UNCTAD Press conference 16 March 2021

Professor, without any delay.

Richard, you have the floor.

[Other language spoken]

Over to you.

Thank you, Catherine, and good afternoon to everybody.

OK, this is essentially an update on particularly the TDR, but to some extent also a reflection on the last year of the COVID crisis, which we still have not really exited.

So there's a, it's a, it does, I think try and do three things.

It looks at what happened last year, what we got wrong and what lessons we've learnt.

It's secondly, it's how we think the recovery will evolve over this year, the Biden bounce and possible slippages that could that could happen.

And thirdly, what is over the immediate horizon in terms of prospects, particularly for developing and emerging economies?

We call 2020 annus horribilis and it might have been more horribilis than it actually turned out to be, largely because there was significant government intervention, particularly in advanced economies, in response, in response to the crisis and the lockdown.

We give ourselves probably AB Plus in terms of our forecast, we weren't as alarmist as some some others were over the course of the summer.

Overall growth we expect to be around 3.9% for 2020.

We forecast 4.3% in the trade and development report of of last year.

So it's a negative obviously 4.3% and there are a number of reasons for that.

East Asia was probably somewhat more positive than we expected.

China certainly exceeded our expectations and there were regional trade links that had positive ramifications for other parts of the of the region.

And it was the only region with positive growth in 2020.

And the US did better than we expected, strong intervention and the CARES Act was a relatively important stimulus or relief package that that that was passed last year.

Financial markets were much stronger than than many people expected, including ourselves.

And there were probably some favourable terms of trade effects in the United States.

People forget that there is commodities are still an important part of US exports and commodity prices improved in the second-half of the year.

Latin America although it was the worst hit region in 2020 did slightly better than we expected largely I think because of Brazil and Nelson might want to say something about something about that and they were improved.

There was more improvement than we expected in in countries like Turkey and Russia.

Russia obviously again because of the improvement in oil prices in the second-half of the year.

The kind of lessons that we can immediately take I think from 2020 is that financial volatility remains a an endemic feature of the contemporary global economy.

And that's both positive and negative.

The bounds we were very worried in in March and April of last year about the vicious cycle that was engulfing many emerging economies as capital left, as capital flight was a clearly visible and very strong influence in in in the immediate months following the pandemic.

But there was a bounce back.

There was a bounce back in commodity prices, there was a bounce back in capital flows, there was a bounce back in asset markets and that obviously varied tremendously across emerging economies.

But that certainly had a, a more positive impact on some of some of the emerging economies than than we anticipated.

The role of the Federal Reserve of course, as a, as a de facto lender of last resort was a very important factor in the buoyancy of, of, of the relative buoyancy of financial flows in the second-half of the year.

A second lesson that we've obviously learned from this is that fiscal space matters a lot and is a big difference still between developed and developing countries in terms of the, of the, of the fiscal firepower that they can mobilise in response to the kind of shock that we've seen.

And, and public debt servicing remains a much greater burden on emerging economies than it does on, on advanced, advanced economies in terms of interest payments and, and the kind of bond, bond contracts that they can draw up.

And a third, I think fact, fact that we learn particularly from last year, although we've been saying it for some time, is that multilateralism has essentially lost its mojo.

Coordination through the G20 was not particularly strong.

The initiatives around debt, the debt suspension, the debt servicing suspension initiative was, was was extremely weak.

There was no SDR issue and last year, which we thought was a necessary part of a multilateral response and the vaccine, the vaccine roll out by the by the end of of 2020, it was clearly apparent that the there was a serious weaknesses in the health architecture to deal with that in a fair and, and and equal fashion.

In terms of 2021, we've raised our forecast from from 4.1 to 4.7% and that's and, and as you can see from table one in the report, the we've raised our forecasts across the board for the, for the global economy and its, its constituent parts.

A lot of that of course has to do with the United States.

The, the, the, the recently passed stimulus package is a significant package on any criteria and that will have a, a strong positive effect along with the successful vaccine roll out.

On the on the US economy, we anticipate a 1.9% increase above what we anticipated in terms of the US economy.

What we're less sure about is just how much the Biden bounce will make other countries jump this year.

We're probably not as optimistic about huge spillovers from that to the rest of the world as we've seen with some forecasts such as the as the OECD.

And we are worried to some extent that there is very little investment spending in the current US package.

There is some on education, there's some on health obviously.

But the talk is that the investment component of the US stimulus will be pushed into the the second-half of next year.

And politics in the US make that exactly difficult to to, to ascertain what might be in any sort of investment package in the US That said, compared with other advanced economies, the current US, US administration is, is responding to the crisis in in a very serious way that that has not been picked up by the European Union and it has not been picked up by Japan.

We have the figures on what we estimate to be this, the fiscal push in, in other advanced economies in the press release and they are quite clearly inferior to the the initiative from the from the current US administration.

And that's got to be a concern.

I think in terms of the overall health of the global economy, including the impact on on emerging on emerging economies in other developing countries.

We do insist again that we're not looking at AV shaped recovery in the global economy.

The current on our current estimate, we still see the global economy over $10 trillion short of where it should have been at the end of 2021 if the trend from before the crisis had continued.

And that is a very large financial hole in the global economy and a lot of that burden is being borne by developing and and emerging economies.

We also worry about potential slippages this year.

Growth patterns as we look at them across the regions have not really broken with pre pandemic patterns.

And we were very insistent at the at the in 2019 that the growth patterns in the global economy were not sustainable and were themselves highly fragile.

The continued dependence of East Asia and the European on on export LED growth, lopsided 1 sided export LED growth.

The ongoing the ongoing dependence of US growth on consumer spending and buoyant financial markets and the assistance in much of Latin America and Africa on on commodity markets and capital inflows is not a very balanced pattern of growth for the global economy.

And that raises a lot of concerns for us about the sustainability and the resilience of of the growth path that we are currently on coming out of the coming out of the crisis.

Secondly, there are, there are certainly still inflationary Hawks hovering above the recovery.

We've heard them already in the United States.

[Other language spoken]

We don't see any evidence to support those concerns, but the worry is that if they do take hold, including in financial markets, then the resort to austerity and the need to keep costs down and signing up free trade agreements is the way to get out of this crisis in a sustained way will likely resurface.

And as we've said endlessly in the Trade and Development report, these are not policies that will provide a strong, robust, inclusive recovery in the global economy.

And finally, we still worry a lot about the disconnect between financial markets and the real economy, the, the spectacular bounce back of some financial markets last year.

There is something that that that I'm sure you're all aware of and there are potential surprises when you see the kind of bubbling that, that, that I think is already present in, in asset markets in, in parts of the in parts of the global economy.

So there are potential, even though we are relatively optimistic about the scale of the of growth, the size of growth next year, there are certainly potential slippages that we need to be aware of and we are complacency is not the right attitude to take when it comes to to the health of the global economy in 2021.

Finally, looking ahead in terms of what might be around the corner beyond this year, I mean we won last in the trade and development last year of the possibility of a lost decade if, if the, if the policy, if the wrong policy turns are are taken particularly for developing countries and emerging and emerging markets.

And I think that concern remains partly for the reasons that I've, I've just said, partly because many developing countries are even more burdened with debt than they were in, in 20 in, in 2019 when we when we started to worry about the, the coming decade.

And and that's an ongoing concern that UNCAS has expressed over the years.

And, and we have and we're more concerned I think today than we were at two or three years ago.

We've seen an increase in market concentration over the period after the global financial crisis.

We know that's true in financial markets and we know it's certainly true with the digital economy.

And we continue to worry about that.

If anything, that may have worsened as a consequence of of COVID-19.

It's bad for income distribution, it's bad for investment and it's bad for a more resilient future.

So the need to look at the dominant position of large international corporations in markets remains a ****** to a healthy global economy.

And of course, inequality has worsened significantly as a consequence of COVID-19.

A lot of people and we, we, we talked about it ourselves in the last in last year's report, the possibility of AK shaped recovery with the top 1015% doing well even during the pandemic with a lot of the bottom 8090% in a much more precarious situation than they than than they were as a consequence of lock downs and and other responses.

And, and we, we remain concerned about that kind of inequality and not only in advanced economies either, but I think in both advanced and, and developing countries, it leads to breakdowns of trust, it leads to political instability.

And, and again, it's not the basis on which a more resilient future can be, can be built.

And, and you know, as I, as I mentioned earlier, one of the lessons we, we, we have taken is the weaknesses in the multilateral system that have been exposed by COVID-19.

It's a system that is still overly enamoured with markets and to detach from the challenges of structural transformation of the kind that are embedded in the Sustainable Development Goals and the Agenda 2030.

[Other language spoken]

The vaccine issue I've already mentioned and this is not just an issue about access to pharmaceuticals, it's an issue about it's an issues about intellectual property rights and technology transfer and the damage that they can pose particularly for developing countries.

There are issues that we have a box in this, in this update on the issue of food security and rising food prices, which are troubling many policy makers in developing countries.

And that's not just about rising prices, but it's also about corporate dominance of global food chains.

The debt problem, as I mentioned is a big problem and that's as much about private creditors as it is about public debt and the power of private creditors to dictate policies on on debt relief and debt restructuring.

I think, I think here at least we do want to give a shout out to Janet Yellen.

I think unlike the previous administration, it looks like the the US administration will be backing a large SDR issue, something in the order of $500 billion come at the either of the G20 meeting that was coming up or at the IMF meetings in in April.

And that's a welcome move.

We don't think it's enough.

We argue that it should be larger than that, but it's an important shift in American policy when it comes to the multilateral system that that we would certainly endorse.

And of course there is the ongoing problem that we've again talked about a lot when it comes to looking ahead and the long term prospects about a persistent weakness in the investment climate in a world of footloose capital and and hyper globalised markets.

And that remains a real concern that we have looking at long term in terms of in terms of beyond the recovery to the kind of growth path that is is taking shape for the decade.

So we are, you know, we are optimistic about this year, but we have real serious concerns about the underlying structure of the global economy that can pose all kinds of problems, particularly for developing countries.

[Other language spoken]

Very much.

We're not there yet.

Nelson, you have the floor.

Can we unmute Nelson Baputa, yes, over to you.

[Other language spoken]

Well, good morning or good afternoon to everybody.

Just to compliment Richard Richer's remarks, I will point out that as you can see in the in the press release for the whole world economy, UKTAD projects that GDP will recover this year is slightly above what it was before the crisis.

But still, if we consider what the world economy was growing before the pandemic, there's, there's, there's going to be a 5% gap in 2021, meaning that even we, we with the current recovery pulled most by China and the US, the world economy will still be 5% below the level that it will have had if there were no, no pandemic.

So this means that the crisis is still very serious.

The recovery is not over.

We still need relief policies in many areas of the world.

And we also need reconstruction policies.

And this is where there's a big difference between advanced and developing economies.

Developing economies do not have enough policy space, fiscal, monetary, exchange rate, resources to take the appropriate actions to protect their population at the same time and at the same time stimulate the economy to recover income and employment faster.

The pandemic is still being fought in many areas of the world and help is needed for developing economies.

This help concentrates at least in three main areas.

First, vaccination.

This includes 8 rich countries helping poor countries in vaccinating their their people, but also some agreement or a waiver on property rights to accelerate the production of vaccines in the developing world.

There is production capability in many countries to accelerate the production of vaccines, provided some agreement is reached on intellectual properties or even if some extra extraordinary temporary agreement makes it possible to produce vaccines faster.

In second place, that relief, as Richard pointed out, there were some actions.

The recent signal from the US to approve the SDR emission is positive.

But still in more is needed especially to low income countries.

There the more can be done in terms of debt relief and refinancing.

The G20 proposed a suspension of that service in the short run, but that is still is much lower than what is needed.

And in the report that points out that that should be expanded in 3rd place, the recovery in the developing ward requires the recovery in the advanced world.

So if the developed, developed world adopts proper policies, their expansion will spill over to the rest of the world and will benefit all.

And what we see as of now, we see some initiatives in that direction in China and clearly in the US, but we don't see that very clearly in Europe for many reasons.

So there's still more can be done from the from advanced economies to recover their own economies to generating common employment for their own population and that will benefit the whole world.

So there's still room for more proactive action in the advance of the world, more coordinated actions.

So far we don't see that in a coordinated way.

What we see is the repetition of some old trends.

So the US tends to have a more domestic LED consumption based expansion, which is now given the directions announced by the, the the US government are more progressive, no doubt about that tends to transfer more income to the poor.

And we also hope that this is complemented by structural change to reduce inequality that will benefit the US economy that will benefit the rest of the world as well.

In Europe you have the, the, the, the, the traditional situation of an insufficient the domestic stimulus.

There is fiscal space.

There are enough resources for Europe to pull itself out of the recession.

What is likely is proper coordination among the Europeans.

And but that's something that can be solved by negotiations and by politics and Europe can do more and it will be better for Europe and it will be better for the rest of the world.

In this Asia, there's a combination of relying on export LED growth by some manufacturing powerhouses and the investment drive in China.

The Chinese government signal that is wants to pursue it a rebalancing strategy based more on domestic consumption and reducing inequalities in China as well, which will benefit China and the rest of the world.

And in sub-Saharan Africa and Latin America and other developing economies, the growth is still very dependent on capital inflows and commodity exports.

Commodities are booming, which are benefiting some countries, especially sub-Saharan Africa and some Latin American economies.

But the commodity expansion by itself is not sufficient to help these economies deal with the fact of the pandemic.

Something else is needed and some large developing economies also have fiscal space to do more.

As a is a matter of political decision of doing more, and in this situation the proper international debate on what are the alternatives, less ideology and more pragmatism on what each government can do will help.

Some large emerging economists can rely more on fiscal expansion.

If that is done in a coordinated way with the US and Europe, that will not create imbalances that will actually help each other and that can expedite recovery, especially in Latin America and in parts of in some countries of Africa that will require a proper support from the IMF.

The proper supports not necessarily new landing.

It can take the form of more swap arrangements or or more more culticious lines of, of support.

The the, the US Federal Reserve has done that recently with some central banks creating swap lines and that creates the support, liquidity support to be used if needed.

I think that's some, some something that should be analysed and expended not only for the countries that now have these lines with the the Federal Reserve, but also for other countries through the IMF.

There is a lot of liquidity in the world.

Interest rates are are are low even after the recent spike in the the long rates in the US, the long rates are actually at the same level that they were six years ago.

So there what happened recently in the US was just a correction of long term interest rates in face of the prospective that the US will recover faster.

There's still a lot of liquidity, there's still very low interest rates in the world.

The main problem for developing economies in this scenario is not access to liquidity, is access to liquidity.

We're at the proper exchange rate at the proper currency.

And that's where a better solution to to hedge against exchange rate volatility will help a lot the recovery of the world economy.

That requires new instruments, that requires a new approach from the IMF.

The resources are available, but we still have to have to reach the political decision to do it and develop these new instruments to deal with this new reality of the post pandemic world.

And the other lesson that this crisis shows is that fiscal policy work, when fiscal policies try it, be it in the advanced economies in the US, in Europe, be it in the developing world.

Richard mentioned that in Brazil we had a massive fiscal expansion last year, most of the focus on cash transfers to the poor and that reduced the size of the recession.

And the worst part of the crisis back in April and May, people while in Brazil and outside Brazil expect the economy to to contract something between 6 and 8%.

There was a there, there was a fiscal stimulus of of approximately 7% of GDP just from the federal side and that reduced the recession.

Actually the economy contracted 4%, half of what was expected in the worst phase of the crisis.

As a result of that, public debt did not grow as fast as people expected and the budget that it was not as **** as people expected.

So fiscal policy worked in attenuating the impact of the crisis and actually creating more space for eventual reconstruction initiatives after the, the, the pandemic is dealt with.

I think this also is this also happens in many areas of the world.

So the main challenge that the world faces right now is how to, to move on, to move from relief policies, from disaster relief policies.

They're still needed in many, many places, but we also have to move gradually to reconstruction policies, reconstruction policies based in more investments, public and private, and policies to reduce inequality and to promote a more sustainable pattern of development issues that UNCTAD has been stressing in the last 10 years in all of its TDRS.

And this, this can be done now in a world with a much lower real interest rates that creates much more policy opportunities.

There is policy space for more proactive development in the world.

The real question is whether or not that that, that that opportunity will be, will be made possible by by actions.

And we see that in some countries, but we don't see that in a global way.

I think the, the leadership of advanced economies is important in that area.

And the leaders leadership of some large developing economies is also important to show the way.

And we in this, in this, in the, and by doing this, helping the world to reach a more sustainable development pattern.

Those are my comments for now.

[Other language spoken]

Thank you very much.

Nathan, before opening the floor, can we unmute Isabel Sacco from FA and the press kit is available in English, French and Spanish and is on the embargo until Thursday morning, 7:00 AM Geneva time, 6:00 AM GMT.

Isabel, you have the floor.

[Other language spoken]

Thank you very much.

[Other language spoken]

Made a comment on the disconnection of financial markets and the real economy.

And I am very interested to to understand why is this disconnection disconnection and how does he explain this, that the poverty and economical problems are increasing everywhere and markets are just growing up and up and up.

And for Mr Barbosa, I could like to if, if he can comment on the specific situation in Latin America.

He mentioned that some countries he was all talking about Latin America and Africa, some countries have more fiscal space.

And I would like to know if this, this fiscal, this comment applies to Latin America in general and if he can come in also in Latin about Latin America in depth.

I mean, people are general public are afraid that the countries are taking steps to pay for that the, the cash transfers to pay for all the consequences of the lockdowns in the countries.

And that in some years the, the, the states will not have the, the means to, I mean, you're not, they may think that they, they will not have money to pay pensions and other general service.

So what can we can he comment on this?

[Other language spoken]

Thank you very much, David.

Let's start with you, Richard, please.

[Other language spoken]

I can, I can be pretty quick.

I mean, this is, you know, this the, we've made the points endlessly in the trade and development, back in the trade and development report about the excessive deregulation of financial markets, often going hand in hand with a handful of large financial players dominating those markets, which is true in, in banking, but it's also true in asset management and other parts of the financial system.

These tend to be very short term in terms of their horizons.

They look for very quick gains and they tend to transact with themselves that they they they their their profitability comes from rising asset prices that they to some extent are in a position to fuel.

So the whole kind of unbalanced nature of the financial system is something that we've been witnessing now for 30 years.

But it's not just a financial problem.

I mean, corporations in the non financial sector have also become tracked in this game.

So if you look for example, at the the profits of the firms on the S&P 500, the the stock, the the, the, the measure of equity in the US, something like 90% of profits of those firms are either channelled into dividend payments or into share buybacks.

That is a, a fraction of the profits they make are used for real investment.

They're used in said for various forms of capital gain and, and, and, and so it's not just a problem of financial firms, it's also a problem of corporations.

And finally, you have states governments in the advanced economies who have bought into all kinds of simplistic ideologies about efficient markets, which ultimately means in practise that their policies have been shaped and someone, some people would argue captured by these same very large financial and corporate players.

And when things go wrong, what states do is bail out these these businesses.

And so you have this very weird situation where austerity is imposed on the vast majority, majority of the population because that's something that pleases the markets.

And when the markets go belly up, you have socialism for these very large corporations.

That is they, they depend on state largesse to keep themselves going.

So you have a very vicious circle now which is leading to this huge distortion in which financial activity is increasingly disconnected from the kinds of investment and productivity growth and, and, and, and and public service, the investment in public services that we would argue is necessary for a healthy economy.

Thank you very much.

And now we go to Nelson.

Yes, Latin America, yes, oh, Latin America, yes, that's went well, grew after the crisis as as in every everywhere in the world.

And this issue of **** debt is really an issue of economic growth.

Will will GDP recover enough for the countries to be able to roll over or pay down part of this debt or not?

That's the issue, that sustainability requires a proper growth rate of the economy.

And if you think about Latin America before the crisis, the main, the largest economies of the region were not growing very fast.

[Other language spoken]

Argentina was in a deep recession, so the real question is not only to recover from the pandemic, but actually to recover the trend growth rates of these three large economies.

And the same thing tends to happen for the rest of the region.

So that's why recovering growth reconstructions policies are key to that sustainability.

Answering your question, if growth recovers, if the government is able to adopt proper policies and if the the Latin America has that has adequate help from the rest of the world, part of the current debt will be paid by growth itself.

That's something that economist knows for a long time, but tends to get downplayed in the media.

Recovery helps doubt that sustainability and in the particular case of Latin America.

Latin America is the land of inequality, unfortunately, is one of the most unequal regions of the world.

So part of this debt in the future should also be paid by a more progressive taxation of the rich people in Latin America.

There are resources, Latin America, to roll over or pay down part of this debt without harming the majority of the Latin American population.

This is a more domestic, this is a more domestic issue.

[Other language spoken]

Each country has to have the ability to deal with that.

It's not simple as we know anywhere in the world, but the path to to fiscal consolidation, if you will, for Latin America involves growth recovery.

Without growth recovery, there is not going to be any, any debt consolidation and more proper progressive taxation.

Thank you very much, Musa.

[Other language spoken]

Over to you Musa Mexicatri in Bonjour Francais S possible ESCU estad la en per economic univo mondial esco osco the Perth enquire on billion on trillion enquire ESCU Le Monde De Pere SE Perth de Veneiro may the Rick Perry leper que ET on registry come get John certainly or John Lakis COVID mercy mercy Richard, Do you need translation Yes.

What is what can we measure the, the, the lost, the lost amount of the, the world economy?

And is there a way to recover to to we covered this last, this last.

Look, we've, I mean we measure it in AI mean there are different ways of doing it.

We have measured it simply as the difference between where the world economy would be today if it had continued on the growth path that was present before COVID-19 hit, and the the the output gap, if you like, the potential for output growth is measured in terms of the difference between between where economies are today compared with where they should have been based upon that projection.

And in fact, in the report we we put a a $10.3 trillion estimate for the loss of output for the global economy.

But you will also find a series of graphs for individual countries based upon using the same kind of of calculation and, and some and indeed in the I think in the press release too, you will find an estimate of the size of that loss as a percentage of the GDP of these of some of the major economies in the G20.

For example, India on this criteria has suffered the biggest loss of any country in the G20, followed closely by the by the United Kingdom and and a number of other emerging economies have experienced similar, quite not as big as those two, but also significant losses in terms of, I mean, as Nelson said, in terms of the kind of policies to recover this.

Obviously, we have been emphasising the, as Nelson said, the opportunities to use fiscal and monetary policy in a more complementary and aggressive way.

But as he said, the that poses real difficulties for emerging and developing countries without the requisite support from the international community, from the IMF and from other financial international financial bodies.

So, so we do see a lot of opportunity to recover that loss, but it does require a much more concerted effort from from these international bodies in terms of financial support and as as we said, the initiative that we expect to see next month.

At the G20 this month, sorry, I think it's later this month, but the G20 of a increase in special drawing rights is certainly one step in the in, in the right direction.

But we would want to see an increase in debt relief and a significant increase in debt relief.

The the the initiative of the G20, the debt service suspension initiative is estimated to amount to 12 billion eleven to $12 billion for the countries that are eligible and there are 73 eligible countries in the DSSI.

But only something like 4546 are actually participating, partly because they worry about the consequences of participating for their access to private capital markets.

And and the failure of the initiative to bring in private creditors is a significant weakness in that initiative.

And it needs certainly needs to be extended to include private creditors.

But we don't really think that even in terms of that, even if that were to happen, that would be sufficient really to address the huge burden that many developing countries are experiencing in terms of debt servicing and the squeezing of fiscal space that comes as a consequence of that.

So, so I think, I think as Nelson said, there are opportunities for developing countries to use whatever fiscal or policy space they have, but it will need much more concerted effort from the international community if we're going to get what everyone claims they want, which is is we're all in this together.

We're going to recover back better, and we're going to have a resilient future that everyone can prosper within.

Is it a follow up?

[Other language spoken]

OSP Voltrovet Escova a tonne was a tonne in.

[Other language spoken]

Government in developed countries are lending a lot of money to to try to recover from the crisis.

Does it mean that there will be a huge increase in taxes in those countries?

Who wants to answer Nissan?

[Other language spoken]

That's similar to the first question.

Not necessarily because the the, this, this, the, the current debt can also be rolled over by a higher income in the future.

If the economy recovers with the same tax rate, you're going to collect more.

If the GDP, the tax collection is the tax rate over the tax base, which is usually the GDP.

So if the economy grows faster with the same tax rates are going to collect more.

What we're seeing now is a increase in deficit because income collapse in many sectors.

So the government's collecting less in revenues and is feeling the difference by issuing the debt.

And that's the what happened during previous crisis that was happened during the first and Second World War.

That's what happened during the, the, the, the Great Recession of the 1930s and after those after, especially after World War 2, that was also very ****.

And there was a recovery in in the Western world, especially in the US, which was mainly financed by the growth of the economy itself.

That's gradually went down.

There was a long period of low real interest rates.

So the one was able to pay then roll over.

It's that at a very low cost in the in parallel to the recovery of their economies, that was help from the US to Europe at that time that was called the Marshall Plan and that also accelerated the recovery.

Something similar to that, not in the same scale, not for the same problems.

We're not dealing with a post war economy.

We're dealing with a post pandemic economy.

The kind of stimulus is different.

We're not dealing with an economy that needs to be reconstructed from war.

We are dealing with an economy that needs to be transformed for environmental reasons.

So we have a new kind of war in place, the war against the disease, the war against global global warming, and is a war against inequality.

Part of this involves more progressive taxation.

So in some countries where inequality is ****, probably the fiscal adjustment, if you will, will involve an increase in progressive taxation.

Whether or not taxation as a whole will go up depends on whether this increase in revenues from **** income people **** or profits will be compensated by tax cuts in other areas.

The situation varies depending on the economies, but I would say that increase in taxation is not necessarily the main way to pay for the debt that was just issued to fight the crisis.

Historically, the main way to roll over pages debt is very growing in the economy.

Thank you very much.

Yes, Richard, please.

[Other language spoken]

All right, thank you.

Yeah, just just to give some.

Numbers because there tends to be a certain hysteria around this.

These are These are numbers that Fitch recently put out on their estimate, the public debt service for advanced economies this year will average 3.3%, which which is .2% higher than in 2019 when it was 3.1%.

So despite the huge increase in debt in in advanced economies and the sharp decline in their tax revenues, debt service pressure on advanced economies in terms of their response to the crisis and that I mean, and the difference again we're helping with advanced with developing is quite significant.

So developing countries in 2019 spent something like 8% of revenues on interest payments, whereas in this year in 2020 will increase to 10.4% the.

Sound is very bad.

In emerge in developing countries In developing countries.

Thank you very much.

Did you get that, Catherine?

Yeah, 10.4% in 2020, right, for the interest rate in developing countries.

10.4% in emerging economies in 2020, compared with eight Yeah, compared with 8% in 2019.

[Other language spoken]

This is just, I mean, it's again, the point that, you know, the global, the, the global economy is, is structured in a way that continues to make the kinds of policies developing countries need to to do what Nelson said, which is respond to not only a health crisis, but an environmental crisis.

And the development challenges remains an obstacle to building resilience in over the next decade.

[Other language spoken]

Can we unmute traffic and please?

[Other language spoken]

Yes, over to you.

[Other language spoken]

Questions to Richard and Mr Nelson.

To Richard, I mean, most of the assessment that you have provided is instructive and also credible in the sense that today the situation seems to be radically different from a year ago.

You've spoken about the disconnect between the financial sector and the real economy.

At what point would the asset inflation can actually derail the entire economic growth and recovery?

Because what we are witnessing increasingly during the COVID and after COVID is a huge bubble of asset inflation.

Whereas that is, that seems to be a real ****** in the coming days or years for the economic recovery.

Could you throw some light on that?

And also I want to congratulate you on bringing this waiver issue to the forefront because your organisation has so far remained completely silent even though it represents the developing countries and on an issue which developing countries are seeking on that for some inexplicable reasons has completely remained silent, which is not a good signal to Mr Nelson.

You know, progressive taxation during this.

In the sense when there is a complete K shape recovery where 1010% or less than 10% of the in various countries have gobbled up huge profits, billions of dollars.

I'm now talking of what I'm seeing in the Indian economy where there is a sudden, you know, divergent of a huge scale between the, the top 10% in terms of making massive profits and the lower 90% pushed down into the worst cycle of poverty.

So could you also throw light on that?

But also having now that you are a former Brazilian finance minister, I'm curious to know why your country has continues to oppose this waiver.

I mean, it's the only developing country which oppose the waiver proposal in the last meeting.

Is there any reason?

I mean, is this, is this policy going to be a permanent policy or is it just a transitory development?

[Other language spoken]

Let's start with you, Richard.

Yeah, very quickly.

[Other language spoken]

I mean, one thing we've learnt over decades now is that these financial bubbles under the current rules of the game seem to last longer than anyone expects.

When we think that there are there, there, they've reached a degree of fragility that will inevitably lead to a, a bust.

They seem to keep going.

And so it's very, I think it's very difficult to speculate on, on exactly how they they may break.

That said, I mean, last year, in the last year's report and we do flag it again, corporate the, the rise in corporate debt in some advanced economies remains a a particular concern because it's not clear whether the firms that have been lent to really have the legs to carry them to the point where they can sustain the debt that they have acquired in recent, in recent years.

So that what people refer to as as zombie firms is a, is, is certainly something that that that needs to concern people.

And I guess the other worry is if, if they, if the markets really become hysterical about inflationary pressures, then these can become self self fulfilling prophecies about concerns that that that come from inflationary expectations.

And that again, as I said, we do not see inflationary threats at the moment for all kinds of reasons.

And and when we look at a country like Japan that has been pumping in liquidity into its markets for a decade now with absolutely no shift in the inflationary needle, then, then we, we, we don't see it.

But I mean, there's no doubt that expectations can be self fulfilling and that has to be, that has to be worry in the particular case of by and one thing we do make a point we make in this report, and people have forgotten it a little bit, but Trump, the Trump administration enacted its own large stimulus package at the end of 20/17/2018.

It was largely tax cuts for rich people, but it was huge.

It was what the estimate is in the order of $1.5 trillion.

And if you add military expenditure to that and Trump increased U.S.

military expenditure quite significantly under his under his watch, then you have a large package in the US.

And again, despite the size of that package and there are differences between important differences in terms of who benefits from the Trump package, who benefits from the Biden package, but there was no impact or very minimal impact on inflationary pressure in the US at that time.

So I'm not sure, I don't have an answer to your question, Ravi, but there are certainly fragilities in the system that need to be carefully monitored because they could lead to serious downside risks in unexpected ways.

[Other language spoken]

Well, the first question, yes, the current situation would have seen a divergent and increase in income and wealth of the of the rich that has is, is very much associated with the booming financial market, especially in the US But you can also see the same pattern in some other countries.

But I would say it's much more, it's much stronger in the US Progressive taxation, as I said, this is a natural way to deal with this in the future.

From history, the the progressive taxation that was created to finance World War 2 was kept in place for two decades roughly.

And that helped to roll over pay down the the fiscal causes of World War 2.

I think something similar is needed now.

Now, a lot of people talk about the temporary wealth tax to extracting revenues from from from the rich after the pandemic.

That's one way to go.

I will much rather prefer to see a more structural chain in taxation that creates a more permanent progressive structure that may be kept in place for 20 years, 30 years, if whatever is necessarily to roll over or finance the current debt.

I think this this has been done before.

It can be done again, there's no secret.

So there's not a technical issue.

That's a political issue and as I said, each country has a different initial condition.

Some countries already have a very progressive taxation system, other countries don't and it's a question of domestic policy to decide how to go.

If that is not done, then probably you're going to have to roll over debt, issuing more debt or fuelling the the system with more money, low interest rates, creating the kind of imbalances that we had before the pandemic.

We saw what an equal economy with low taxation on the upper classes produces.

It produces bubbles, financial bubbles that eventually burst and create a worse problem than than than we had before.

On the Brazilian situation, as I'm aware, the Brazilian government did not sign the waiver.

I don't have information.

What are the bases of that policy?

I can only say to you what appears to me to be the reason I think the current Brazilian administration had a strong coincidence or strong alignment with the previous US administration, the Trump administration.

And since that was the US policy and the Brazilian current administration thinks that was, that was also the best for Brazil for reasons that only they can explain.

I'm not a representative of the Brazilian government.

They adopted that.

That may change because you have a new administration in the US.

Let's see what's what's they're going to do about that.

And in the specific case of Brazil, we are now dealing with the worst phase of the pandemic and we are in a race between the contagion and the vaccination.

And to do proper vaccination, I have to speed up our domestic production.

That may involve a change in the Brazilian government's position about the property rights regarding vaccinate the vaccine.

But that's the ongoing debate in Brazil.

Maybe that can change through this year.

I don't see any raised hand, Richard, I don't know if you want to yes.

[Other language spoken]

Hello Richard and Mr Nelson related associated question namely that despite the kind of forecasting you did in your report, how much of the role can be actually attribute to geopolitical tensions.

For example, the emergence of the so-called Quad, Quad in, you know, Pacific region, the US, Japan, Canada, sorry, Japan, Australia and India, targeting primarily China on almost all fronts, including on the vaccine front.

Will it have any impact at all on economic recovery and growth?

Thank you, Ravi, can we unmute Richard?

Because you're right.

Please, over to you.

Ravi, will it have an impact on, I mean, I mean, it will have an impact to the extent I think that it makes genuinely multilateral options that we think are the preferred options more difficult.

That's that's clear.

That's true both in the short term and, you know, the, the big challenge that we all worry about over the longer term in terms of climate change and environmental damage, there's no solution to that problem without the two largest emitters coming up with a common agenda.

And that's the United States and China.

And so, and it, it, you know, we, it's, it's, it can't be helpful if, you know, there is a, there is a kind of political narrative that is demonising the, the, the Chinese.

And, you know, I think I said it when we said it, I think a couple of years ago.

You know, the resort to the kind of Yellow peril ideology that was true of Western European imperialism at the time of the First World War is not a helpful way of thinking about and responding to the challenges that we face in this highly interconnected, interdependent world that have to be met with serious levels of cooperation and coordination across the main the the main players.

So, so that has that, that has to, we have to the international community has to overcome that if we're going to make serious progress on the agenda 2030 over the course of the next 9 or 10 years.

That's that seems pretty clear to me.

Thank you very much, Isabel.

Can we unmute Isabel Sacco please, over to you today.

[Other language spoken]

Mr Barbosa, I would like just to, to complete what you said before in the sense of how to, to pay debt.

And you said that the debt is paid with economic growth.

And I would like to know how in Latin America where this economic growth growth will come from In, in, in, in in a time when 1,000,000 millions of jobs have been lost, enterprises have shut down.

And we you said, and it's difficult to think that there is enough, I mean taxpayers for to, to guarantee enough income to the, to the state.

So where is this, this economic growth come becoming coming from please and in the next years.

And I would like also to have a, as we as we come had had many comments on the financial markets.

I would I would like to have a comment on what is happening with the cryptocurrencies.

I would like to if, if it's pertinent.

[Other language spoken]

And let's start with the, the situation in Latin America.

Nelson, you have the floor.

Yes, well, well where will growth come from will come from putting people to work because when you're having a crisis, you have a lot of people unemployed and these people still have production capabilities.

If you take the, as I said, the largest economies in Latin America, Brazil, Argentina and Mexico, they were already growing very slow or in a recession in case of Argentina.

So there's a lot of idle capacity, if you will.

It's like we economists call when you know, use all the the potential of your economy.

Too many people, unemployment, some sectors are operating below capacity.

So there is capacity to produce more, to generate more income, wages and profits.

The real, the challenge is how to put that to work and that's has been blocked by many, many things.

One one of them is the fiscal constraint.

So if you have a proper a solution to the fiscal situation of the economies, which involve a more gradualistic fiscal approach, you have to rebalance the budget.

But you must do that in a, in a long period of time.

The kind of crisis that we have does not allow a quick adjustment, harsh adjustment.

A quick fiscal adjustment will just make things worse, as we have been seeing in Latin America.

So if you do that and if you are in this process is able to adopt policies that boost investment, that reduce inequality, that creates a growth in pools that will by putting people to work, by raising wages, by raising employment, by raising the profits of firm using the existing capacity in the economy that can create the this recovery that will help roll over or pay down that in the future.

The situation is dire, as you said, to many people in employment, many, many firms in distress.

And that that means that we're going to have to have more permanent solutions.

The solution to this crisis is not going to be 1-2 year, a 1-2 year process.

So it's going to take decades and it's going to take decades of proper policy and proper policy can create an environment where we have a faster growth and growth, how can I say feedbacks into itself.

This has this is not a novelty thing.

This is the way the world recovery from World War 2.

This is the way the world recovery some countries after the Great Depression of the 1930s.

So the question is how to do that in a city, in case of Latin America, in a region where is which is historically very exposed to financial shocks, a region that is very dependent on commodities.

The countries that have been able to do that better, Chile and Brazil in the past, used to be able to do to use domestic policy to attenuate fluctuations by building a large stock of international.

[Other language spoken]

To to hedging themselves against financial shocks.

Argentina, unfortunately, is not in that position yet.

It's trying to do that.

So that's where international help will can aid the process in Latin America.

Would you like to comment on cryptocurrencies or should we?

[Other language spoken]

Well, cryptocurrencies are kind of an assets.

Actually, you should call crypto assets.

It's not a currency, it's an asset.

You buy Bitcoin because expect Bitcoin to gaining value in the future.

[Other language spoken]

You, you expect that to to increase in value.

So in terms of crypto, if you, if you lay, if you, if you name them crypto assets, you already have kind of an answer before buying that because they expect that in the current situation of low interest rates, this crypto assets will gain in value and they have gained in value as many other assets like Bitcoin went up in the value, gold went up in value, oil went up in value, 5 beans.

And there's when you have a situation of low interest rates and the perspective of recovery, which we point we we pointed out in our report, the world economy will recover this year and especially pulled by China and the US.

You create this expectation of, of, of capital gains in some assets, including crypto assets.

[Other language spoken]

Richard, do you want to add a word on?

[Other language spoken]

Not on cryptocurrency is that you know, I agree with Nelson and and that's I mean there may be a role for digital currencies, but these are clearly speculative at the moment.

They are simply speculative asset.

Let me just in response to Isabel's question and to some extent Nelson's answer, the kinds of strategies that we have been promoting in terms of and what and what Nelson said are not unique to developing.

I mean, there's a, there's a common set of challenges across all countries.

And it, it's not and that we end this report with a quote from Roosevelt that he made.

It's, it's interesting.

He made it exactly on the 80th anniversary of the riot in the United States when those characters invaded the capital in early January.

So this is an 80th anniversary quote from Roosevelt.

And I, I think it speaks not only to the moment in the United States, it speaks also to a wider challenge of breaking from the 40 years of neoliberalism that have failed to deliver the countries and communities in both the advanced and the developing world.

Let's so let me just read it because I think it's, it's, it's a very apposite kind of quote.

Roosevelt said then that the simple, basic things that must never be lost sight of in the turmoil and unbelievable complexity of the modern world.

Our equality of opportunity for youth and for others?

[Other language spoken]

Jobs for those who who can work, still a problem.

Security for those who need it, still an even bigger problem in many respects.

The ending of special privilege for the few?

Certainly a problem.

And the preservation of civil liberties for all.

And finally, the enjoyment of the fruits of scientific progress in a wider and constant in a wider and constantly rising standard of living.

I mean, these are the challenges of the 21st century and not just in the United States, which is partly why you got riots, I think in on the Capitol Hill, but also for much of the developing world.

We, we cannot go on under the current rules of the game that have privileged a minority over the last four years and have delivered very little for the vast majority.

And that's a situation that pre existed the pandemic.

And I think it's a problem that has been exaggerated by the pandemic.

And so we we chose that quote very carefully because we think it captures the moment and the challenges that policy makers face across the global economy.

Thank you, Richard.

[Other language spoken]

So I think we're going to stop here.

Thank you very much for all these those interesting questions.

Thank you Nelson Barbosa and Richard Cozwright for the presentation.

Both are called of the of the report of course embargo until Thursday morning, 7:00 AM Geneva time, 6:00 AM GMT.

Thank you very much and see you also.