This is what chief economists think about the global economy right now

economy euro_

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: David Elliott, Senior Writer, Formative Content

The World Economic Forum’s latest Chief Economists Outlook asks 40 chief economists for their views on the post-pandemic recovery.

  • It identifies three key emerging challenges facing governments and business leaders.
  • The crisis has made inequality worse – but it also provides unique opportunities to address it.

We need to broaden the set of targets we use to define success as we rebuild the global economy after the pandemic.

That view is among the insights from the World Economic Forum’s latest Chief Economists Outlook – Emerging Pathways Towards a Post-COVID-19 Reset and Recovery. For the report, the Forum asked its community of nearly 40 leading chief economists to assess the current economic outlook and consider how business leaders and policymakers need to respond.

The report identifies three key emerging challenges facing governments and business leaders as the world enters the recovery phase. These are: retooling economic policy to reduce inequality and improve social mobility; identifying new sources of economic growth; and aligning on new targets for economic performance.

“Recent events have brought about a long overdue conversation about future growth. As we emerge from the crisis, the quality and direction of economic growth must take primacy over its speed. In this new paradigm, we need metrics beyond GDP and an updated policy toolkit to ensure that future growth is inclusive, sustainable, and provides opportunity for all”, said Saadia Zahidi, Managing Director, World Economic Forum.

But what needs to be overcome to respond to these challenges? Here are five things chief economists think about the crisis and potential paths to recovery.

1. Stock markets may be too optimistic about the speed of recovery

With real economy data and stock markets painting very different pictures, unemployment figures are a better guide to the global economic outlook than the current high of financial markets, according to most of the chief economists questioned for the report.

While financial markets have been encouraged by early signs of recovery in consumer spending and industrial production, both remain far below past levels and the recovery could still be derailed by a new wave of lockdowns. Markets may also not fully appreciate that firms protecting their profits by shrinking their workforce and reducing investments may lead to more unemployment, less innovation and less consumer spending in 2021.

The overall labour outlook remains highly uncertain. However, unemployment in the US has been falling more slowly than expected and may worsen in Europe as job protection measures scale back over the summer.

coronavirus, health, COVID19, pandemic

What is the World Economic Forum doing to manage emerging risks from COVID-19?

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications – a companion for decision-makers, building on the Forum’s annual Global Risks Report.

The report reveals that the economic impact of COVID-19 is dominating companies’ risks perceptions.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

2. We’re at a unique moment to tackle inequality

Inequality has accelerated in recent years as the gains from technological change and global integration have not been evenly distributed. COVID-19 has reinforced some of these patterns since it had a disproportionate impact on the most vulnerable. How the financial burden is shared in the future will be critical.

But for all the chaos it’s caused, the pandemic has opened a window of opportunity. As the Chief Economists Outlook says, the hiatus imposed by the crisis has created a unique moment to introduce far-reaching systemic change to prevent inequality spiralling further out of control.

This will involve governments monitoring inequality alongside other targets, upgrading social protection measures to safeguard against future shocks, and helping to develop socio-economic mobility in the new economy. A slight majority of the chief economists surveyed see some form of unconditional basic benefits – such as Universal Basic Income – forming part of the policy toolkit after the crisis.

Image: World Economic Forum

3. Rethinking tax could help governments build public trust

The chief economists also agreed strongly on the role of tax in addressing the inequality the pandemic has accelerated. Adapting tax architectures is seen as an urgent requirement, including continuing efforts to curb tax evasion, settling on an international agreement to fairly tax digital activity, as well as rethinking wealth taxes and higher marginal income taxes.

As tough choices are made about how to pay off soaring debt levels accumulated by government support schemes during the recovery, there is a big opportunity for governments to regain the trust of citizens whose chances of advancing economically have been dwindling for many years.

“A world in which coronavirus debts are repaid by a wealth tax or a global crackdown on corporate tax havens would look very different from one in which benefits are slashed and VAT is raised,” said Adam Tooze.

4. Supply chain disruption could hamper developing economies

The pandemic has added to existing uncertainty in international trade caused by factors like trade disputes and tensions over technology standards. And while reductions in the trade of physical goods due to lockdowns may be temporary, developing economies could suffer if firms take action to increase resilience in their supply chains by bringing critical parts back home or sourcing from several countries in parallel.

A move towards greater self-sufficiency as multinationals could do long-term damage to trading ties between high- and low-income countries. It remains to be seen, the report says, if businesses will be ready to give up efficiency for resilience. But uncertainty about the pandemic, geopolitical tensions and climate change-related events could cause more supply chain disruptions.

There is a “high likelihood” of supply chain transformation leading to a reversal of international economic convergence, according to respondents. This would force developing economies to reconsider their growth models.

But one opportunity for emerging markets rests in the global acceptance of remote working – meaning nations could offer competitively priced services and imagine a new economic development model, which also entails a higher investment in human capital.

5. With the right action, new growth markets could emerge

The crisis is also expected to impact innovation, another key driver of long-term economic progress next to global integration.

Innovation is critical to overcoming the impacts of the pandemic and addressing inequality and the climate crisis. But it could suffer as economic contraction threatens research and development resources.

Governments can put economic progress on the right track with robust innovation and investment strategies, but this will require a deep transformation across all sectors. It will only be possible if public and private organizations work together and governments get actively involved in reshaping existing sectors and building new markets.

These new frontier markets – which range from green energy and the circular economy to health, education and care – could have a transformative impact on economies and societies, the report says.

Societies today have have a unique window of opportunity to move on to a more inclusive and greener growth path, according to the report.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

What wealth managers can learn from family dynamics

Children of ISIL terrorists likely held in ‘secret detention facilities’, UN human rights office warns

Serious concerns over Sahel, require ‘urgent action’: Senior UN Africa official

iSting: Change Europe with your Writing

EU mobilises emergency assistance for Croatia in the aftermath of devastating earthquake

‘By no means is this over’: WHO briefing

Hungary’s emergency measures: MEPs ask EU to impose sanctions and stop payments

7 ways to break the fast fashion habit – and save the planet

2030 development agenda: Major breakthrough for world of work

Can Argentina’s new president save the country’s economy?

Drastic deterioration in security across Burkina Faso as 70,000 flee their homes in past two months, UN warns

This AI outperformed 20 corporate lawyers at legal work

Over $39 million earmarked by UN-backed fund to combat effects of climate change in Nepal

State aid: Commission concludes that recapitalisation of German NordLB is market conform

Now is the time to seize ‘unprecedented opportunity’ of the Sustainable Development Forum, says ECOSOC President

Gender parity has a huge role to play in the fight to save our oceans

Fairness should be at the heart of the agricultural goods trade

More countries are making progress on corruption – but there’s much to be done, says a new report

LGBTQI+ and health care: do they deserve more attention from medical universities?

Baby foods high in sugar, inappropriately marketed in Europe, reveal two UN studies

A record number of people will need help worldwide during 2020: Global Humanitarian Overview

Can one FTA and 110 lobby meetings make the dirty oil clean in Europe?

Eurozone: New data show recession and debt closer to explosion

Brexit: An orderly exit is in the interests of both parties

‘Two pack’ austerity package in force but with less vigor

UN highlights importance of skills development on World Youth Skills Day

Eurozone: Even good statistics mean deeper recession

The role of public affairs in student NGOs

Shaping the future of democracy in Armenia

Young people all over the world come together to demand paid good quality internships

ECB readies itself for extraordinary monetary measures defying Germany

Inspiring medical students to choose primary health care

From drought to floods in Somalia; displacement and hunger worsen, says UN

The European Parliament launches a website on European election results

Trump reshapes the Middle East at the expenses of Europe

What little Cameron got in Brussels seems enough to keep Britain in the EU

UN chief condemns deadly attacks in Pakistan

Chinese Premier Li Keqiang’s speech from World Economic Forum’s Annual Meeting of New Champions

China’s response shows how bold decision-making can contain coronavirus

Migrants, asylum seekers detained in Hungary ‘deliberately deprived of food’: UN human rights office

Mergers: Commission approves acquisition of Raytheon by UTC, subject to conditions

African Peace Facility: African Union Peace & Security Operations boosted by an additional €800 million from the European Union

A pandemic of solidarity? This is how people are supporting one another as coronavirus spreads

Healthcare’s a human right, not ‘a privilege for the rich’ UNAIDS argues at Davos

OECD will follow Canadian proceedings addressing allegations of political interference in foreign bribery prosecution

How to end overfishing in the global South

Guatemala Dos Erres massacre conviction welcomed by UN human rights office

European Youth Capital 2018 : Cascais

The Liquefaction of Healthcare Services: Consequences and Possible Solutions

Tobacco-free public space – how is the European law executed in my country?

From underestimation to valorization: how mobile technology is transforming global health

Mankind’s first tool to fight malaria also kills

‘Continuing absence’ of political solution to Israel-Palestine conflict ‘undermines and compounds’ UN efforts to end wholesale crisis

VP McGuinness on women’s rights: “Not an option, but a duty”

Online radio and news broadcasts: Parliament and Council reach deal

Why it’s time to celebrate migrants

What lessons to draw from the destruction of Syria

Pedal power makes ‘positive impact on climate’, urges UN on World Bicycle Day

US-China trade war at point of no return: Washington’s demands go beyond tariffs

We are stronger than this pandemic (COVID-19)

More Stings?



Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s