Global Economic Recovery Still ‘Very Vulnerable’ to Shocks, Turbulence, Uncertainty, Say Panellists in Second Committee Briefing
Global Economic Recovery Still ‘Very Vulnerable’ to Shocks, Turbulence, Uncertainty, Say Panellists in Second Committee Briefing
|Department of Public Information • News and Media Division • New York|
Sixty-sixth General Assembly
Global Economic Recovery Still ‘Very Vulnerable’ to Shocks, Turbulence,
Uncertainty, Say Panellists in Second Committee Briefing
World Bank, International Monetary Fund Officials
Focus Discussion on Job Creation, Gender Equality in Context of Development
Global economic recovery remained “very vulnerable to further negative shocks”, a panel of World Bank and International Monetary Fund (IMF) officials told the Second Committee (Financial and Economic) today during a briefing on the outcome of the 2011 annual meetings of the Bretton Woods institutions.
Recent turbulence and uncertainty about future prospects would potentially be very negative for growth in both high-income and developing countries, the panellists warned, calling for swift policy interventions to prevent the global economic crisis from getting worse.
Developing countries were now more vulnerable than they had been in pre-crisis 2008, they said, adding that volatile commodity prices and pressures on food security also remained enormous challenges. Since the core of the crisis was to be found in the developed economies, developed markets should play a part in coming up with a solution.
Emphasizing that job creation and gender equality were instrumental in sustaining the global economy, the panellists said employment was vital in translating growth into lasting poverty reduction; meanwhile, gender equality was the right and smart policy to pursue economically.
Thomas Stelzer, Assistant Secretary-General for Policy Coordination and Inter-Agency Affairs in the Department of Economic and Social Affairs, moderated the briefing. It also featured presentations by: Jorge Familiar Calderón, Vice President and Corporate Secretary of the World Bank Group, on the meeting of Development Committee; Elliott C. Harris, Special Representative of IMF to the United Nations, on the meeting of the International Monetary and Financial Committee; Sudarshan Gooptu, Sector Manager in the Economic Policy and Debt Department of the World Bank Group’s Poverty Reduction Economic Management Network, on the world economic outlook; and Carolina Sanchez, Senior Economist with the World Bank Group, on the 2012 World Development Report: Gender Equality and Development.
Mr. Gooptu said the vulnerability of developing countries may be hidden, but increased uncertainty and shaken confidence would dampen investment and spending. There had been a change in perceptions of recent growth performance, including date revision for high-income countries as a result of weaker-than-anticipated second quarter results. Third quarter gross flows to developing countries were down to 64 per cent and 52 per cent from the corresponding periods in 2009 and 2010, respectively, and were having a substantial effect on the economic growth of developing countries.
Burdened by debt, he said, developed economies were at a standstill in their own growth and in ability to finance development in poor countries. The global environment had become more precarious and the fundamentals in developing countries remained strong, but contagion was generating potentially strong “headwinds”. “Market jitters” had resulted in large-scale sell-offs and, since 31 July, developing markets had fallen by 19.4 per cent and high-income ones by 12.8 per cent. Contagion in Europe could result in an involuntary default, with serious consequences for global economy, he warned. Meanwhile, local food prices were still rising in many countries, most notably those in the Horn of Africa. Grain stocks, especially maize, had recovered somewhat, but remained tight, posing a risk of further price spikes.
He went on to say that the World Development Report on Jobs 2013 would focus on how the global financial crisis had resulted in massive job losses in both emerging and industrialized countries. Increasing long-term unemployment in the latter raised the spectre of a jobless recovery, while a robust comeback in the former could not hide workers’ vulnerability to shocks, he said, noting that the “Arab Spring” had highlighted the discontent among educated youth whose employment opportunities had fallen short of their expectations.
Ms. Sanchez outlined areas in which women had made progress in providing human capital, gaining access to resources and increasing their voice in terms of decision-making, which she called “agency”. Worldwide university enrolment of women had risen seven-fold compared to only four-fold for men, with women comprising 51 per cent of the world’s tertiary students. Enrolment gaps had closed on all levels, she said. Still, 35 million women were out of school, especially in sub-Saharan Africa. While higher female life expectancy meant that women were outliving men in almost every country, problems rooted in lack of access to resources meant that poor sanitation caused more female deaths in infancy, she noted. Lack of access to maternal health services or poor-quality service meant they were dying in their most productive years.
Pointing out that 500 million women had joined the global labour force, with women holding four out of every 10 jobs, she said there were marked differences in the work they actually did. Female farmers cultivated smaller plots and female entrepreneurs had less access to credit than men. That shortcoming reduced female productivity against that of men, she said. In terms of political participation, all but six countries had now ratified the Convention on the Elimination of All Forms of Discrimination against Women, but only 19 per cent of parliamentarians worldwide were female.
Emphasizing that inequality had a high economic cost, she said equal access to resources for women was likely to boost world output by between 2 and 4 per cent. There was global evidence that when women controlled resources and decision-making, their children were healthier and would enjoy better access to opportunities, including higher wages, in the future. Increased female decision-making led to policy shifts and better development outcomes, she said, stressing that the cost in productivity of the failure to ensure greater involvement of women amounted to “leaving money sitting on the table”.
Mr. Familiar Calderón said that, while jobs and gender equality had been the two main themes during the Development Committee meeting, there had also been much discussion of how developing countries were performing in the face of the prevailing global economic circumstances, including turbulent and volatile markets. The crisis had reduced their capacity to withstand further shocks, he said, adding that delegates had welcomed the World Bank Group’s cooperation with member Governments and other partners on a comprehensive approach to job creation for both women and men.
Delegates had also warmly welcomed the World Bank Group’s report on gender equality and development, identifying with its clear message that gender equality was “smart economics” and essential to poverty reduction, he continued. Members had agreed that gender equality required specific actions by Governments, the private sector and development partners. They had endorsed the World Bank Group’s recommendations and urged it to further integrate gender equality into its operations and reporting, he said, adding that they had also urged it to focus on addressing the social and economic consequences of the current transition in the Middle East and North Africa.
He said delegates had made forceful statements on the Horn of Africa, underscoring that an emergency of such magnitude required swift coordination and international action to save lives and livelihoods. There was a need to build national capacity, increase resilience, reduce further risks and create longer-term solutions. Stressing the need to keep agriculture and food security high on the agenda, members had also called on the World Bank Group to continue to tackle longer-term challenges, including climate change and investment in infrastructure.
Mr. Harris called stressed the need for said policy interventions to prevent the global economic situation from getting worse, noting that the crisis of confidence arose from political uncertainty, which exacerbated financial instability. That was reflected in the current global economic situation, which posed two main risks: the global paradox of thrift, where there was too much saving and consolidation; and the risk of policy inaction if steps were not taken fast enough. The International Monetary and Financial Committee had identified four core dangers: rising risk associated with sovereign debt; fragility of current economic conditions; weakening of economic growth; and unemployment.
Recalling that the core of the crisis lay with the advanced economies, he said they must be at the centre of the search for a solution. Banks should have adequate sources of financing and housing markets must recover, he emphasized. Major industrial economies must implement structural reform to boost growth and create jobs. The key to that effort was to increase European financial stability by, among other measures, containing and building up resilience in capital flows and ensuring that abrupt withdraws would not cause instability and disruptions. IMF would have a key role to play in that regard, including through surveillance, enhancing the global financial safety net and setting up early-assessment financing tools, ensuring adequate policy reform and continuing efforts to manage financing flows.
In an ensuing discussion delegates asked about Bretton Woods policies aimed specifically at least developed and middle-income countries, with Nepal’s representative asking what specific measures would target the former and what other targeted support measures were available to them. What specific policy- and fiscal-support measures were planned for least developed countries?
Turkey’s delegate, meanwhile, asked about the World Bank’s strategy for middle-income countries, specifically its plans to facilitate access to finance, trade and capital, as well as increased access to innovative financing tools for commercial lending. He also asked about the link between growth and job creation, saying there was a dilemma over pursuing productivity gains by using high technology over more labour-intensive, employment-building methods. He sought advice on providing employment when technology was replacing employees.
Mr. Harris contested the idea that least developed countries were at a disadvantage for lacking their own category, pointing out that each enjoyed access to all the concessionary facilities of both the World Bank and IMF. In terms of political advice, he said vulnerability exercises for low-income countries had been introduced to address the most likely shocks, identifying their impacts and how best to absorb them, while ensuring that the necessary support would be ready in time to do so. Technical assistance facilitated enabled better policies and implementation, he added.
Mr. Familiar Calderón said the International Development Association Crisis Response Window gave the World Bank the tools needed to respond quickly to crises in least developed countries. Furthermore, the World Bank and IMF helped businesses move to frontier markets and more complex environments, which were the ones requiring most support. The International Finance Corporation (IFC) had contributed to the International Development Association (IDA), giving a complete World Bank Group approach to low-income countries.
Mr. Familiar Calderón, discussing the World Bank’s middle-income country strategy, said it was under review. Consultations were expected to focus on innovative financing tools and mechanisms, and on preparing the World Bank to meet clients’ needs, he said.
Mr. Goopta, meanwhile, responding to Turkey’s question on growth performance and job creation, said Member States should work with international organizations to find innovative ways to create jobs while promoting growth. They should focus on labour-intensive sectors, he added.
On gender equality, Germany’s representative sought clarification about when the World Development Report 2012 on Gender and Development would become operational and its implications for the Bank’s work.
Ms. Sanchez replied that that the report was not intended as an operational document, but its documentation and analysis promoted discussion of its implications. The Bank was not “starting from zero” and had already worked extensively on the subject, she said. The report was the result of a consensus that the issue was interesting and worth discussing, and it contained a Gender Action Plan discussing how to how to make gender a bigger part of the Bank’s work.
Also participating in the discussion were representatives of Portugal, New Zealand, Norway, France, Denmark, Benin, Gambia, Germany, Bangladesh and the Netherlands.
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