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 Monetary and fiscal stimulus is being withdrawn progressively in the OECD area.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

Act Urgently to Preserve Biodiversity for Sustainable Future — ADB President

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The world must act urgently to preserve ecosystems and biodiversity for the sake of a sustainable future and prosperity, Asian Development Bank (ADB) President Masatsugu Asakawa said at the opening of a global event on biodiversity here today.

“The world is at a critical turning point. If we are to reverse the alarming decline in nature, we must respond with urgency and coordinated action,” Mr. Asakawa said. “These efforts are needed to ensure the survival of our ecosystems, and for the sake of our shared future and prosperity.”  

Asia and the Pacific is one of the most biodiverse regions in the world—home to 17 of the 36 global biodiversity hotspots, 7 of the 17 megadiverse countries, and the greatest marine diversity. “If restored and well-managed, these natural capital assets can help to mitigate global climate change and biodiversity loss in a cost-effective and impactful manner,” Mr. Asakawa said in his opening remarks at the Ecological Civilization Forum at the 15th Conference of Parties to the Convention on Biological Diversity (COP15) in Kunming, the People’s Republic of China (PRC).  

The event is cohosted by the PRC’s Ministry of Ecology and Environment, Yunnan provincial government, and the Secretariat of the Convention on Biological Diversity. Participants include high-level representatives from governments, the private sector, development agencies including ADB, and civil society. 

ADB is committed to helping accelerate and increase nature-positive investments in Asia and the Pacific. “Through our ADB Nature-Positive Investment Roadmap, we are working with partners to scale up finance, develop knowledge of natural capital, and generate financially sustainable projects that deliver on biodiversity and healthy ecosystems,” Mr. Asakawa said.

At COP15, ADB is launching a new publication, Greening Development in the People’s Republic of China, which outlines how ADB and the PRC have successfully partnered to promote green development and ecological restoration in a way that complements economic and social priorities. 

In partnership with the Chinese Academy of Science and Stanford University, ADB is sharing progress on its new Natural Capital Lab due for launch in 2022. This will be a digital platform for sharing methods for valuing biodiversity and ecosystems, and for building knowledge, capacities, and alliances across the region.  

In addition, ADB with partners will be launching the Regional Flyway Initiative that will conserve ecosystem services that support people and critical habitats for more than 50 million migratory waterbirds.

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Health & Wellness

Stockholm+50: Accelerate action towards a healthy and prosperous planet for all

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The United Nations General Assembly agreed on the way forward for plans to host an international meeting at the highest possible level in Stockholm next June, during the week of World Environment Day. The event will commemorate the 50 years since the United Nations Conference on the Human Environment and serve as a contribution to accelerate action towards a more sustainable society.

The Declaration of the United Nations Conference on the Human Environment was made in 1972 in Stockholm, Sweden, resulting in what is often seen as the the first step toward the development of international environmental law, recognizing the importance of a healthy environment for people, and creating the UN Environment Programme (UNEP).

Five decades after the 1972 Stockholm Conference, the Government of Sweden, with support from the Government of Kenya, will host Stockholm+50, an international meeting in 2022 to commemorate the 50 years since the United Nations Conference on the Human Environment and its outcome documents, as a contribution to the environmental dimension of sustainable development to accelerate the implementation of commitments in the context of the decade of action and delivery for sustainable development, including a sustainable recovery from the coronavirus disease (COVID-19) pandemic.

The international meeting, “Stockholm+50: a healthy planet for the prosperity of all – our responsibility, our opportunity”, will take place in Stockholm on 2 and 3 June 2022, following a UN General Assembly resolution. In three leadership dialogues, the meeting will reflect on the urgent need for actions towards a healthy planet and prosperity of all, achieving a sustainable and inclusive recovery from the COVID-19 pandemic, and accelerating the implementation of the environmental dimension of Sustainable Development in the context of the Decade of Action. The meeting will also reinforce the messages and the outcomes of the event to commemorate UNEP’s 50th anniversary (UNEP@50), which will have taken place in March 2022, in Nairobi.

Per Bolund, Sweden’s Minister for the Environment and Climate, and Deputy Prime Minister, said “Our aim is clear, we want Stockholm+50 to make a concrete contribution to accelerating the transformation to a sustainable future. We call this meeting to commemorate the fiftieth anniversary of the 1972 conference. We are running out of time and urgent action is needed. These challenges are global, and we must meet them with a global response that drives action on the ground.”

Inger Andersen, Executive Director of UNEP, who was on 11 October appointed by UN Secretary-General António Guterres as the Secretary-General of the Stockholm+50 international meeting, said: “We need to urgently work to transform our economies and societies, but our branches will spread only as far as our roots are deep. By remembering Stockholm at 50, we also remember how the world came together to heal the ozone layer in 2013, phase out leaded fuel this year and stop endangered species from going extinct. By convening in Stockholm, we also recommit to human and planetary health, responsibility, prosperity, equality and peace – as we have seen only too clearly in COVID-19.”

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Logistics giant commits to Gothenburg Green City Zone

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DB Schenker is collaborating with Business Region Göteborg to scale up electric freight transport as part of the Gothenburg Green City Zone initiative – the first logistics company to do so.

Business Region Göteborg is one of the initiators of the Gothenburg Green City Zone, which brings together businesses, societal stakeholders and researchers to develop, test and scale up new vehicle and infrastructure technologies. The goal of the initiative is to achieve zero-emission transport within parts of Gothenburg by 2030, and to do so using green electricity.

DB Schenker is one of Europe’s largest logistics and supply chain companies. The company currently has three electric vehicles operating in central Gothenburg: two parcel delivery vans and one distribution truck operated by the hauliers TGM and Bäckebol åkeri. These three vehicles handle packet distribution in the Event District and Lindholmen, both of which are within the Gothenburg Green City Zone. The electric vehicles also cover some nearby areas.

Keen to go electric as quickly as possible
“We want to scale up the transition to electric power as quickly as possible. To do so, we will need to charge our vehicles at night in order to operate them without interruption during the day. While charging a handful of vehicles presents no problem, charging our entire vehicle fleet will demand entirely different conditions than we have today. This requires charging infrastructure that doesn’t yet exist,” explains Hanna Melander, quality and environmental manager at DB Schenker.

To lay the foundations for rapid electrification throughout the transport sector, Business Region Göteborg and DB Schenker have therefore started a collaborative project to analyse and learn from real-world traffic, to understand flows and needs and how and where charging stations should be located in order to be able to scale up the vehicle fleet and take the next step.

Together, within the Gothenburg Green City Zone, the partners will develop general analytical methods for electrification that can benefit other hauliers. The intention is to facilitate rapid upscaling throughout the sector, thus contributing to the goal of the initiative: to create a zero-emission transport system by 2030.

A method that all freight stakeholders can utilise
“We are determined to make freight traffic in central Gothenburg emission-free as quickly as possible and we welcome DB Schenker’s commitment. Together, we will develop a method for large-scale electrification that can benefit all stakeholders in the freight sector, that is generalisable. All stakeholders face similar challenges,” says Maria Strömberg, director of cluster and innovation at Business Region Göteborg.

Property owners, market stakeholders and the city’s administrations and municipally owned companies will gain a clear picture of the infrastructure that needs to be established and the specifications the various installations must fulfil.

“To this end, we also need to understand what the potential actually is and what is required to achieve it, not only at a local level but also regionally,” says Matilda Landén of Business Region Göteborg, process manager for the Gothenburg Green City Zone.

While the partners fully expect that further significant stakeholders will commit to the collaboration on the journey ahead, it is important to capture data from traffic that is already operating so as not to lose valuable time.

About Gothenburg Green City Zone
In the Gothenburg Green City Zone, we test new technologies and collaborate to develop and scale up system solutions aimed at ensuring that all transport in parts of Gothenburg will be 100% emission-free by 2030. Gothenburg Green City Zone is an initiative by the City of Gothenburg, implemented through Business Region Göteborg, Volvo Cars and RISE Research Institutes of Sweden. Learn more about the initiative and other founder members here.

Initially consisting of Lindholmen, the Event District in central Gothenburg and Forsåker in Mölndal, the Gothenburg Green City Zone will create opportunities for businesses, societal stakeholders and researchers to test, develop and scale up their ideas. This will be a zone for testing rather than prohibition, where we will welcome and stimulate interest in new solutions, create innovation and learn together. We shall show consideration for one another, for the business community, the local environment and the climate.

With the Gothenburg Green City Zone, Gothenburg is the first region in the world to develop zero-emission, scalable transport solutions at system level.

Business Region Göteborg is also tasked with coordinating the city’s combined efforts to transition to a fossil-free transport system by 2030, with electrification as the guiding light. This work is being performed in close cooperation with all relevant stakeholders within the City of Gothenburg, the business community and the Gothenburg region.

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