UK Lags Global Economic Growth Projections - UNCTAD
(20 September 2021 – United Kingdom) In its annual trade and development report, the UN Conference on Trade and Development (UNCTAD) states that although the global economy is expected to bounce back in 2021, growth is “lumpy” with the United Kingdom (UK), Middle East and Africa in particular set to struggle.
The COVID pandemic response in developed countries has suspended fiscal constraints however international rules and practices lock developing countries into pre-pandemic responses and a state of economic stress, according to UNCTAD’s Trade and Development Report 2021. Many countries in the South have been hit much harder than during the global financial crisis (GFC) of 2008. With a heavy debt burden, they also have less room for manoeuvring their way out through fiscal stimulus.
Lack of monetary autonomy and access to vaccines are also holding many developing economies back, widening the gulf with advanced economies and threatening to usher in another “lost decade”. UNCTAD includes several proposals in the report that are drawn from the lessons of the pandemic. They include:
- concerted debt relief and even cancellation in some cases
- a reassessment of fiscal policy
- greater policy coordination and strong support for developing countries in vaccine deployment
Even barring substantial setbacks, global output will only resume its 2016/19 trend by 2030. Notably preceding the pandemic income growth was unsatisfactory anyway according to UNCTAD. Average annual global growth in the decade after the GFC was the slowest since 1945.
Global trade is recovering strongly after the COVID-19 enforced slow down last year reflected in a 5.6 percent slide in merchandise and services trade through 2020. UNCTAD forecasts real growth in goods and services will exceed almost ten percent in 2021, with overall global economic growth rising to 5.3 percent, marking the highest level in nearly 50 years.
UNCTAD did however highlight that it expects global growth to slow to 3.6 percent in 2022, leaving world income 3.7 percent below its pre-pandemic level, while it estimates a cumulative income loss of US$13 trillion between 2020 and 2022.
Though most major economies achieved a reversion to the mean in both exports and imports by the end of H1 2021, Britain has been left behind predominantly due to its “Brexit” from the European Union (EU) in Q4 2020. Uncertainty over the future trading relationship between the UK and EU created an immense amount of uncertainty for exporters in particular.
“These widening gaps, both domestic and international, are a reminder that underlying conditions, if left in place, will make resilience and growth luxuries enjoyed by fewer and fewer privileged people. Without bolder policies that reflect reinvigorated multilateralism, the post-pandemic recovery will lack equity, and fail to meet the challenges of our time” commented UNCTAD Secretary-General, Rebeca Grynspan.
“The pandemic has created an opportunity to rethink the core principles of international economic governance, a chance that was missed after the GFC. In less than a year, wide-ranging US policy initiatives in the United States have begun to effect concrete change in the case of infrastructure spending and expanded social protection, financed through more progressive taxation. The next logical step is to take this approach to the multilateral level” said UNCTAD’s Globalization and Development Strategies Director, Richard Kozul-Wright,
"The recovery is uneven across geographical, income and sectoral lines. Within advanced economies, the rentier class has experienced an explosion in wealth, while low-earners struggle. The recovery has been extremely uneven, and scars will continue to weigh on the trade performance in the years ahead” UNCTAD stated in the report.
“Weaknesses mostly resulting from post-referendum uncertainties have severely disrupted trade with the European Union. In early 2021, lockdown measures, together with the winding-down of a rush to stockpile products ahead of the end of the Brexit transition period in late 2020, led to a second significant collapse of trade flows in less than 12 months” the report outlines.
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