The global economy is set to grow by 4.7 per cent this year thanks to a stronger-than-expected recovery in the United States, a report by the UN Conference on Trade and Development (UNCTAD) said on Thursday, revising up its previous forecast of 4.3 per cent.
The upwards revision from its previous forecast made last September factors in an expected boost in US consumer spending on the back of progress distributing Covid-19 vaccines and a vast stimulus package, the report said. “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 said. Earlier this month, the OECD also revised higher its growth forecast for this year to 5.6 per cent from 4.2 per cent.
However, the 22-page UNCTAD report called ‘Out of the frying pan...into the fire?’ said Covid-19 will have lasting economic consequences that will require continued government support. It said the main risk to the global outlook is a “misguided return to austerity”.
The report estimates that last year there was a 3.9 per cent drop in output as the spread of the coronavirus sparked lockdowns across the world.
It called the impact “exorbitant”, describing the “destruction of income on an unprecedented scale” with people in developing countries particularly hard hit.
Still, it says it would have been worse had central banks not taken preemptive action to avoid a financial meltdown. Relief packages and a bounce-back in commodity prices, as well as the fast-tracking of vaccine development, also helped, the report said. Despite the scale of the global health and economic crisis, international cooperation has fallen well short of what was needed.
The report compares the $12 billion in suspended debt servicing (for 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.
The report sees signs that emerging growth strategies after Covid-19 across the world are reverting to their pre-crisis norms, 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.
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