GENEVA: UNCTAD’s Trade and Development Report 2021, released on 15 September, says this year will see the global economy bounce back thanks to the continuation of radical policy interventions begun in 2020 and a successful (if still incomplete) vaccine roll-out in advanced economies. Global growth will hit 5.3%, its fastest rate in nearly five decades.
The recovery, however, is uneven across geographical, income and sectoral lines. Within advanced economies, the rentier class has experienced an explosion in wealth, while low-earners struggle.
In 2022, UNCTAD expects global growth to slow to 3.6%, leaving world income still 3.7% below where its pre-pandemic trend would have put it.
India is expected to grow at 7.2 per cent in 2021 but economic growth could decelerate next year, according to a United Nations report which said the recovery in the country is constrained by the ongoing human and economic cost of the COVID-19 pandemic and the negative impact of food price inflation on private consumption.
Globally, international trade in goods and services has recovered, after the overall flow dropped by 5.6% in 2020. The downturn proved less severe than had been anticipated, as month-on-month merchandise trade flows in the latter part of 2020 rebounded almost as strongly as they had fallen earlier.
The report’s modelling projections point to real growth of global trade in goods and services of 9.5% in 2021. Still, the recovery has been extremely uneven, and scars will continue to weigh on the trade performance in the years ahead.
In 2021, the positive trajectory of commodity prices from the trough observed in the second quarter of 2020 has continued. The aggregate commodity index registered an increase of 25% from December 2020 to May 2021, mainly due to the price of fuels, which surged by 35%, while that of minerals, ores and metals registered an increase of 13%.
“The pandemic has created an opportunity to rethink the core principles of international economic governance, a chance that was missed after the global financial crisis,” said Richard Kozul-Wright, director of UNCTAD’s globalization and development strategies division.
“In less than a year, wide-ranging policy initiatives in the United States have begun to effect concrete change in the case of infrastructure spending and expanded social protection, financed through more progressive taxation. The next logical step is to take this approach to the multilateral level.”
Internationally, US support for the new special drawing rights (SDR) allocation, global minimum corporate taxation, and a waiver of vaccine-related intellectual property rights in the World Trade Organization hold out the possibility of a renewal of multilateralism.
But this will need much stronger backing from other advanced economies and the inclusion of developing country voices if the world is to tackle the excesses of hyperglobalization and the deepening environmental crisis in a timely manner.
The biggest risk for the global economy is that a rebound in the North will divert attention from long-needed reforms without which developing countries will remain in a weak and vulnerable position.
