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Nach 16 Jahren endet die Ära Angela Merkels als Bundeskanzlerin. Aus Sicht des britischen Premier Boris Johnson hinterlasse sie ein "Vermächtnis für Generationen", berichtet der Tagesspiegel, Medienpartner von EURACTIV.

A woman receives a dose of a COVID-19 vaccine at a health clinic in Garowe, Somalia. As scientists continue to investigate the Omicron COVID-19 variant, the World Health Organization (WHO) last week urged countries not to panic but to prepare for its likely spread. Credit: UNICEF/Ismael Taxta

By Alexander Kozul-Wright
GENEVA, Dec 7 2021 (IPS)

On 25 November, news emerged from South Africa of a new COVID-19 variant. It has since been identified as Omicron, a Greek alphabet derivation the World Health Organization (WHO) reserves for virus variants “of concern”.

For now, scientists are still racing to understand Omicron’s virulence. There is, however, growing concern that its high number of mutations make it more transmissible and more resistant to existing vaccines (or previous infections) than other variants.

Currently, these worries are based on preliminary analysis emerging from South Africa, where the new variant was first detected. Further data monitoring will be needed to inform countries about appropriate policy responses. But irrespective of whether Omicron panic is justified, economic shockwaves have run ahead of the disease.

The virus has already sent jitters through financial markets in advanced economies and complicated the policy stance of central bankers in Europe and the USA. In the global South, meanwhile, some regions are likely to be more affected than others. Three key observations underscore where economic risks are the greatest.

The first is a threat of renewed country lockdowns. To date, COVID-19 has tightened the fiscal space available to many developing countries. Recent inflationary pressures have also put paid to further monetary policy loosening.

Lockdowns would be particularly damaging in Latin America, therefore, as macro-financial policies across the continent are approaching an upper-bound.

Although Omicron has not yet been detected in China, its presence there would almost certainly prompt Beijing to double-down on its ‘zero tolerance’ strategy, resulting in local lockdowns and reduced consumption.

If authorities decided to reimpose restrictions comparable to those observed in August 2021, following an outbreak in Nanjing, the toll on growth would be considerable – economists slashed China’s quarterly growth expectations at the time due to city-wide closures.

While other countries lack China’s willingness to choke off economic activity, under-funded health care systems may force developing country governments to impose social distancing to try and limit pressure on hospitals.

Here, countries in Sub-Saharan Africa and South Asia are least well prepared, as vaccine rates remain particularly low (from 1-30 percent).

The second factor relates to trade. Omicron could dampen the recent gains in global trade, which UNCTAD forecasts will increase by 23% in 2021 from the year before, due to the easing of pandemic restrictions and economic stimulus packages.

However, UNCTAD’s forecast did not consider an outbreak of Omicron. A fresh wave of lockdowns would be particularly damaging in East Asia, where intra-industry value chains are deeply connected. With global supply chains still vulnerable, further supply disruptions across China – which accounts for roughly one-fifth of world merchandise exports – would pare back world trade.

Tourism could take a big hit over the coming weeks if governments continue suspending travel routes. Shrinking foreign exchange earnings would be especially hard felt in the Caribbean, the Middle East and North Africa, where tourism makes up a relatively large share of national income, compared to other developing country regions.

The third angle relates to financial market fluctuations. The VIX index, a measure of Wall Street’s expected volatility one month into the future, has risen by 47% since 24 November. Meanwhile, the yield on 10-year US Treasury securities, which move with in line growth and inflation expectations, fell 13% over the same period.

Jitters have been apparent in a broad array of financial market barometers. The prices of developing country currencies and commodities – both considered risky assets – have nosedived over the past two weeks, with oil benchmarks on both sides of the Atlantic down 10-15% since the discovery of Omicron.

A sustained period of falling energy prices would undermine OPEC countries’ net export and fiscal balance positions.

The upshot is that a slump in global risk appetite would undermine developing countries’ growth prospects. What’s more, any shift to higher pandemic spending would lead to a rise in bond yields, causing financial conditions to tighten even further. This would be especially problematic for countries with large external financing costs like Ghana and Turkey.

On the other hand, concerns it may also stall the rebound in advanced economies could delay the normalisation of monetary policy by the US Federal Reserve and the European Central Bank, which would ease the pressure on developing countries to adopt more aggressive monetary tightening.

The COVID-19 crisis continues to expose the disparity in fiscal and monetary firepower available to developed vs. developing economies. And while the severity of Omicron remains in doubt, this latest variant risks further undermining global growth convergence.

Alexander Kozul-Wright is a consultant for the Third World Network (TWN)

 

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Ein Jahr nach den ersten Impfungen gegen Covid-19 am 8. Dezember 2020 hat das regierungsunabhängige Impfbündnis People's Vaccine Alliance wohlhabende Länder zum Umdenken bei ihrer Impfpolitik aufgerufen.

In today's edition of the Capitals, find out more about Ireland receiving the biggest portion of the EU Brexit fund, Hungarian Prime Minister Viktor Orban saying his country is "prepared for battle" as the new German coalition reveals a "pro-immigration, pro-gender, federalist, pro-German Europe agenda”, and so much more.

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Dec 7 2021 (IPS)

Funding for developing countries to address global warming is grossly inadequate. Very little finance is for adaptation to climate change, the urgent need of countries most adversely affected. Also, adaptation needs to be forward-looking rather than only addressing accumulated problems.

Anis Chowdhury

Suicide pact?
Climate change poses an existential threat, especially to poor countries with little means to adapt. Rich countries’ failure to deliver promised financial support has only made things worse. COVID-19 has dealt another knock-out blow, worsened by rich countries’ “health apartheid”.

The COP26 deal was undoubtedly a “historically shameful dereliction of duty” and “nowhere near enough to avoid climate disaster”. Glasgow’s failure shows up lack of real progress and inadequate policy responses. Worse, no significant new resources came with the “Glasgow Suicide Pact”.

The United Nations Conference on Trade and Development (UNCTAD)’s Trade and Development Report 2021 laments rich countries’ unwillingness to address grave challenges facing developing countries. After all, Agenda 2030 for Sustainable Development was in trouble even before COVID-19.

Climate policy responses involve both mitigation and adaptation. Mitigation seeks to reduce greenhouse gas (GHG) emissions through more efficient energy use, and by using renewable energy instead of fossil fuels. Adaptation involves strengthening resilience and protection to minimize adverse effects on human lives.

National adaptation needs get far less international funding than mitigation for the world. Thus, poor countries struggle alone addressing global warming mainly caused by others. Adaptation challenges are also wide-ranging, due to varying country vulnerabilities.

Risky approach to risk
Governments have been advised to reduce vulnerability to shocks by improving data and risk assessment. Most measures to strengthen resilience use conventional financial risk management methods. These seek to better protect existing assets, and to provide temporary financial support when shocks happen.

Jomo Kwame Sundaram

Climate adaptation is thus addressed via disaster risk assessment, early warning systems, improved ecosystem management and better social safety nets. But the approach hardly distinguishes climate change from other risks.

Relying on past experience, the conventional approach is hardly forward-looking in addressing new challenges. Recommended measures tend to deploy scarce resources to address past and current effects of climate change.

Focussing on current vulnerabilities enables adapting to extant climate threats. This may provide some temporary resilience and relief. But it does not prepare for new threats. Thus, the approach ignores future problems, not providing much protection from or reducing vulnerability to emerging threats.

Counting on pricing and other market techniques for climate adaptation risk assessment is also limiting. The approach tends to focus on what is predictable and incremental, rather than on what is more uncertain and systemic.

With its roots in financial risk management, the approach favours returning to some assumed norms of normality and stability. It thus rejects considering new possibilities, including a more dynamic approach to sustainable transformation.

Furthermore, returning to ‘normal’ for many communities implies exploitation and precarity. Preservation and coping are also favoured by the approach. Typically, these are hardly enough to address the complex challenges faced. Worse, they may inadvertently cause maladaptation.

Avoid maladaptation
A transformative approach to climate risk is needed instead. The only lasting solution may be to reduce developing countries’ reliance on climate sensitive activities, such as cattle breeding, through far reaching changes to create more resilient economies.

This requires moving away from de-risking in favour of a more integrated and systemic approach to diversify economies for greater resilience. More diversified economies are more supportive of sustainable development, and much less vulnerable or likely to be disrupted by external shocks.

In recent years, this has been clear from the greater vulnerability of primary export-dependent economies to economic shocks originating elsewhere. But it is also true of climate shocks. Thus, climate adaptation requires a new vision of common goals, instead of merely avoiding risks and worst-case scenarios.

Diversification crucial
Thus, climate adaptation in the global South needs to be addressed through development. Moving from de-risking to diversification requires a developmental state committed to ‘green’ industrial policy – involving investment and technology – to do so.

Diversification involves two cumulative processes working in tandem. First, shifting from primary production to manufacturing and higher value services. Second, moving resources from less to more capital-intensive activities.

Developing countries have to pursue sustainable development, keeping emissions and resource consumption within ecological limits. This requires economic diversification, raising productivity and improving social conditions.

Such new transformation strategies must recognize ecological and climate constraints. Developing country policymakers have limited means to address such challenges. With uneven ‘neo-liberal’ globalization, they are also handicapped by institutional weaknesses, e.g., even in mobilizing domestic resources.

Multilateralism key
Some rich countries – e.g., the UK and Australia – have cut their aid budgets and not deployed their unused Special Drawing Rights to help developing countries. They have done little to encourage private creditors to enable developing countries to invest to develop out of the multiple crises they face.

Thus far, measures for debt relief are very modest and grossly inadequate, “kicking the can down the road”. Deferring debt simply means borrowings are due to be paid later, as compound interest accumulates. Meanwhile, debt burdens continue to grow.

The UNCTAD report warns that measly climate funding is accelerating global warming, undermining prospects for decarbonizing the world. It highlights the need for pro-active multilateralism and support for developing countries to address the climate and pandemic induced crises.

“Global challenges clearly require multilateral responses”. But so far, only the IMF has provided some real relief by cancelling debt service obligations for 28 countries – worth US$727 million – between April 2020 and October 2021.

The end of the first Cold War undermined the felt need for UN-led multilateralism. If US President Biden really seeks to emulate President Roosevelt, he can begin by reviving the UN-led multilateralism FDR envisaged, instead of recklessly pursuing the new Cold War favoured by neo-conservatives in his team.

 

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