The United Nations calls for a united front and improved monetary policy amid stagnant global economic growth

The study warns that the Covid-19 pandemic is exacerbating poverty and inequality, and calls for working together to close the gap in national and intercountry inequality.

“Now is the time to close the gap between domestic and national inequality. If we work together, we can make 2022 a true recovery year for people and the economy as a family. “UN Secretary-General Antonio Guterres said at the time of the announcement.

The 2022 edition of the United Nations World Economic Situation and Outlook (WESP) report, released Thursday, shows what the United Nations Bureau of Economic and Social Affairs predicts after a boom in the world economy, which grew 5.5% in 2021. increase. Its global activity will increase by 4% in 2022 and 3.5% in 2023.

The study points out four main factors for this decline. It is a new wave of Covid-19 infections, ongoing labor market difficulties, prolonged supply chain problems and rising inflationary pressures.

Growth slowed significantly at the end of 2021, especially in China and the United States, due to strong consumer spending and investment recovery, and trade in goods above pre-pandemic levels, despite strong improvements in economic performance over the past year. .. And the European Union points out WESP2022.

This slowdown is partly due to the final stages of economic and fiscal stimulus and major supply chain disruptions.

During a period of “fragile and non-uniform” global recovery, the report calls for “more targeted and coordinated political and financial measures at the national and international levels,” Guterres said. rice field.

The human and economic damage to the pandemic is expected to increase further as the highly infectious Omicron variant of Covid-19 is causing a new wave of infection.

Liu Zhenmin, Director General of the United Nations Department of Economic and Social Affairs, emphasized that a “comprehensive and sustainable” recovery of the world economy “cannot be achieved without a coordinated and sustainable global approach to thwart Covid-19.” .. Includes universal access to vaccines. “

UNCDF photo

Market vendors are using the SafeBoda app to connect vendors and customers during the Covid-19 blockade in Kampala, Uganda.

Challenges that could hinder a promising recovery in Africa

After a 3.8% increase in 2021, overall production in Africa is expected to increase by 4% in 2022. The recovery is underpinned by improved investment rates and significant increases in exports and commodity prices. The latter, which has been hit by falling commodity prices in recent years, provides some financial headroom for African commodity exporters.

However, the economic recovery of tourism-dependent countries is fragile and will be affected by further shocks to overseas travel.

The risk balance remains a downside, as African countries face a highly uncertain external environment. New varieties could lead to a new wave of travel bans, which would undermine tourism and the flow of essentials to Africa.

Imminent monetary policy changes in major economies, including the United States and Europe, face the difficulty of the African government struggling to contain public debt, mobilizing high development spending needs and additional income. At times, it can cause a sudden tightening of financial conditions.

Domestic risks associated with extreme weather events and possible deteriorating security conditions due to climate change also weigh heavily on the outlook for some countries.

Also, most African economies are still on the verge of pandemics, some of which are experiencing the highest waves of infection due to the epidemic of Omicron variants.

Unfortunately, Africa’s population remains the most under-vaccinated in the world (10%). Vaccines, logistics, inaccessibility to infrastructure, and hesitation and maintenance in developed countries have hampered rapid vaccination on the continent with disastrous consequences. For public health and development.

Domestic political instability has also created great tensions among some African countries, disrupting livelihoods throughout the region and curbing investment. Conflicts and anxieties exacerbate existing problems that undermine the economic potential of the continent, such as poverty, unemployment, food insecurity and internally displaced persons.

In Lima, Peru, goods are shipped on foot.

IMF / Ernesto Benavides

In Lima, Peru, goods are shipped on foot.

Labor market has not recovered yet

The study predicts that employment levels will be well below pre-pandemic levels for at least the next two years. She points out that labor force participation in the United States and Europe remains at historically low levels, as many of those who lost their jobs or left the workforce during the pandemic have not yet returned. To do.

“Labor shortages in developed countries are exacerbating supply chain problems and inflationary pressures. At the same time, employment growth in developing countries remains weak amid slow progress in immunization and limited stimulus spending. “The report states.

As a result, employment recovery is expected to be slow in Africa, Latin America, the Caribbean and West Asia. Also, in many countries, the pace of job creation is not enough to make up for past unemployment.

Against the backdrop of such a weak recovery in employment, the number of people in extreme poverty is expected to be well above pre-pandemic levels, and poverty is expected to increase further in the most vulnerable economies.

Remittances from foreign migrant workers to their country of origin are becoming increasingly important to families and the economy as a whole.

IOM / Muse Mohammed

Remittances from foreign migrant workers to their country of origin are becoming increasingly important to families and the economy as a whole.

Increasing inequality, a long-term sequel to Covid-19

The pandemic has severely affected global poverty reduction efforts due to slowing growth and continued unemployment.

Moreover, a full recovery of GDP per capita over the next few years remains difficult for many developing countries. The analysis predicts that Africa, Latin America and the Caribbean will have 5.5% and 4.2% deviations from pre-pandemic projections, respectively.

These sustainable output gaps will exacerbate poverty and inequality and slow the progress of sustainable development and the fight against climate change.

In contrast, per capita GDP in advanced economies is expected to recover almost completely by 2023 compared to pre-pandemic projections.

As a long-term result of the pandemic, higher levels of inequality within and between countries have emerged. In particular, the Covid-19 crisis exacerbates gender inequality, especially in developing countries where women’s employment and labor market participation are significantly reduced.

Support for unpaid domestic work, including childcare, will continue to be an important factor in helping women re-enter the labor market.

Bangladeshi domestic workers have lost their jobs due to the Covid-19 crisis.

WFP / Sayed Asif Mahmud

Bangladeshi domestic workers have lost their jobs due to the Covid-19 crisis.

Outlook for changing macroeconomic policies

The limited financial space and financial constraints faced by many developing countries continue to limit the government’s ability to make pandemic-related spending, including immunization, social protection, health care, and increased employment support. increase.

At the same time, central banks have begun to withdraw economic intervention in the face of crisis against the backdrop of rising inflationary pressures. Although necessary, the rapid withdrawal of monetary stimulus can jeopardize a fragile recovery.

The asset purchase program helped deal with financial difficulties and help recover in the event of a crisis. However, they also increase global financial fragility and deepen economic inequality.

Fiscal and debt conditions are particularly difficult for many low-income developing countries. Many people are on the verge of a debt crisis due to unsustainable external debt burdens, additional borrowing during pandemics, and rising debt repayment costs.

“Financial authorities in developed countries purchase assets and balance them to maintain fiscal stability, keep public debt repayment costs low, ensure debt sustainability and avoid premature fiscal consolidation. We need to accelerate and phase out seat reductions, “said Hamid Rashid, Global Economic Oversight and Lead Author of the Report.