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More than one in six young people out of work due to COVID-19

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More than one in six young people have stopped working since the onset of the COVID-19 pandemic  while those who remain employed have seen their working hours cut by 23 per cent, says the International Labour Organization (ILO).

According to the ILO Monitor: COVID-19 and the world of work. 4th edition , youth are being disproportionately affected by the pandemic, and the substantial and rapid increase in youth unemployment seen since February is affecting young women more than young men.

The pandemic is inflicting a triple shock on young people. Not only is it destroying their employment, but it is also disrupting education and training, and placing major obstacles in the way of those seeking to enter the labour market or to move between jobs.

At 13.6 per cent, the youth unemployment rate in 2019 was already higher than for any other group. There were around 267 million young people not in employment, education or training (NEET) worldwide. Those 15-24 year olds who were employed were also more likely to be in forms of work that leave them vulnerable, such as low paid occupations, informal sector work, or as migrant workers.

“The COVID-19 economic crisis is hitting young people – especially women – harder and faster than any other group. If we do not take significant and immediate action to improve their situation, the legacy of the virus could be with us for decades. If their talent and energy is side-lined by a lack of opportunity or skills it will damage all our futures and make it much more difficult to re-build a better, post-COVID economy,” said ILO Director-General, Guy Ryder.

The Monitor calls for urgent, large-scale and targeted policy responses to support youth, including broad-based employment/training guarantee programmes in developed countries, and employment-intensive programmes and guarantees in low- and middle-income economies.

Testing and tracing pays off

The 4th edition of the Monitor also looks at measures to create a safe environment for returning to work. It says that rigorous testing and tracing (TT) of COVID-19 infections, “is strongly related to lower labour market disruption… [and] substantially smaller social disruptions than confinement and lockdown measures.”

In countries with strong testing and tracing, the average fall in working hours is reduced by as much as 50 per cent. There are three reasons for this: TT reduces reliance on strict confinement measures; promotes the public confidence and so encourages consumption and supports employment; and helps minimize operational disruption at the workplace.

In addition, testing and tracing can itself create new jobs, even if temporary, which can be targeted towards youth and other priority groups.

The Monitor highlights the importance of managing data privacy concerns. Cost is also a factor, but the benefit-to-cost ratio of TT is “highly favourable”.

“Creating an employment-rich recovery that also promotes equity and sustainability means getting people and enterprises working again as soon as possible, in safe conditions,” said Ryder. “Testing and tracing can be an important part of the policy package if we are to fight fear, reduce risk and get our economies and societies moving again quickly.”

Loss of working hours

The Monitor also updates the estimate for the decline in working hours in the first and second quarters of 2020, compared with the fourth quarter of 2019. An estimated 4.8 per cent of working hours were lost during Q1 2020 (equivalent to approximately 135 million full-time jobs, assuming a 48-hour working week). This represents a slight upward revision of around 7 million jobs since the third edition of the Monitor. The estimated number of jobs lost in Q2 remain unchanged at 305 million.

From a regional perspective, the Americas (13.1 per cent), and Europe and Central Asia (12.9 per cent) present the largest losses in hours worked in Q2.

The Monitor reiterates its call for immediate and urgent measures to support workers and enterprises along the ILO’s four-pillar strategy: stimulating the economy and employment; supporting enterprises, jobs and incomes; protecting workers in the workplace; relying on social dialogue for solutions.

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Amidst Strong Economic Rebound in Russia, Risks Stemming from COVID-19 and Inflation

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Following a strong economic rebound in 2021, with 4.3 percent growth, Russia’s growth is expected to slow in 2022 and 2023, with a forecast of 2.4 percent and 1.8 percent growth, respectively, according to the World Bank’s latest Regular Economic Report for Russia (#46 in the series).

The Russian economy has now recovered to above its pre-pandemic peak, with growth driven by a strong rebound in consumer demand. In 2022, growth will be supported by continued strength in commodity markets, but will likely also be hampered by COVID-19 control measures and tighter interest rates.

Household consumption in the second quarter increased to more than 9 percent on the previous quarter (seasonally adjusted), showing the fastest rate of growth in a decade. Labor markets also saw a substantial upswing, with unemployment falling to a four-year low and real wages growing.

Russia’s current account surplus has also been exceptionally strong, on the back of high commodity prices and low levels of outbound tourism. The federal budget has been consolidated, led by a strong growth in revenue, and is on track to meet the authorities’ target of meeting the fiscal rule next year.

“This surge in spending resulted from the release of pent-up demand created by pandemic restrictions,” said David Knight, Lead Economist and Program Leader, World Bank. “It was aided by increased credit, Russian tourists staying at home for the holidays this year, and resource inflows via the energy sector.”

The report assesses the short-term risks weighing on Russia’s growth and finds that  low vaccination rates are necessitating stricter COVID-19 control measures that may reduce economic activity, while more persistent inflation will likely call for tighter interest rates for a longer period, limiting the growth outlook.

The report also analyzes how Russia could be impacted by global economic growth under three different green transition scenarios, and suggests that domestic climate action can help mitigate some of the possible impacts of a global green transition and create new opportunities for Russia.

The country’s new low-carbon development strategy, which aims for a 70 percent reduction in net emissions by 2050 and net carbon neutrality by 2060, will become an important first step for Russia. A focus on enabling the transition to a more diversified and faster growing economy will call for strengthening of a broad range of assets including human capital, knowledge, and world-class market institutions.

“Environmental sustainability is becoming central to the global economic agenda. Increased commitments by countries and firms to carbon neutrality signal that wholesale changes to policy frameworks will be needed in the coming years,” said Renaud Seligmann, World Bank Country Director for Russia. “With Russia’s pledge to become carbon neutral by 2060, the country now needs to take concrete actions of moving towards decarbonization.”

To accomplish these goals, the report recommends the implementation of carbon pricing and the consolidation of energy subsidies for consumers in Russia. At the same time, measures should be taken to ensure people are protected from the costs and any adverse impacts of the transition.

The report estimates that consumer energy subsidies on electricity, gas and petroleum in Russia amounted to 1.4 percent of the country’s GDP in 2019. By redeploying these resources, the authorities could increase GDP and ensure that no consumers are left worse off. At the same time, this would help reduce greenhouse gas emissions and move Russia closer to its goal of a green and sustainable economy.  

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World trade reaches all-time high, but 2022 outlook ‘uncertain’

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Global trade is expected to be worth about $28 trillion this year – an increase of 23 per cent compared with 2020 – but the outlook for 2022 remains very uncertain, UN economists said on Tuesday.

This strong growth in demand – for goods, as opposed to services – is largely the result of pandemic restrictions easing, but also from economic stimulus packages and sharp increases in the price of raw materials.

According to UN trade and development body UNCTAD, although worldwide commerce stabilized during the second half of 2021, trade in goods went on to reach record levels between July and September.

Services still sluggish

In line with this overall increase, the services sector picked up too, but it has remained below 2019 levels.

From a regional perspective, trade growth remained uneven for the first half of the year, but it had a “broader” reach in the three months that followed, UNCTAD’s Global Trade update said.

Trade flows continued to increase more strongly for developing countries in comparison to developed economies overall in the third quarter of the year, moreover.

The report valued the global goods trade at $5.6 trillion in the third quarter of this year, which is a new all-time record, while services stood at about $1.5 trillion.

For the remainder of this year, UNCTAD has forecast slower growth for the trade in goods but “a more positive trend for services”, albeit from a lower starting point.

Among the factors contributing to uncertainty about next year, UNCTAD cited China’s “below expectations” growth in the third quarter of 2021.

“Lower-than-expected economic growth rates are generally reflected in more downcast global trade trends,” UNCTAD noted, while also pointing to inflationary pressures” that may also negatively impact national economies and international trade flows.

The UN body’s global trade outlook also noted that “many economies, including those in the European Union”, continue to face COVID-19-related disruption which may affect consumer demand in 2022.

Semiconductor stress test

In addition to the “large and unpredictable swings in demand” that have characterized 2021, high fuel prices have also caused shipping costs to spiral and contributed to supply shortages.

This has contributed to backlogs across major supply chains that could continue into next year and could even “reshape trade flows across the world”, UNCTAD cautioned.

Geopolitical factors may also play a role in this change, as regional trade within Africa and within the Asia-Pacific area increases on the one hand, “diverting trade away from other routes”.

Similarly, efforts towards a more socially and environmentally sustainable economy may also affect international trade, by disincentivizing high carbon products.

The need to protect countries’ own strategic interests and weaknesses in specific sectors could also influence trade in 2022, UNCTAD noted, amid a shortage of microprocessors called semiconductors that “has already disrupted many industries, notably the automotive sector”.

“Since the onset of the COVID-19 pandemic, the semiconductor industry has been facing headwind due to unanticipated surges in demand and persisting supply constraints…If persistent, this shortage could continue to negatively affect production and trade in many manufacturing sectors.”

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Small Businesses Adapting to Rapidly Changing Economic Landscape

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The World Economic Forum has long been at the forefront of recognizing the strategic importance of sustainable value creation objectives for business. While interest has mostly focused on how large corporations contribute to the global economy and sustainable development objectives, small and mid-sized enterprises (SMEs) are often overlooked as major drivers of economic activity, as well as social and environmental progress around the world.

A new report released today finds factors that previously disadvantaged SMEs can lead them to new opportunities. Nine case studies from multiple industries and regions highlight what SMEs can do to increase their future readiness.

Developed in collaboration with the National University of Singapore Business School, the University of Cambridge Judge Business School and Entrepreneurs’ Organization, the report also finds that SMEs are lagging behind in terms of societal impact. Although there is a clear need to operate in line with sustainability goals, many SMEs have yet to include explicit strategies and performance measurement centred on societal impact.

The top challenges cited by SME executives include talent acquisition and retention (for 52.5% respondents), survival and expansion (43.8%), funding and access to capital (35.7%), non-supportive policy environment (21%), the difficulty of maintaining a strong culture and clear company purpose and value (20%).

SMEs can leverage their size, networks, people and the strengths of technology to support their goals of sustainable growth, positive societal impact and robust adaptive capacity. While it is essential for SMEs and the wider economy to increase their future readiness, they can thrive only insofar as the necessary supporting infrastructure and regulatory frameworks exist.

“We hope this will inspire and encourage SMEs and mid-sized companies to harness their potential in becoming a major driver of sustainable and inclusive economic growth and innovation by focusing on several core dimensions of future readiness,” said Børge Brende, President, World Economic Forum.

“Through this report, the Forum aims to highlight the significant role SMEs can play not just locally but also globally. The New Champions Community is a step towards bringing these smaller companies into the forefront of global discourse around socioeconomic development and engaging them in a community of forward-thinking companies from across the world,” said Stephan Mergenthaler, Head of Strategic Intelligence and Member of the Executive Committee, World Economic Forum.

The report aims to develop a deeper understanding of organizational capabilities and orientations needed for SMEs to successfully generate lasting financial growth, affect society and the environment positively, and develop high levels of resilience and agility.

It relies on robust research methods and combines rigorous primary and secondary research. The takeaways and conclusions presented in the research have been derived from an analysis of over 200 peer-reviewed articles and engagement of more than 300 CEOs and founders of SMEs through surveys and in-depth interviews.

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