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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 Monetary and fiscal stimulus is being withdrawn progressively in the OECD area.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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Human Rights

Myanmar coup: ‘No sign’ of end to brutal crackdown on all fronts

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Unsplash/Gayatri Malhotra

One hundred days since the Myanmar military seized power, the “brutal” repression of protesters has continued, despite all international efforts to end the violence, the UN rights office (OHCHR) said on Tuesday.

“The military authorities are showing no sign of letting up in their brutal crackdown on opponents in a bid to consolidate their hold on power”, spokesperson Rupert Colville told journalists at a media briefing.

According to credible reports, as of 10 May, at least 782 people have been killed as security forces used unnecessary, disproportionate and lethal force, to suppress demonstrations and other forms of public participation, since the military coup on 1 February.

“While much of the world’s attention has been on the number of peaceful protesters and bystanders killed by the security forces, the authorities continue to commit other gross human rights violations against the people of Myanmar”, added Mr. Colville.

The OHCHR spokesperson called for greater international involvement to prevent the human rights situation there from deteriorating further.

In particular, he urged the Association of Southeast Asian Nations (ASEAN) to “react quickly and to intensify its actions” to ensure Myanmar’s military leadership adheres to the commitments it made in the five-point plan agreed at the regional bloc’s meeting of leaders on 24 April, in Jakarta.

The five-point consensus agreed to an immediate cessation of violence in Myanmar and that dialogue should be held among all parties to seek a peaceful solution in the interests of the people.

‘Daily raids’ on homes and offices

Mr. Colville went on to note that there are daily raids on private homes and offices, with more than 3,740 people currently in detention, including many in situations that may amount to enforced disappearances.

“Of those in custody, the vast majority have not been brought before a judge, while most of the 86 people prosecuted thus far have been tried in secret, with limited or no access to any form of legal counsel”, he said.

“Military tribunals and courts martial have been established in several townships in which martial law was declared. At least 25 individuals have received the death sentence to date – some 20 of whom were tried in absentia.”

Military ‘taking relatives’

Over the past month, the military leadership has issued more than 1,561 arrest warrants against civil society activists, trade unionists, journalists, academics, public personalities and online voices, driving the vast majority of them underground.

“To intensify pressure, the military authorities have resorted to taking relatives of wanted people into custody to force them to turn themselves in to the police”, Mr. Colville said, adding that there is also increasing pressure on civil servants to go back to work.

In recent weeks, more than 3,000 civil servants – nearly 70 per cent women – have been dismissed, removed, or suspended by the coup leadership. Those suspended also include 990 university professors, researchers and assistants.

In addition, there are reports that up to 11,000 more workers in the education sector were suspended on Monday.

‘Deeply concerned’ for those fleeing persecution

The OHCHR spokesperson also voiced “deep concerns” for the people fleeing persecution, especially human rights defenders and journalists.

According to the UN refugee agency (UNHCR), several hundred people from Myanmar have crossed into Thailand and India in recent weeks.

The people seeking safety outside Myanmar must receive such protection and support from Myanmar’s neighbours, Mr. Colville urged, adding that while it can take time to decide whether an individual fleeing the country is a refugee or not, “at the very least they should be treated as an asylum seeker and not forced to go back”.

“This is particularly important for people with jobs as sensitive as journalists and those active in the civil disobedience movement, opposing the Tatmadaw (Myanmar’s military).”

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Vaccine inequity posing ‘significant risk’ to global economic recovery

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London, UK, Covid-19 restrictions in place in Soho. IMF/Jeff Moore

Although the outlook for global growth has improved, the ongoing impacts of the COVID-19 pandemic, as well as inadequate progress on vaccination in poorer countries, are putting recovery at risk, according to the latest UN economic forecast, published on Tuesday. 

The World Economic Situation and Prospects (WESP) mid-year report warned widening inequality is threatening global growth, projected at 5.4 per cent this year. 

Vaccine access critical 

“Vaccine inequity between countries and regions is posing a significant risk to an already uneven and fragile global recovery”, said UN Chief Economist Elliott Harris.  

“Timely and universal access to COVID-19 vaccinations will mean the difference between ending the pandemic promptly and placing the world economy on the trajectory of a resilient recovery, or losing many more years of growth, development and opportunities.” 

The mid-year forecast updates the WESP report published in January by the UN Department of Economic and Social Affairs (DESA). 

It examines the performance of the world economy since the pandemic began, as well as the impact of global policy responses and post-crisis recovery scenarios. 

A mixed picture 

The 5.4 per cent in projected global growth this year follows a sharp contraction of 3.6 per cent in 2020, and reflects an upward revision from the original forecast. 

While the world’s two largest economies – China and the United States – are on the road to recovery, growth remains fragile and uncertain in several countries in South Asia, sub-Saharan Africa, and Latin America and the Caribbean.  

Many countries will not see economic output return to pre-pandemic levels until 2022 or 2023. 

“For a vast majority of developing countries, economic output will remain below 2019 levels for most of 2021”, the authors said.  “Amid insufficient fiscal space to stimulate demand, many of these countries will face low and stagnant growth and the prospect of a lost decade.”  

Trade strong but uneven 

The report also details strong but uneven recovery in global trade, which has already surpassed pre-pandemic levels due to demand for electrical and electronic equipment, personal protective equipment, and other manufactured goods. 

Economies which depend on manufacturing have fared better, however countries which rely on tourism, or commodities, are unlikely to see a quick rebound.  

Tourism services in particular, will remain depressed due to slow lifting of restrictions on international travel, coupled with fears of new waves of COVID-19 infection. 

Women hit hardest 

The pandemic has pushed an estimated 114.4 million people into extreme poverty, with women accounting for around 58 million of that total. 

The report found that while women have been at the forefront of the crisis— 

representing most health workers, caregivers and essential service providers—they have also been the hardest hit in several ways. 

During the pandemic, labour force participation shrunk by two per cent worldwide, compared to only 0.2 per cent during the global financial crisis in 2007-8, but more women than men were forced to leave their jobs to meet family demands. Women-owned businesses have also fared disproportionately worse, according to the report. 

COVID-19 has also dealt sharp blows to services for women’s health, and reproductive health, and the disruption to education has helped undermine global progress towards gender equality.  There has also been a spike in gender-based violence, which UN Women has labelled a “shadow pandemic.” 

Ensure inclusive recovery 

As women are also underrepresented in decision-making surrounding the pandemic, and in economic policy responses, the report highlighted why recovery must be inclusive.  

“The pandemic has pushed nearly 58 million women and girls into extreme poverty, dealing a huge blow to poverty reduction efforts worldwide, and exacerbated gender gaps in income, wealth and education, impeding progress on gender equality”, said Hamid Rashid, Chief of the Global Economic Monitoring Branch at DESA, and the lead author of the report. 

“Fiscal and monetary measures to steer recovery must take into account the differentiated impact of the crisis on different population groups, including women, to ensure an economic recovery that is inclusive and resilient.”

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Human Rights

UN chief express deep concern over East Jerusalem violence

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Palestinians react as Israeli police fire a stun grenade during clashes at Damascus Gate on Laylat al-Qadr during the holy month of Ramadan, in Jerusalem's Old City, May 9, 2021. /Reuters

The UN Secretary-General, António Guterres, and senior UN officials have expressed their deep concern over confrontations between Palestinians and Israeli security forces in East Jerusalem, particularly those which began on Friday evening, and continued into Sunday night. Several Palestinian children are among the wounded.

The violence on Friday has been described as some of the worst seen in Jerusalem for many years. Some 200 Palestinians and 17 Israeli Police were reportedly injured in fighting around Haram Al-Sharif/Temple Mount. On Saturday, protesters reportedly threw stones at police, who responded with stun grenades, rubber bullets and water cannons and, on Sunday, fighting continued in East Jerusalem, ahead of a planned march by an Israeli group through the Old City.

The official spokesperson for Mr. Guterres, Stéphane Dujarric, said in a statement published on Sunday evening, that Israeli authorities must exercise maximum restraint and respect the right to freedom of peaceful assembly. 

“All leaders have a responsibility to act against extremists and to speak out against all acts of violence and incitement”, the statement continued. “The Secretary-General reiterates his commitment, including through the Middle East Quartet, to supporting Palestinians and Israelis to resolve the conflict on the basis of relevant United Nations resolutions, international law and bilateral agreements”.

The Envoys of the Middle East Quartet (from the European Union, Russia, the United States, and the United Nations), released a press statement on Saturday,  in which they expressed their alarm at “the provocative statements made by some political groups, as well as the launching of rockets and the resumption of incendiary balloons from Gaza towards Israel, and attacks on Palestinian farmland in the West Bank”.

Imminent risk of eviction

The Quartet representatives went on to declare their concern regarding the possible evictions of Palestinian families from homes, in which they have lived in for generations, in two neighbourhoods in East Jerusalem – Sheikh Jarrah and Silwan – and their opposition to “unilateral actions, which will only escalate the already tense environment”.

This is a reference to a court case involving several Palestinians who face eviction due to a legal challenge by the Nahalat Shimon settler organization. The risk is considered to be imminent for four of the families.

The UN has called for on the Israeli Government to halt all forced evictions and on Thursday, Rupert Colville, the spokesperson for the UN Human Rights Office (OHCHR), warned that, if they take place, the evictions in the Sheikh Jarrah case would violate Israel’s obligations under international law.

Saturday’s fighting took place on Laylat-al-Qadr, the most holy day in the Muslim month of Ramadan, after large numbers of worshippers had prayed at the Haram Al-Sharif/Temple Mount compound. In their statement, the Quartet

Envoys called on the Israeli authorities to exercise restraint and to avoid measures that would further escalate the situation during this period of Muslim Holy Days.

“We call on all sides to uphold and respect the status quo at the holy sites”, the statement continues. “All leaders have a responsibility to act against extremists and to speak out against all acts of violence and incitement”. 

The statement concluded with a reiteration by the Quartet Envoys of their commitment to a negotiated two state solution.

37 Palestinian children injured and arrested

On Sunday, the UN Children’s Fund, UNICEF, urged the Israeli authorities to refrain from using violence against children and release all those children detained.

In a joint statement, Ted Chaiban, UNICEF Regional Director for the Middle East and North Africa, and Lucia Elmi, UNICEF Special Representative in the State of Palestine, noted that 29 Palestinian children have been injured over the past two days, and a further eight arrested. “A one-year-old toddler was among those injured. Some children were taken for treatment at hospitals, with injuries in the head and the spine. This comes amid reports that nearly 300 people were injured in the area”.

The senior UNICEF officials said that the agency had received reports of ambulances being restricted from arriving on location to assist and evacuate the injured, and that an on-site clinic was reportedly hit and searched.

The statement called for all children to be protected from violence and kept out of harm’s way at all times, for families’ rights to access all places of worship to be preserved, and for those injured to be assisted without restrictions.

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