The human, economic and social effects of the COVID-19 pandemic have been undeniably brutal. Particularly in emerging and developing countries. Governments are still facing very complex challenges. Fortunately, the signs of a stronger economic rebound are now in sight.
Just a few weeks ago, our latest Economic Outlook projected a 5.6% global GDP growth for 2021 - nearly 1.5 percentage points higher than what we expected in December 2020. Global industrial production has also strengthened; and global merchandise trade has been growing since May 2020, and is now above its pre-pandemic levels.
Some large emerging economies, such as China, India and Turkey, have seen relatively fast rebounds, thanks to fiscal measures and the recovery of the manufacturing and construction sectors.
However, uncertainty remains very high. These positive projections will depend on the continued production and deployment of the vaccines. An uneven rollout might not be able to stop new and more powerful mutations of the virus. This could mean a weaker recovery, larger job losses and more business failures.
The vaccine situation is even more challenging in emerging markets. The total number of vaccination doses administered in Africa is just 1.2 per 100 people – ten times less than the world average of 12.5 per 100 people. Asia and South America have administered 9.6 and 15 vaccination doses per 100 people, but the numbers are still too low to cope with the spread of the virus.
Moreover, Africa, Latin America and India – as we have seen this past week – are facing a resurgence of cases, a shortage of vaccines and limited fiscal space for policy support.
Another particular risk for emerging markets is that rising US bond yields trigger a reversal of capital flows and sharp currency depreciations that would add to existing pressures on debt and on inflation, due to rising commodity prices.
Under these challenging circumstances, it is clear that we must continue to fight and contain the virus, and support the health systems, the most vulnerable and the hardest hit businesses. But we cannot lose sight of the important, longer-term issues. We need to consider what more we can do to reimagine emerging economies in a post-COVID world.
Allow me to share four main recommendations.
First, we need to ensure emerging economies create the necessary fiscal space and use it for as long as necessary to build forward better. The issuance of IMF Special Drawing Rights is welcome. Yet these efforts must go hand-in-hand with maintaining open and transparent markets and building capacities to foster innovation and facilitate the reallocation of resources into new sources of growth.
Second, we must focus on a just transition towards a low-carbon economy. Key issues at stake are climate change and inefficient resource allocation, as well as access to technology and financing for emerging and developing economies.
Third, we need to tackle inequalities by strengthening skills, investing in education systems and increasing the coverage of health and social protection systems, including for informal workers. We also need to promote greater integration of women and young people in quality jobs and to forge a new social pact to better share the benefits of growth.
And last, but not least, we need to strengthen inclusive multilateral co-operation. This includes the conclusion of the agreement on taxing the digital economy. And more broadly, we need a New Deal for Development, based on solidarity and co-responsibility, to spur investment in global public goods and place resilience and inclusion at the core of policy-making.
The OECD is working to support emerging economies through the crisis. Since the outbreak of the pandemic, have produced more than 188 reports to help tackle the crisis, which are available in our digital hub.
Emerging markets are essential to the fabric of the global economy and their recovery will be crucial to overcome the crisis. None of us will reach a fully sustainable, resilient and green economy unless all countries and regions are on board. This is why the OECD is fully committed to supporting international efforts for the recovery. We will continue to engage with emerging and developing economies, including through our Development Centre where many of these countries are members, and provide comparative analyses, data and recommendations to promote better policies for better lives in a world post-COVID-19.
By Angel Gurría