set to gain for a third straight week.

* At 9:40 a.m. ET (13:38 GMT), the Toronto Stock Exchange‘s S&P/TSX composite index was up 24.24 points, or 0.1%, at 19,326.16.

* The Canadian economy is likely to grow at a slower pace in this quarter and the next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.

* The energy sector climbed 0.6% even as U.S. crude prices slipped 0.1% a barrel. Brent crude added 0.1%. [O/R]

* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3% as gold futures rose 0.7% to $1,777.9 an ounce. [GOL/] [MET/L]

* The financials sector gained 0.2%. The industrials sector rose 0.1%.

* On the TSX, 117 issues advanced, while 102 issues declined in a 1.15-to-1 ratio favoring gainers, with 14.26 million shares traded.

* The largest percentage gainers on the TSX were Cascades Inc, which jumped 4.2%, and Ballard Power Systems, which rose 2.9%.

* Lghtspeed POS fell 5.6%, the most on the TSX, while the second biggest decliner was goeasy, down 4.9%.

* The most heavily traded shares by volume were Zenabis Global Inc, Bombardier and Royal Bank of Canada.

* The TSX posted 23 new 52-week highs and no new low.

* Across Canadian issues, there were 160 new 52-week highs and 12 new lows, with total volume of 29.68 million shares.

(Reporting by Shashank Nayar in Bengaluru;Editing by Vinay Dwivedi)

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Canadian economy likely to slow, but COVID-19 threat to growth low

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By Indradip Ghosh and Mumal Rathore

BENGALURU (Reuters) – The Canadian economy is likely to grow at a slower pace this quarter and next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.

Restrictions have been renewed in some provinces as they struggle with a rapid spread of the virus, which has already infected over 1 million people in the country.

After an expected 5.6% growth in the first quarter, the economy was forecast to expand 3.6% this quarter, a sharp downgrade from 6.7% predicted in January.

It was then forecast to grow 6.0% in the third quarter and 5.5% in the fourth, compared with 6.8% and 5.0% forecast previously.

But over three-quarters of economists, or 16 of 21, in response to an additional question said tighter curbs from another COVID-19 wave were unlikely to derail the economic recovery, including one respondent who said “very unlikely”.

Canada is undergoing a third wave of the virus and while case loads are accelerating, the resiliency the economy has shown in the face of the second wave suggests it can ride out the third wave as well, without considerable economic consequences,” said Sri Thanabalasingam, senior economist at TD Economics.

The April 12-16 poll of 40 economists forecast the commodity-driven economy would grow on average 5.8% this year, the fastest pace of annual expansion in 13 years and the highest prediction since polling began in April 2019.

For next year, the consensus was upgraded to 4.0% from 3.6% growth predicted in January.

What is likely to help is the promise of a fiscal package by Prime Minister Justin Trudeau late last year, which the Canadian government was expected to outline, at least partly, in its first federal budget in two years, on April 19.

When asked what impact that would have, over half, or 11 of 20 economists, said it would boost the economy significantly. Eight respondents said it would have little impact and one said it would have an adverse impact.

“The economic impact of the federal government’s promised C$100 billion fiscal stimulus will depend most importantly on its make up,” said Tony Stillo, director of Canada economics at Oxford Economics.

“A stimulus package that enhances the economy’s potential could provide a material boost to growth without stoking price pressures.”

All but two of 17 economists expected the Bank of Canada to announce a taper to the amount of its weekly bond purchases at its April 21 meeting. The consensus showed interest rates left unchanged at 0.25% until 2023 at least.

“The BoC is set to cut the pace of its asset purchases next week,” noted Stephen Brown, senior Canada economist at Capital Economics.

“While it will also upgrade its GDP forecasts, we expect it to make an offsetting change to its estimate of the economy’s potential, implying the Bank will not materially alter its assessment of when interest rates need to rise.”

 

 

(Reporting and polling by Indradip Ghosh and Mumal Rathore; editing by Rahul Karunakar, Larry King)

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