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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 Monetary and fiscal stimulus is being withdrawn progressively in the OECD area.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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Health & Wellness

Health experts arrive in Wuhan to investigate COVID-19 origins

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Members of an international team studying the origins of the virus that causes COVID-19 arrived in Wuhan, China, on Thursday, the head of the World Health Organization (WHO) announced during an expert meeting on the disease. 

Tedros Adhanom Ghebreyesus, the WHO Director-General, was addressing the latest session of the Emergency Committee on COVID-19 established under the International Health Regulations (IHR), a treaty that guides global response to public health risks. 

The new coronavirus that sparked the pandemic first emerged in Wuhan in December 2019.  Tedros reported that most of the 15 members of the delayed mission are now in the city, although two people are still in Singapore awaiting COVID-19 test results. 

“All members of the team had multiple negative PCR and antibody tests in their homes countries prior to traveling”, he said. 

“The team members who have arrived in Wuhan will be in quarantine for the next two weeks, and will begin working remotely with counterparts in China. They will then continue their work on the ground for a further two weeks.” 

Focus now on vaccine equity, travel prospects 

Thursday marked the sixth meeting of the IHR Emergency Committee on COVID-19.   

Members first convened a year ago, when there were less than 560 cases of the new disease. Today, more than 90 million cases have been reported globally, and the death toll has almost reached two million. 

Tedros said although the rollout of COVID-19 vaccines represents “hope of light at the end of the tunnel”, focus is now on ensuring all countries can access them on an equitable basis. 

He also highlighted two urgent issues for the committee’s attention: the recent emergence of multiple new variants of the virus, and the potential use of vaccination and testing certificates for international travel. 

“One theme ties both issues together: solidarity”, said Tedros.  “We cannot afford to prioritize or punish certain groups or countries. We are all in this together, and we must all come out of it together.” 

Challenges in Africa 

Meanwhile, the UN agency has warned of the need to avert a “runaway surge” of infections in Africa, as cases there top three million and new variants of the virus emerge on the continent. 

COVID-19 cases have risen steadily since mid-September, with a steeper rise from late November, and could increase in the wake of the Christmas and New Year holidays due to travel and festive gatherings. 

Dr. Matshidiso Moeti, WHO Regional Director for Africa, said although virus mutations are not surprising, preliminary analysis reveals that a new variant circulating widely in South Africa, known as 501Y.V2, is more transmissible.  

“Even if the new variant is not more virulent, a virus that can spread more easily will put further strain on hospitals and health workers who are in many cases already overstretched”, she said.  

“This is a stark reminder that the virus is relentless, that it still presents a manifest threat, and that our war is far from won.” 

WHO is supporting African countries with reinforcing genome sequencing efforts, key to finding and understanding new COVID-19 variants. 

So far, 501Y.V2 has been identified in Botswana, the Gambia and Zambia, while Nigeria is further investigating another variant found in samples collected in August and November.   The virus variant circulating in the United Kingdom has not been reported on the continent.

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Tech News

World Bank Group and CES Announce Global Tech Challenge Winners

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image: ces.tech

World Bank Group and CES announced the winners of the Global Tech Challenge at CES®2021.

The result of a partnership between the Consumer Technology Association (CTA) and the World Bank Group, the Global Tech Challenge was launched at CES 2020 to reward scalable and innovative technological solutions in three main areas: digital health in East Africa, resilience in India and gender equality around the world. Technology solutions that helped communities respond to the COVID-19 pandemic were also prioritized.

Selected among over 1,000 applications, three winners were selected for gender equality, 10 for resilience and 17 for digital health. More details about the selected innovations can be accessed here for health, resilience and gender equality.

Global Tech Challenge winners will have the opportunity to access financial and/or technical assistance to pilot and scale their solutions on the ground with private sector companies, governments and within development projects financed by the World Bank Group, one of the largest sources of funding and knowledge for developing countries.  

“From closing the digital divide to building resilience in the face of natural disasters or pandemics, innovation can solve some of the most pressing development challenges. The World Bank Group is pleased to support impactful programs focused on bringing equal access to connectivity to women in developing countries and to recognize cutting-edge solutions such as AI-enabled robots to rebuild homes in post-disaster areas. Now is the time to scale up solutions that have proven effective, so that no one is left behind in the new digital era,” said Makhtar Diop, the World Bank’s Vice President for Infrastructure.

“Disruptive technologies are a fundamental driver of economic growth and job creation—and key to solving development challenges around the world. At IFC, we are proud to support the private sector in bringing these technologies to emerging markets, with innovations that range from portable ultrasound devices that can detect COVID-19 to medical tools that provide real-time cardiac diagnoses even in remote areas,” said Stephanie von Friedeburg, Interim Managing Director and Executive Vice President, and Chief Operating Officer at IFC.

We are thrilled to be continuing our work with the World Bank so the world’s best and brightest innovators at CES can collaborate with the World Bank Group to enter new markets, provide solutions and aid in development,” said Karen Chupka, EVP, CES, Consumer Technology Association (CTA).

Owned and produced by CTA, CES 2021 will be an all-digital experience connecting exhibitors, customers, thought leaders and media from around the world. CES 2021 will allow participants to hear from technology innovators, see cutting-edge technologies and the latest product launches, and engage with global brands and startups from around the world. For over 50 years, CES has been the global stage for innovation, and CES 2021 will provide an engaging platform for companies large and small to launch products, build brands and form partnerships.

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Environment

2020, one of three warmest years on record

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The COVID-19 pandemic was not the only long-term crisis the world will remember from 2020. In terms of climate change, the year was also one of the three warmest on record, and rivalled 2016 for the top spot, the UN weather agency said on Wednesday. 

“The confirmation by the World Meteorological Organization (WMO) that 2020 was one of the warmest years on record is yet another stark reminder of the relentless pace of climate change, which is destroying lives and livelihoods across our planet”, said Secretary-General António Guterres

He pointed out that at 1.2 degrees of warming above pre-industrial levels, the world is already witnessing unprecedented weather extremes in every region and on every continent.  

“We are headed for a catastrophic temperature rise of 3 to 5 degrees Celsius this century”, he warned. “Making peace with nature is the defining task of the 21st century. It must be the top priority for everyone, everywhere.”  

Powerful force 

La Niña, which began in late last year, is expected to continue into the early-middle part of 2021.   

“The exceptional heat of 2020 is despite a La Niña event, which has a temporary cooling effect”, said WMO Secretary-General Prof. Petteri Taalas.  

La Niña and El Niño effects on average global temperatures are typically strongest in the second year of the event. 

“It is remarkable that temperatures in 2020 were virtually on a par with 2016, when we saw one of the strongest El Niño warming events on record”, he added. “This is a clear indication that the global signal from human-induced climate change is now as powerful as the force of nature”.  

The extent to which the continued cooling effects of La Niña this year may temporarily diminish the overall long-term warming trend remains to be seen.  

Following atypical patterns  

WMO pointed to sustained heat and wildfires in Siberia, diminishing Arctic sea ice and record-breaking hurricanes in the Atlantic as being among the climate events that most stood out in 2020.  

The UN weather agency also reminded that temperature is just one climate change indicator. Greenhouse gas concentrations, ocean heat content, global mean sea level, sea ice extent and extreme events are also factors. 

Backed by science 

WMO’s consolidated global temperature update incorporates information from five leading international sets of data.  

It also uses datasets that combine millions of meteorological and marine observations, including from satellites, with models to produce a complete reanalysis of the atmosphere.  

“The combination of observations with models makes it possible to estimate temperatures at any time and in any place across the globe, even in data-sparse areas such as the polar regions”, according to WMO.  

Looking to the future  

The Paris Agreement aims to limit global warming to well below 2°C, preferably to 1.5°C degrees, compared to pre-industrial levels. 

However, the global average temperature in 2020 had already approached the lower limit of the temperature increase that the Agreement seeks to avert.  

Moreover, there is at least a one-in-five chance that the average global temperature will temporarily exceed 1.5 °C by 2024, according to WMO’s Global Annual to Decadal Climate Update, led by the United Kingdom’s Met Office. 

The 2021 Met Office annual global temperature forecast also suggests that next year will again be one of the earth’s hottest years.  

Updating its provisional December report, WMO will issue its final publication in March, which will incorporate temperature figures, information on all leading climate indicators and selected climate impacts. 

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