Quake-proofing the global economy
The world of finance started February 2018 with a massive tremor. The first shock sent the US stocks tumbling, with Dow Jones posting its biggest single-day drop in history on 5th February. The shock waves travelled around the world, sending stocks in Europe and Asia into a tailspin. While the disruption was short-lived, ugly visions of the earthquake-level shocks of the recent financial crisis reared their heads as risk-averse investors scrambled to understand what had hit them.
We now know that the shock was sparked by higher-than-expected wage growth in the US. Higher wages usually spell inflation. The return of normal inflation rates – after a period when deflation was a much greater concern – will prompt central banks to raise interest rates more rapidly.
In December last year, UN DESA’s World Economic Situation and Prospects 2018 report cautioned that the tightening of purse-strings by major central banks might cause sudden spikes in market volatility. But even having that knowledge, could countries have shielded themselves against these and other risks beyond their control?
The March issue of the World Economic Situation and Prospects Monthly Briefing analyses some tools that could help emerging economies brave the next such “tremor.” Chief among them are macroprudential policies – named for their objective of containing systemic risks and protecting the financial system as a whole.
These policies may soon be put to the test, as years of pumping cash into the global economy and low borrowing costs have allowed financial vulnerabilities to build up, including high levels of debt. In 2017, non-financial corporate debt in emerging economies exceeded 100 per cent of their gross domestic product (GDP).
As the US and other major economies normalize their monetary policies, emerging economies should prepare for a period of potentially more volatile and lower capital flows. For many of them, effective use of macroprudential tools could soften the blow and allow them even more policy space in the future. Be it a minor tremor or a huge shock, such quake-proofing is crucial, if the momentum of the global economy is to be maintained.
The Monthly Briefing on the World Economic Situation and Prospects is available at http://bit.ly/wespbrief
Photo: Jonathan Ernst / World Bank
Action continues to #SaveOurOcean
When the international community came together at the Ocean Conference in June 2017 to begin reversing the decline of the ocean’s health, many Member States and actors stressed the need for effective Conference follow-up to ensure that all nations are working together to meet their Sustainable Development Goal 14 implementation obligations and that we also follow up on the 1,400 voluntary commitments made.
To follow-up on these commitments and their realization, to catalyze and generate new voluntary commitments, and to facilitate collaboration and networking amongst different actors in support of SDG 14, the United Nations have launched nine thematic multi-stakeholder Communities of Ocean Action.
Each community is coordinated by focal points who work together with the United Nations Secretary-General’s Special Envoy for the Ocean, Mr. Peter Thomson, and the UN DESA to carry out its activities.
Supporting the work of the Communities, UN DESA has revamped The Ocean Conference Registry of Voluntary Commitments, which now provides a platform for all stakeholders to report on their commitments, and for sharing of knowledge and best practices within and across the nine Communities of Ocean Action.
The nine Communities of Ocean Action are:
1. Coral reefs
2. Implementation of international law as reflected in United Nations Convention on the Law of the Sea
4. Marine and coastal ecosystems management
5. Marine pollution
6. Ocean acidification
7. Scientific knowledge, research capacity development and transfer of marine technology
8. Sustainable blue economy
9. Sustainable fisheries
For more information: Communities of Ocean Action for supporting implementation of SDG 14
Photo: 2016 World Oceans Day Oceanic Photo Competition, Above Water Seascapes Category – Winner: Mathieu Foulquié, France
Taxation and the Sustainable Development Goals
The First Global Conference of the Platform for Collaboration on Tax, held in mid-February, took forward the dialogue on the role of tax in achieving the Sustainable Development Goals (SDGs) and allowed participants to exchange country insights on challenges and experiences in using tax systems to support sustainable development.
The Platform for Collaboration on Tax – an inter-agency partnership of the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations and the World Bank welcomed more than 500 participants from 110 developed and developing countries to its first global conference, including ministers of finance, commissioners of tax authorities and civil society and private sector representatives.
The Platform Partners issued a Statement at the Closing of the Conference, which identifies a number of actions they intend to pursue together:
- Scaling up their work to support developing countries in addressing tax transparency and base erosion and profit shifting, including on treaties. To this end, the Platform will continue its work on toolkits to help developing countries address challenges in international taxation and will respond to additional concerns raised by countries with guidance and recommendations.
- Analysing and reporting on the spillovers and opportunities from changes in the international tax environment on and for developing countries. The Platform Partners will further increase their coordination and cooperation to provide coherent and consistent international tax policy advice. They also commit to supporting enhanced participation of developing countries in international tax policy discussions and institutions, and facilitating dynamic interaction between standard setting and capacity building.
- Supporting countries in reforming their tax systems through country-led Medium Term Revenue Strategies (MTRS) – comprehensive reform plans reflecting country circumstances and state of institutional capacity.
- Launching a multi-year Tax and SDGs Program, which will include components on taxation and health, education, gender, inequality, environment and infrastructure – to address a more comprehensive set of issues that are critical to the attainment of the SDGs.
- Continuing to promote partnerships and stakeholder engagement. To this end, the Platform will establish a regular, structured, inclusive and broad-based dialogue with the full range of stakeholders, including governments, regional tax organizations, donor agencies, civil society and the business sector.