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Global growth is slowing amid rising trade and financial risks

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Global economic growth remains strong but has passed its recent peak and faces escalating risks including rising trade tensions and tightening financial conditions, according to the OECD’s latest Economic Outlook.

Growth forecasts for next year have been revised down for most of the world’s major economies. Global GDP is now expected to expand by 3.5% in 2019, compared with the 3.7% forecast in last May’s Outlook, and by 3.5% in 2020.

In many countries, unemployment is at record lows and labour shortages are beginning to emerge. But rising risks could undermine the projected soft landing from the slowdown. Trade growth and investment have been slackening on the back of tariff hikes. Higher interest rates and an appreciating US dollar have resulted in an outflow of capital from emerging economies and are weakening their currencies. Monetary and fiscal stimulus is being withdrawn progressively in the OECD area.

The shakier outlook in 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil, while the further slowdown in 2020 is more a reflection of developments in advanced economies as slower trade and lower fiscal and monetary support take their toll.

Presenting the Outlook, OECD Secretary-General Angel Gurría said: “Trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive.”

“We urge policy-makers to help restore confidence in the international rules-based trading system and to implement reforms that boost growth and raise living standards – particularly for the most vulnerable.”

The Outlook says trade tensions are already harming global GDP and trade, and estimates that if the US hikes tariffs on all Chinese goods to 25%, with retaliatory action being taken by China, world economic activity could be much weaker. By 2021, world GDP would be hit by 0.5%, by an estimated 0.8% in the US and by 1% in China. Greater uncertainty would add to these negative effects and result in weaker investment around the world. The Outlook also shows that annual shipping traffic growth at container ports, which represents around 80% of international merchandise trade, has fallen to below 3% from close to 6% in 2017.

Growth in China has eased over the course of 2018 amid tighter rules on “shadow bank” financial intermediaries outside the formal banking sector, a more rigorous approval process for local government investment and new US tariffs on Chinese imports. Stimulus measures and easier financial conditions by the central bank may help to bolster slowing growth and help engineer a soft landing, but could also aggravate risks to financial stability, says the Outlook. A much sharper slowdown in Chinese growth would damage global growth significantly, particularly if it were to hit financial market confidence.

With very low interest rates in many countries – particularly in the euro area – and historically high  debt-to-GDP levels (both public and private), policy-makers’ room for manoeuvre in case of a more marked global downturn is limited. The Outlook says it is important to maintain the capacity for tax and spending policies to stimulate demand if growth weakens sharply. Although such fiscal space is limited, co-ordinated action will be far more effective than countries going it alone. Such action should be focussed on  growth-friendly measures, such as investment in physical and digital infrastructure and targeting consumption spending more towards the less well-off.

Laurence Boone, OECD Chief Economist, said: “There are few indications at present that the slowdown will be more severe than projected. But the risks are high enough to raise the alarm and prepare for any storms ahead. Cooperation on fiscal policy at the global and euro level will be needed.”

She added: “Shoring up the global economy also involves responding to people’s concerns about the lack of improvements in wages, living standards and opportunities. Promoting competition to improve business dynamics can help by increasing workers’ bargaining position and lowering prices for consumers. Investing in skills is also crucial. It raises productivity and income and reduces inequality between workers.”

A special chapter in the Outlook shows how, as digitalisation spreads, the divide between high-skill, low-routine jobs and low-skill, high-routine work continues to grow, posing the risk of further widening inequalities. It says strengthening product market competition would not only prompt wider diffusion of new technologies, thereby raising productivity growth, but also help transfer output and efficiency gains to wages.

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Green Deal: €1 billion investment to boost the green and digital transition

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The European Commission has decided to launch a €1 billion call for research and innovation projects that respond to the climate crisis and help protect Europe’s unique ecosystems and biodiversity. The Horizon 2020-funded European Green Deal Call, which will open tomorrow for registration, will spur Europe’s recovery from the coronavirus crisis by turning green challenges into innovation opportunities.

Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth said: “The €1 billion European Green Deal call is the last and biggest call under Horizon 2020. With innovation at its heart, this investment will accelerate a just and sustainable transition to a climate-neutral Europe by 2050. As we do not want anyone left behind in this systemic transformation, we call for specific actions to engage with citizens in novel ways and improve societal relevance and impact.

This Green Deal Call differs in important aspects from previous Horizon 2020 calls. Given the urgency of the challenges it addresses, it aims for clear, discernible results in the short to medium-term, but with a perspective of long-term change. There are fewer, but more targeted, larger and visible actions, with a focus on rapid scalability, dissemination and uptake.

The projects funded under this call are expected to deliver results with tangible benefits in ten areas:

Eight thematic areas reflecting the key work streams of the European Green Deal:

  1. Increasing climate ambition
  2. Clean, affordable and secure energy
  3. Industry for a clean and circular economy
  4. Energy and resource efficient buildings
  5. Sustainable and smart mobility
  6. Farm to fork
  7. Biodiversity and ecosystems
  8. Zero-pollution, toxic-free environments

And two horizontal areasstrengthening knowledge and empowering citizens, which offer a longer-term perspective in achieving the transformations set out in the European Green Deal.

The €1 billion investment will continue building Europe’s knowledge systems and infrastructures. The call includes opportunities for international cooperation in addressing the needs of less-developed nations, particularly in Africa, in the context of the Paris Agreement as well as the Sustainable Development Goals (SDGs).

The deadline for submissions is 26 January 2021, with selected projects expected to start in autumn 2021.

A Horizon 2020 Green Deal Call Info Day & Brokerage event will take place as part of the virtual European Research & Innovation Days that will take place from 22-24 September 2020.

Background

The European Green Deal is the European Commission’s blueprint and roadmap to make Europe the first climate neutral continent by 2050, with a sustainable economy that leaves no one behind. 

To reach this 2050 goal, action will be required by all sectors of our economy, including:

  • investing in environmentally-friendly technologies;
  • supporting industry to innovate;
  • rolling out cleaner, cheaper and healthier forms of private and public transport;
  • decarbonising the energy sector;
  • ensuring buildings are more energy efficient;
  • working with international partners to improve global environmental standards.

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Equal pay essential to build a world of dignity and justice for all

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The United Nations is marking the first ever International Equal Pay Day, on Friday, drawing attention to the gender pay gap – the difference between what a woman earns compared to a man, for work of equal value – and the systemic inequalities it is rooted in.  

Globally, despite decades of activism, and dozens of laws on equal pay, women still earn less than 80 cents for every dollar men do. For women with children, women of colour, women refugees and migrants, and women with disabilities, that figure is even lower. 

Women’s unequal status at work “feeds inequality” in other areas of their lives, UN Secretary-General António Guterres said in a message.  

“Women’s jobs are less likely to come with benefits like health insurance and paid time off. Even when women are entitled to a pension, lower salaries mean lower payments in their old age,” he said. 

Noting that equal pay laws have failed to address the problem, the UN chief called for greater effort to find solutions. 

 “We need to ask why women are relegated to lower-paid work; why professions that are female-dominated have lower salaries – including jobs in the care sector; why so many women work part-time; why women see their wages decrease with motherhood while men with children often enjoy a salary boost; and why women hit a ceiling in higher-earning professions,” he stressed. 

End harmful gender stereotypes 

Mr. Guterres also underlined the need to end harmful gender stereotypes and remove institutional barriers, as well as sharing family responsibilities equally. 

“We need to recognize, redistribute, and value the unpaid care work that is disproportionately done by women,” he urged. 

Such efforts are all the more urgent given signs that the gender pay gap may worsen due to COVID-19 and its fallout, including because so many women work in service, hospitality and informal sectors which have been hardest hit. 

“The COVID-19 pandemic has exploited and exposed inequalities of all kinds, including gender inequality. As we invest in recovery, we must take the opportunity to end pay discrimination against women,” said the Secretary-General. 

“Equal pay is essential not only for women, but to build a world of dignity and justice for all,” he underlined. 

Unequal pay a stubborn and universal problem 

According to UN Women, the UN Entity for Gender Equality and the Empowerment of Women, in spite of significant progress in women’s education and higher female labour market participation rates in many countries, closing the gender pay gap has been too slow. 

At the current pace, it could take 257 years to achieve economic gender parity. 

Women workers’ average pay is generally lower than men’s in all countries, across all sectors, for all levels of education, and age groups. While gender pay gap estimates can vary substantially across regions and even within countries, higher income countries tend to have lower levels of wage inequality compared to low and middle-income countries.  

However, estimates of the gender pay gap understate the real extent of the issue, particularly in developing countries, because of a lack of information about informal economies, which are disproportionately made up of women workers, so the full picture is likely worse than what the available data shows us, says the UN agency. 

The International Day 

The International Equal Pay Day, to be commemorated on 18 September annually, was established in 2019 by the UN General Assembly, which voiced deep concern over slow progress in women’s economic empowerment, the undervaluing of work traditionally held by women, and the difficulties in tackling pay inequality. 

The General Assembly urged action to reach the goal of equal pay for work of equal value for all, and encouraged all stakeholders to continue to support the goal of equal pay for work of equal value. 

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Protect lives, mitigate future shocks and recover better

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A healthcare worker checks the temperature of a patient at a hospital in Nonthaburi Province, Thailand. UN Women/Pathumporn Thongking

Over the course of 2020 thus far, the coronavirus has taken hundreds of thousands of lives, infected millions of people, and wreaked socio-economic, humanitarian and human rights havoc, the United Nations said in a new report released on Wednesday.

According to the September update of the UN Comprehensive Response to COVID-19, no country has been spared; no population left unscathed. 

Among other things, the update outlines the steps needed to save lives, protect societies and recover better while pointing the way to addressing future shocks, above all from climate change, and overcoming the universal inequities.

Three-point response

UN Secretary-General António Guterres has often said that the pandemic is a human crisis that has laid bare severe and systemic inequalities.  

“No country has been spared. No population group remains unscathed. Nobody is immune to its impacts”, the report spelled out.

To address this, the UN is pursuing a three-point comprehensive response focused on health, safeguarding lives and livelihoods, and addressing underlying vulnerabilities to rebuild a more resilient, inclusive and sustainable world.

Health first

The update revealed that the UN system led the global health response early on, providing life-saving humanitarian assistance to the most vulnerable, establishing rapid responses to the socio-economic impact and laying out a broad policy agenda.

Solid science, reliable data, and analysis are critical for policy- and decision-making, especially for the tough choices required during a pandemic, according to the report. 

To help create a knowledge base and provide support to national policymakers, the UN has also issued a series of policy brief that examines the pandemic’s diverse impacts and offers relevant information and advice. 

Containing the virus

The most urgent course of action in dealing with COVID -19 has been to suppress transmission of the virus, through detecting, testing, isolating and caring for those affected. 

This requires physical distancing, fact- and science-based public information, expanded testing, increased health-care facility capacities, supporting health-care workers, and ensuring adequate supplies. 

Some countries can or have already achieved these conditions with their own resources but developing countries continue to need considerable support, the report noted.

Universal access

The update shone a spotlight on the need for the biggest public health effort in human history.

That means a vaccine, diagnostics and treatment for everyone, everywhere. 

At the Global Vaccine Summit in June, the UN chief spelled out, “A COVID-19 vaccine must be seen as a global public good”.

Battling twin crises

As climate change is not on hold, recovery from COVID-19 must go hand-in hand with climate action.

And addressing both simultaneously requires a response stronger than any seen before, upheld the report.

It saw recovery as an opportunity to address the fragilities laid bare by the virus, including the climate crisis.

Moreover, it outlined the steps needed to move forward, such as decarbonizing transport, buildings and energy sectors; transitioning away from fossil fuels; and creating jobs to build resilient and sustainable infrastructures. 

Sustaining the response

As the world is still in the acute phase of the pandemic, the UN update maintained the importance of sustained political leadership, unprecedented levels of funding, and extraordinary solidarity between and within countries to recover. 

The Organization will continue to consult with Member States and all partners on how best to support these efforts over the long term.

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