The recovery from the Covid-19 pandemic remains “hobbled” and the world economy could sustain as much as $5.3 trillion in losses over the next five years if the vaccine divide is not reduced, according to the International Monetary Fund.
“We are unable to walk forward properly — it is like walking with stones in our shoes,” the IMF's managing director Kristalina Georgieva said in her curtain-raiser speech on Tuesday before the fund's annual meetings with the World Bank in Washington next week.
“Risks and obstacles to a balanced global recovery have become even more pronounced: the stones in our shoes have become more painful.”
In July, the fund projected the global economy would grow 6 per cent this year, but divergence in vaccination among countries is producing uneven recoveries, and rising inflation and high debt levels have led the fund to adjust its forecast, with growth now expected “to moderate slightly this year”, Ms Georgieva said.
Economic output in advanced economies like the US, China and Europe is projected to return to pre-pandemic trends by 2022, but most emerging and developing countries will take many more years to recover, she said.
“In many other countries, growth continues to worsen, hampered by low access to vaccines and constrained policy response, especially in some low-income nations. And this divergence in economic fortunes is becoming more persistent,” Ms Georgieva said.
The delayed recovery will make it “more difficult to avoid long-term economic scarring” from job losses that have affected young people, women and informal workers the hardest.
Headline inflation rates have increased rapidly in a number of countries with some more affected than others, according to the fund.
While the IMF expects price pressures to subside in most countries in 2022, some emerging and developing economies will continue to see price pressures.
A particular concern with inflation is the rise in global food prices, which have surged by more than 30 per cent over the past year, Ms Georgieva said.
“Together with rises in energy prices, this is putting further pressure on poorer families,” she said. “More generally, inflation prospects remain highly uncertain. A more sustained increase in inflation expectations could cause a rapid rise in interest rates, and a sharp tightening of financial conditions. This would pose a particular challenge for emerging and developing economies with high debt levels.”
Global public debt has increased to almost 100 per cent of gross domestic product as governments have rolled out trillions of dollars in fiscal stimulus to cushion the impact of the pandemic on their economies, according to the IMF.
“Many started the pandemic with very little fiscal firepower. Now they have even less room in their budgets — and very limited ability to issue new debt at favourable terms. In short, they face tough times and are caught on the wrong side of the fiscal financing divide,” Ms Georgieva said.
Looking ahead, overcoming the challenges requires greater vaccination, calibration of government policies and speeding up necessary reforms, she said.
Richer nations must deliver vaccines
Ms Georgieva called for a sharp increase in the delivery of vaccine doses to the developing world.
“Richer nations must deliver on their donation pledges immediately. We must boost vaccine production and distribution capabilities; and remove trade restrictions on medical materials,” she said.
“In addition to vaccines, we must also close a $20 billion gap in grant financing for testing, tracing and therapeutics. If we don’t, large parts of the world will remain unvaccinated and the human tragedy will continue. That would hold the recovery back. We could see global GDP losses rise to $5.3tn over the next five years.”
With rising inflation risks, central banks should be prepared to act quickly if the recovery strengthens faster than expected, she added.
“Calibrating policies also means carefully tailoring fiscal measures. The longer the pandemic persists, the tighter the fiscal constraints will become, forcing difficult trade-offs between lifelines to people, near-term support to the economy and advancing long-term structural goals,” Ms Georgieva said.
Climate change
The fund chief called on governments to accelerate the reforms needed to transform economies by focusing on climate change, technological change and inclusion.
The upside of succeeding towards a greener economy and focusing on renewable energy, new electricity networks, energy efficiency and low carbon mobility could raise global GDP by about 2 per cent this decade and create 30 million new jobs, according to fund estimates.
Ms Georgieva reiterated previous calls for closer multilateral co-operation to overcome the challenges the world faces.
The fund has provided $118bn in new financing to 87 countries and debt service relief to poor states.
“We have all learned so much from the past 18 months,” Ms Georgieva said. “This extraordinary crisis has divided us but it has also armed us with knowledge that allows us to think differently about our future.”
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New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
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Zayed Sustainability Prize
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Babumoshai Bandookbaaz
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Three stars
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Specs
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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Temple numbers
Expected completion: 2022
Height: 24 meters
Ground floor banquet hall: 370 square metres to accommodate about 750 people
Ground floor multipurpose hall: 92 square metres for up to 200 people
First floor main Prayer Hall: 465 square metres to hold 1,500 people at a time
First floor terrace areas: 2,30 square metres
Temple will be spread over 6,900 square metres
Structure includes two basements, ground and first floor
UAE currency: the story behind the money in your pockets
The specs: 2018 Opel Mokka X
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Fuel economy, combined: 6.5L / 100km
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The panel’s 2017 report followed a trail to West Africa where large sums of cash and gold were hidden by Abdullah Al Senussi, Qaddafi’s former intelligence chief, in 2011.
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The five pillars of Islam
The five pillars of Islam
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The five pillars of Islam
1. Fasting
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