19 November 2020  Economic Development

 

The pandemic has redefined the world economy in ways that will deepen inequality and can only be reversed if a global transformation in attitudes towards trade and development allows the whole world to recover together, the UN trade body UNCTAD said, in a report published on Thursday. 

 

The report, Impact of the Pandemic on Trade and Development: Transitioning to a new normal, said the pandemic had accelerated existing trends in trade, investment and technology, but its impact was “tilted towards the most vulnerable, both within and across countries” and it would leave many developing countries with unsustainable debt burdens.

Getting the world back on track towards the Sustainable Development Goals (SDGs), a so-called “better recovery”, meant reshaping global corporate networks and multilateral cooperation, the report said.

Unavoidable transformation

“While the pandemic may be far from over, it has become clear that transforming global approaches to trade and development cannot be avoided when charting a sustainable course to recovery from the pandemic”, UNCTAD Secretary-General Mukhisa Kituyi wrote in the foreword.

“It is our hope that this ‘better recovery’ can sow the seeds of a healthier, fairer and greener globalization that can be nourished by a more resilient approach to multilateralism.”

The pandemic is loading more costs onto developing countries while simultaneously reducing the availability of external finance, the report said. Cutbacks are likely in international development spending and remittances sent home by migrant workers are expected to fall 20 per cent this year.

Developing countries did not only need debt relief, but direct liquidity support to give them budgetary spending power in the short term and a framework for sovereign debt restructuring in the long term, it said.

“For developing countries – especially for the poorest and most vulnerable among them – new international consensus on financing must be reached in order to extend to all countries the fiscal breathing room and liquidity needed to meet the extraordinary outlay of resources required to tackle the health and economic crisis head on.”

New Marshall Plan

The report called for a "Marshall Plan" of international development spending to help poorer countries recover.

"There is the risk that a sovereign liquidity crisis could quickly turn into a solvency crisis if countries do not receive sufficient liquidity support. Proactive steps by the international community are required to avert a broader and deeper crisis", it said.

The report said that international trade had sped the transmission of the pandemic and the accompanying economic shock around the world, but trade was also part of the solution and policies for fairer and greener trade would help the weakest and most vulnerable to recover.

Some of the pandemic’s economic trends would endure and should be harnessed to help the global recovery, such as accelerated digitalization. But other potentially positive changes such as more climate-friendly production and consumption, still needed policy support to reach critical mass, the report said.

Room for hope, in new world order

Despite enormous challenges to development aspirations, the right policies and sufficient coordination would steer the world economy back towards the SDGs, which were agreed by all UN Member States in 2015 and aim to reduce poverty, protect the planet and promote peace and prosperity by 2030.

“Thus, despite the grim outlook, it is still possible to turn COVID-19 into the finest hour of the United Nations and build a more inclusive, resilient and sustainable future”, the report concluded.

 

World Bank/Rob Beechey    The port of Dar es Salaam, Tanzania's coastal capital.