The world’s poorest countries will be left with $ 12tn (£ 8.7tn) disadvantaged in 2025 amid a weaker economic recovery from Covid-19 as wealthy nations restrict their access to vaccines, the UN has warned.
In its annual Trade and Development Report, the United Nations Conference on Trade and Development (Unctad) said low-income countries had been hit harder by the pandemic than during the 2008 financial crisis, increasing their debt and increasing pressure on their public finances.
The UN economic arm said there was a growing risk that low-income developing countries would lag further behind due to limited progress in deploying coronavirus vaccines, despite Western leaders promising to “build back better” from the crisis.
“So far, it seems that the world economy is building up separately,” the report said.
Unctad said the global economy is bouncing back strongly this year thanks to the continuation of financial support measures initiated in 2020 from governments around the world, as well as rapid advances in vaccines in advanced economies. It predicted that global growth would hit 5.3% this year, the fastest in nearly five decades, after falling by 3.5% in 2020.
However, the UN agency warned that it would take several years for the world economy to recover the losses caused by the covid-19 shock as the growth rate slows from a first rapid rebound in 2021 and as governments and central banks come under pressure to cut emergency aid.
Global growth is expected to decline to 3.6% in 2022, while an annual average growth rate of 3.5% from 2023 onwards means that global output will only return to its trend from 2016-19 in 2030.
Warning that politicians in advanced economies had not yet woken up to the magnitude of the shock to developing countries or its persistence, the Geneva-based agency said that concerted action among rich countries was needed to provide debt relief to poorer countries. In some cases, debt consolidation was necessary to “avoid another lost decade of development,” it said.
Advanced economies’ reluctance to follow the US lead in granting waiver from vaccine patents was also a “worrying sign” of a disparate Western response to a crisis that would continue to affect the world economy without action, Unctad said. It warned that the total cost of delayed vaccinations could be up to $ 2.3 tt by 2025, with developing countries having to bear the bulk of the cost.
The agency pointed out that Western governments had departed from 40 years of neoliberal dogma by intervening heavily in their economies to protect lives and jobs during the pandemic. It said the return to an era of weaker levels of state aid, watered-down labor market rules and unequal trade and investment agreements would jeopardize international development.
The report said the pandemic response in developed countries had activated a resurgent state and suspended restrictions on public finances, but international rules and practices had locked developing countries into pre-pandemic reactions and a semi-permanent state of economic stress.
“Over the last 40 years, we have witnessed the emergence of a complete interest rate economy with global reach and debt dependence, both public and private,” said Richard Kozul-Wright, Director of Unctad’s Globalization and Development Strategies Department. “Not only that, inequality has become a feature of our globalized world, while concentrated private economic power destroys the public authority to respond.”