By Radwan Jakeem
NEW YORK (IDN) — A new United Nations report shows that the rapid spread of the Omicron COVID-19 variant has halted a rapid recovery, countering signs of solid growth at the end of 2021. The report titled, 2022 World Economic Situation and Prospects (WESP) by the UN Department of Economic and Social Affairs (DESA) cites problems contributing to the slowing down of the economy: new waves of COVID-19 infections, persistent labour market and lingering supply-chain challenges, as well as rising inflationary pressures.
According to the report, economic slowdown is expected to continue into next year. After an encouraging expansion of 5.5 per cent in 2021—as a result of sturdy consumer spending and some growth in investment, with trade in goods surpassing pre-pandemic levels—global output is projected to increase by only 4.0 per cent in 2022 and 3.5 per cent in 2023.
Commenting on the launch of the report on January 13, UN Secretary-General António Guterres declared that, with WESP calling for better targeted and coordinated policy and financial measures, it is time to close the inequality gaps within and among countries. “If we work in solidarity—as one human family—we can make 2022 a true year of recovery for people and economies alike,” he said.
DESA Under-Secretary-General Liu Zhenmin drew attention to the importance of a coordinated, sustained global approach to containing COVID-19 that calls for universal access to vaccines. He warned that, without it, “the pandemic will continue to pose the greatest risk to an inclusive and sustainable recovery of the world economy”.
The report predicts that developing countries will take a greater long-term hit than wealthier nations. However, Africa and Latin America and the Caribbean would register significantly lower growth, compared to pre-pandemic projections. This, in turn, would lead to more poverty and less progress on sustainable development and climate action.
The report further points out that the number of people living in extreme poverty will remain well-above pre-pandemic levels. In fact, poverty would increase further in the most vulnerable economies. in Africa, the absolute number of people living in poverty is projected to rise through 2023. In contrast, the economies of richer countries are expected to almost fully recover by next year.
The special financial measures put in place by many governments since the pandemic—such as bailouts, improved social protection and job support—should stay in place to ensure a strong recovery, says the report. However, in view of rising inflation, several central banks have begun to unwind their extraordinary monetary response to the crisis.
The report continues: Many low-income developing countries, are facing unsustainable external debt burdens, amid sharp interest rate rises.
Additional borrowing during the pandemic and increasing debt-servicing costs, have put many of them on the verge of a debt crisis. These countries are in urgent need of further and coordinated international support for debt relief, the report notes.
Employment levels are projected to remain well-below pre-pandemic levels during the next two years, and possibly beyond. Labour force participation in the United States and Europe is expected to remain at historically low levels, as many who lost jobs or left the labour market during the pandemic, have not yet returned.
These shortages in developed economies are adding to other pressures, such as inflation, and supply-chain challenges.
At the same time, employment growth in developing countries remains weak, amid lower vaccination progress and limited stimulus spending. Africa, Latin America and the Caribbean, and Western Asia are projected to see a slow recovery of jobs. In many countries, the pace of job creation is not enough to offset the earlier employment losses.
The WESP was released two days after the latest World Bank’s Global Economic Prospects report, which drew similar conclusions, predicting that, given the rapid spread of the Omicron variant, the COVID-19 pandemic will continue to disrupt economic activity in the near term. [IDN-InDepthNews – 16 January 2022]
Photo: An employee arranges vegetables in a supermarket in Indonesia. © ILO/Feri Latief
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