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Trump’s unilateralism hurting global economy

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Since 2017, when Donald Trump took office in the White House, the global economy has gone through a whirlwind of deteriorating events. The situation has become worse every year so that most international economic institutions and organizations are becoming skeptic about the outlook of the global economy.

The United States’ trade war with China, the country’s hostile stance toward many of the world’s developing countries and threats and imposition of rounds and rounds of sanctions on many influential nations has pushed the global economy toward a threshold of potential recession.

The global economy’s severe condition was the topic of many small talks during the International Monetary Fund and World Bank fall meetings in Washington this month.

Clearly Trump’s impulsive acts are not merely affecting some targeted countries and quivers of Washington’s irrational decisions are finally being felt all around the world.

IMF Managing Director Kristalina Georgieva’s speech at the IMF gathering was a clear indication of the pain which is being felt by economies all around the world. Mentioning the negative impact of U.S. policies Georgieva said if the situation continues “Everybody loses!” 

Many of the Central bank governors and finance ministers attending the events also shared the IMF head’s concerns that Trump’s actions are destroying all that has been achieved so far based on the international monetary collaborations. 

World Bank President David Malpass believed that U.S. policy has shifted from the 1940s, when Washington co-founded the IMF. 

“In those years, when U.S. co-founded IMF, the Washington message was that broadly shared prosperity benefits everyone,” Malpass regretted.

Trump a threat to economic stability

Christine Lagarde, former head of the International Monetary Fund, and the new head of European Central Bank (ECB) said last week that Trump is the source of many major risks facing the global economy.

According to Lagarde, Trump’s unpredictability is making the market unpredictable and consequently investors and traders are not willing to take risks anymore.

“The trade war is going to give a big haircut to the global economy,” Lagarde said in an interview with CBS on Sunday.

Europe: the exporters

The damage inflicted by Trump actions is particularly being felt among exporting countries, many of which are heavily dependent on their exports.

Uncertainty has become widespread among traders which, as Lagarde said, due to Trump’s unpredictable personality are less and less inclined to take risks. 

The U.S. policy is undermining the world’s open trade and even many developed economies are also beginning to see the fact that U.S.’s unilateralism is a huge threat to the stability of the global economy.

As the European Union’s Economic and Financial Affairs Commissioner Pierre Moscovici put it European countries which “rely on exports and are open to trade,” are among the nations that are feeling the pressure the most.

Global economy tied to U.S. interests

Economic expert and analyst Mohammad-Ali Kazemian also believes that Donald Trump has disrupted the balance of the world economy and the rules of world trade since he took power.

“Before Trump came to power, we saw the global economy abiding by specific rules and regulations. The new American president, being in power, broke all these rules and equations.” Kazemian said in an interview with Tehran Times.

This indicates how the U.S. policies and actions will end up harming the world economy and trade, he noted.

“Multinational companies and enterprises have suffered the worst from Trump’s presence in power. Such corporations adjusted their businesses based on free trade rules, but now Trump has broken all those rules. For example, France’s Peugeot Corporation has been eager to establish trade relations with Iran, however the United States, with its irregular pressures and behavior, prevented this from happening.” 

“White House has tied the global economy to their own economic interests, and this is not acceptable at all,” Kazemian said.

The silver lining

Kazemian believes that even though Trump’s actions has had many catastrophic outcomes for the global economy, however some good has come out of it too.

To put it in his words, “Trump’s presence, despite being a threat to the world economy and free trade, has resulted in emergence of some valuable concerns among many countries.

Economic powers such as Russia and China, and emerging markets like India and Brazil and even Europe have become aware of the negative impact of U.S. hegemony on their economies and therefore are taking measures to reduce their reliance on the United States.”

For instance, China and Russia are moving toward doing trade in their national currencies. Other emerging economies have also come to the same conclusion, acknowledging the fact that America’s economic dominance over the world will result in insecurity of their businesses and economic environment, seeking to free themselves of the “American economic unilateralism.”

From our partner Tehran Times

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Economy

The Covid After-Effects and the Looming Skills Shortage

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coronavirus people

The shock of the pandemic is changing the ways in which we think about the world and in which we analyze the future trajectories of development. The persistence of the Covid pandemic will likely accentuate this transformation and the prominence of the “green agenda” this year is just one of the facets of these changes. Market research as well as the numerous think-tanks will be accordingly re-calibrating the time horizons and the main themes of analysis. Greater attention to longer risks and fragilities is likely to take on greater prominence, with particular scrutiny being accorded to high-impact risk factors that have a non-negligible probability of materializing in the medium- to long-term. Apart from the risks of global warming other key risk factors involve the rising labour shortages, most notably in areas pertaining to human capital development.

The impact of the Covid pandemic on the labour market will have long-term implications, with “hysteresis effects” observed in both highly skilled and low-income tiers of the labour market. One of the most significant factors affecting the global labour market was the reduction in migration flows, which resulted in the exacerbation of labour shortages across the major migrant recipient countries, such as Russia. There was also a notable blow delivered by the pandemic to the spheres of human capital development such as education and healthcare, which in turn exacerbated the imbalances and shortages in these areas. In particular, according to the estimates of the World Health Organization (WHO) shortages can mount up to 9.9 million physicians, nurses and midwives globally by 2030.

In Europe, although the number of physicians and nurses has increased in general in the region by approximately 10% over the past 10 years, this increase appears to be insufficient to cover the needs of ageing populations. At the same time the WHO points to sizeable inequalities in the availability of physicians and nurses between countries, whereby there are 5 times more doctors in some countries than in others. The situation with regard to nurses is even more acute, as data show that some countries have 9 times fewer nurses than others.

In the US substantial labour shortages in the healthcare sector are also expected, with anti-crisis measures falling short of substantially reversing the ailments in the national healthcare system. In particular, data published by the AAMC (Association of American Medical Colleges), suggests that the United States could see an estimated shortage of between 37,800 and 124,000 physicians by 2034, including shortfalls in both primary and specialty care.

The blows sustained by global education from the pandemic were no less formidable. These affected first and foremost the youngest generation of the globe – according to UNESCO, “more than 1.5 billion students and youth across the planet are or have been affected by school and university closures due to the COVID-19 pandemic”. On top of the adverse effects on the younger generation (see Box 1), there is also the widening “teachers gap”, namely a worldwide shortage of well-trained teachers. According to the UNESCO Institute for Statistics (UIS), “69 million teachers must be recruited to achieve universal primary and secondary education by 2030”.

From our partner RIAC

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Accelerating COVID-19 Vaccine Uptake to Boost Malawi’s Economic Recovery

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Lunzu market in southern Malawi. WFP/Greg Barrow

Since the onset of the COVID-19 pandemic, many countries including Malawi have struggled to mitigate its impact amid limited fiscal support and fragile health systems. The pandemic has plunged the continent into its first recession in over 25 years, and vulnerable groups such as the poor, informal sector workers, women, and youth, suffer disproportionately from reduced opportunities and unequal access to social safety nets.

Fast-tracking COVID-19 vaccine acquisition—alongside widespread testing, improved treatment, and strong health systems—are critical to protecting lives and stimulating economic recovery. In support of the African Union’s (AU) target to vaccinate 60 percent of the continent’s population by 2022, the World Bank and the AU announced a partnership to assist the Africa Vaccine Acquisition Task Team (AVATT) initiative with resources, allowing countries to purchase and deploy vaccines for up to 400 million Africans. This extraordinary effort complements COVAX and comes at a time of rising cases in the region.

I am convinced that unless every country in the world has fair, broad, and fast access to effective and safe COVID-19 vaccines, we will not stem the spread of the pandemic and set the global economy on track for a steady and inclusive recovery. The World Bank has taken unprecedented steps to ramp up financing for Malawi, and every country in Africa, to empower them with the resources to implement successful vaccination campaigns and compensate for income losses, food price increases, and service delivery disruptions.

In line with Malawi’s COVID-19 National Response and Preparedness Plan which aims to vaccinate 60 percent of the population, the World Bank approved $30 million in additional financing for the acquisition and deployment of safe and effective COVID-19 vaccines. This financing comes as a boost to Malawi’s COVID-19 Emergency Response and Health Systems Preparedness project, bringing World Bank contributions in this sector up to $37 million.

Malawi’s decision to purchase 1.8 million doses of Johnson and Johnson vaccines through the AU/African Vaccine Acquisition Trust (AVAT) with World Bank financing is a welcome development and will enable Malawi to secure additional vaccines to meet its vaccination target.

However, Malawi’s vaccination campaign has encountered challenges driven by concerns regarding safety, efficacy, religious and cultural beliefs. These concerns, combined with abundant misinformation, are fueling widespread vaccine hesitancy despite the pandemic’s impact on the health and welfare of billions of people.  The low uptake of COVID-19 vaccines is of great concern, and it remains an uphill battle to reach the target of 60 percent by the end of 2023 from the current 2.2 percent.

Government leadership remains fundamental as the country continues to address vaccine hesitancy by consistently communicating the benefits of the vaccine, releasing COVID data, and engaging communities to help them understand how this impacts them.

As we deploy targeted resources to address COVID-19, we are also working to ensure that these investments support a robust, sustainable and resilient recovery. Our support emphasizes transparency, social protection, poverty alleviation, and policy-based financing to make sure that COVID assistance gets to the people who have been hit the hardest.

For example, the Financial Inclusion and Entrepreneurship Scaling Project (FInES) in Malawi is supporting micro, small, and medium enterprises by providing them with $47 million in affordable credit through commercial banks and microfinance institutions. Eight months into implementation, approximately $8.4 million (MK6.9 billion) has been made available through three commercial banks on better terms and interest rates. Additionally, nearly 200,000 urban households have received cash transfers and urban poor now have more affordable access to water to promote COVID-19 prevention.

Furthermore, domestic mobilization of resources for the COVID-19 response are vital to ensuring the security of supply of health sector commodities needed to administer vaccinations and sustain ongoing measures. Likewise, regional approaches fostering cross-border collaboration are just as imperative as in-country efforts to prevent the spread of the virus. United Nations (UN) partners in Malawi have been instrumental in convening regional stakeholders and supporting vaccine deployment.

Taking broad, fast action to help countries like Malawi during this unprecedented crisis will save lives and prevent more people falling into poverty. We thank Malawi for their decisive action and will continue to support the country and its people to build a resilient and inclusive recovery.

This op-ed first appeared in The Nation, via World Bank

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Economy

An Airplane Dilemma: Convenience Versus Environment

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Mr. President:  There are many consequences of COVID-19 that have changed the existing landscape due to the cumulative effects of personal behavior.  For example, the decline in the use of automobiles has been to the benefit of the environment.  A landmark study published by Nature in May 2020 confirmed a 17 percent drop in daily CO2 emissions but with the expectation that the number will bounce back as human activity returns to normal.

Yet there is hope.  We are all creatures of habit and having tried teleconferences, we are less likely to take the trouble to hop on a plane for a personal meeting, wasting time and effort.  Such is also the belief of aircraft operators.  Add to this the convenience of shopping from home and having the stuff delivered to your door and one can guess what is happening.

In short, the need for passenger planes has diminished while cargo operators face increased demand.  Fewer passenger planes also means a reduction in belly cargo capacity worsening the situation.  All of which has led to a new business with new jobs — converting passenger aircraft for cargo use.  It is not as simple as it might seem, and not just a matter of removing seats, for all unnecessary items must be removed for cargo use. They take up cargo weight and if not removed waste fuel.

After the seats and interior fittings have been removed, the cabin floor has to be strengthened.  The side windows are plugged and smoothed out.  A cargo door is cut out and the existing emergency doors are deactivated and sealed.  Also a new crew entry door has to be cut-out and installed. 

A new in-cabin cargo barrier with a sliding access door is put in, allowing best use of cargo and cockpit space and a merged carrier and crew space.  A new crew lavatory together with replacement water and waste systems replace the old, which supplied the original passenger area and are no longer needed.

The cockpit gets upgrades which include a simplified air distribution system and revised hydraulics.  At the end of it all, we have a cargo jet.  If the airlines are converting their planes, then they must believe not all the travelers will be returning after the covid crisis recedes.

Airline losses have been extraordinary.  Figures sourced from the World Bank and the International Civil Aviation Organization reveal air carriers lost $370 billion in revenues.  This includes $120 billion in the Asia-Pacific region, $100 billion in Europe and $88 billion in North America.

For many of the airlines, it is now a new business model transforming its fleet for cargo demand and launching new cargo routes.  The latter also requires obtaining regulatory approvals.

A promising development for the future is sustainable aviation fuel (SAP).  Developed by the Air France KLM Martinair consortium it reduces CO2 emissions, and cleaner air transport contributes to lessening global warming.

It is a good start since airplanes are major transportation culprits increasing air pollution and radiative forcing.  The latter being the heat reflected back to earth when it is greater than the heat radiated from the earth.  All of which should incline the environmentally conscious to avoid airplane travel — buses and trains pollute less and might be a preferred alternative for domestic travel.

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