The global economy is expected to expand 4% in 2021 after shrinking 4.3% in 2020, the World Bank said on Tuesday, although it warned that rising COVID-19 infections and delays in vaccine distribution could limit the recovery to just 1.6% this year.
The World Bank’s semi-annual forecast showed the collapse in activity due to the coronavirus pandemic was slightly less severe than previously forecast, but the recovery was also more subdued and still subject to considerable downside risk.
“The near-term outlook remains highly uncertain,” the Bank said in a statement. “A downside scenario in which infections continue to rise and the rollout of a vaccine is delayed could limit the global expansion to 1.6% in 2021.”
With successful pandemic control and a faster vaccination process, global growth could accelerate to nearly 5%, it said in its latest Global Economic Prospects report.
More than 85 million people have been infected by the novel coronavirus and nearly 1.85 million have died since the first cases were identified in China in December 2019.
The pandemic is expected to have long-lasting adverse effects on the global economy, worsening a slowdown that was already projected before the outbreak began, and the world could face a “decade of growth disappointments” unless comprehensive reforms were put in place, the Bank said.
Shallower contractions in advanced economies and a more robust recovery in China helped avert a bigger collapse in overall global output, but disruptions were more acute in most other emerging market and developing economies, the Bank said.
Aggregate gross domestic product in emerging markets and developing economies – including China – is expected to grow 5% in 2021 after a contraction of 2.6% in 2020.
China’s economy was expected to expand by 7.9% this year after growing by 2% in 2020, the Bank said.
Excluding China, emerging market and developing economies were seen expanding 3.4% in 2021 after shrinking 5% in 2020.
Per capita incomes have dropped in 90% of emerging market and developing economies, tipping millions back into poverty, with reduced investor confidence, increasing unemployment and loss of education time seen dampening prospects for future poverty reduction, the Bank said.
The crisis also triggered a surge in debt levels among emerging market and developing economies, with government debt up by 9 percentage points of GDP – the largest one-year spike since the late 1980s.
“The global community needs to act rapidly and forcefully to make sure the latest wave of debt does not end with debt crises,” the report said, adding that reductions in debt levels would be the only way for some countries to return to solvency.
A resurgence of infections stalled a nascent rebound in advanced economies in the third quarter, with economic output now expected to expand by 3.3% in 2021, instead of 3.9% as initially forecast, the Bank said.
It forecast that U.S. gross domestic product would expand by 3.5% in 2021, after an estimated 3.6% contraction in 2020. The euro area was expected to see output grow 3.6% this year, following a 7.4% decline in 2020, while activity in Japan, which shrank by 5.3% in the year just ended, is forecast to grow by 2.5%.
Source: World Bank Group
A week on from Brexit, the main road to Dover has been so quiet that officials were able to close half of it Thursday for a litter-picking operation without causing delays for drivers.
But behind such placid scenes, many truckers are still warning of chaos as they struggle to adjust to the new paperwork required by Britain’s departure from the European Union. Drivers are being held up for hours because they lack the right documents, they say.
With traffic well below its usual levels, the pain has so far manifested itself out of sight at factory gates and truckers’ depots. It’s likely to spread to the ports as activity rebounds in coming days, according to seven firms interviewed by Bloomberg. “It’s an absolute mess,” said David Zaccheo, operations manager at Alcaline U.K. Ltd., whose fleet of 145 vehicles shuttles goods between Britain and the EU. “What’s going to happen next week? We’re not even that busy at the moment.”
Zaccheo said his firm has had vehicles stuck in Italy since Monday because of a lack of correct transit documents. In another case, a trailer destined for Milan had to wait for two days in the U.K. before it could move because it didn’t have the right paperwork, he said.
Faced with the threat of chaos at the border in the weeks after Brexit, many firms decided to stockpile goods or delay deliveries, leaving Dover eerily quiet. Traffic through the port is down 85% from its 2019 average. With the industry expecting activity to pick up in coming days, Britain faces the first major test of its Brexit readiness.
“At the moment, the border is in fact flowing and it’s flowing very smoothly,” Transport Secretary Grant Shapps told the BBC on Friday. Less than 1% of vehicles are turning up without the correct paperwork, he said. By far the bigger problem, he said, is drivers not having the Covid test necessary to get into France.
While the U.K. may have struck a trade deal with the EU avoiding tariffs and quotas, companies are facing new frictions affecting cross-border trade. Firms now have to fill in forms such as customs declarations and export health certificates that weren’t required when Britain was a member of the bloc. The problem, some logistics firms say, is many customers don’t understand what documents are required.
Ellis Blackham, an account manager at JJX Logistics, a Kingswinford, England-based firm that moves goods from the U.K. to the EU, said it took six hours — at least three times longer than usual — to load one of its trucks up with pharmaceutical products bound for Germany because the customer didn’t have the correct paperwork.
“It’s a nightmare,” Blackham said. “It starts right from the top and goes all the way down, the level of confusion.”
He said another company had sent them a pallet of manufactured goods to be shipped to France, but they had provided no accompanying documents. They were surprised when they were told it wouldn’t be possible to send it, Blackham said.
“The customers are massively confused about what’s needed,” he said. “I don’t expect it to be until March at least before people familiarize themselves.”
Bowker Group, a Preston, England-based company that moves freight into the EU, said it had a trailer of chemicals stuck on a quay in Belgium for more than two days this week because of confusion over who was responsible for obtaining the customs clearance.
“It’s fire-fighting all the time at the moment,” said Jason Tiffen, international operations manager at Bowker. “Customs clearance agents are overstretched and under-resourced.”
The industry has long been warning of a shortage of trained staff to fill out the extra 400 million customs declarations that will be required each year for goods moving between Britain and the EU at a cost of about 13 billion pounds ($18 billion).
The Customs Clearance Consortium, which is helping to run a U.K.-government-backed program to assist traders with the forms, told customers this week there is still a “huge shortage” of agents.
“The first few days of the new rules have been very tough,” according to the note by Robert Hardy, the consortium’s co-founder. “There are so many new processes and a massively steep learning curve.”
Another problem U.K. firms are confronting are the new rules of origin that determine whether goods qualify for tariff-free treatment. On Friday, retailer Marks & Spencer Group Plc warned that tariffs and “very complicated administrative processes” will significantly hit its operations in Northern Ireland, the Czech Republic, and France.
Ray Murphy, managing director at Intersped Logistics, said a customer had ordered 23 tonnes of cable but then discovered it was manufactured in Egypt, meaning it didn’t have enough U.K or EU content to qualify for zero-tariff treatment. It would have attracted a 3% tariff on arrival in Greece and the order was canceled, Murphy said.
“There’s a lot of shock among people at the moment,” Murphy said, whose 20-employee firm moves road freight into the EU. Murphy said a shipment was stuck in Italy because the U.K. importer didn’t have an EORI number, a requirement for post-Brexit trade.
“There are many disgruntled people out there,” he said, “and we’ve not even got to what would be a busy period.”
Source: Joe Mayes|Bloomberg
The food and drink industry has raised serious concerns about the new EU-UK trade deal because businesses face punitive tariffs on goods from the bloc processed at British distribution hubs that are re-exported to member states.
HMG has responded to the article by referring to use of other procedures, like transit. This is correct and can help some of these flows, however not all. It depends on how the industry has organized the spcific value chains and the supply chain. Secondly, unfortunately there are not enough simplifications available for the transit procedure since HMG for various reasons has been slow approving ’authorised consignee/consignor” permits. This means that transit movements need to start and end at customs offices instead of at the premises of approved companies (my comment)..
Industry bodies on both sides of the Channel have warned that the so-called “rules of origin” chapter of the deal effectively blocks existing supply chains, and have urgently raised the issue with both the UK government and the European Commission.
Dominic Goudie, the head of international trade for the UK’s Food and Drink Federation, said the group was “very concerned about the implications of rules of origin for food and drink suppliers in both the EU and UK”.
“Goods shipped to distribution hubs in Great Britain face the payment of full EU tariffs when they return to the EU and as a result, suppliers are being forced to cancel the delivery of products to customers in Ireland,” he said.
But an EU official warned that some businesses would have to adapt their operations given the new regime. “You can’t expect Brexit not to have consequences,” said the official. “The UK won’t be a distribution hub for the EU any more. EU businesses will need to stop relying on UK hubs.”
A person familiar with internal Whitehall discussions said that Defra, the UK’s food and agriculture ministry, had confirmed assessments given in legal advice to industry on the issue.
UK industry concerns have been echoed in the EU. One major producer, who asked not to be named, said that the issue affected 25 to 30 of its trucks a week containing EU-finished goods that had been split at a GB warehouse en route to Dublin.
Muriel Korter, the director-general of the EU’s association of chocolate, biscuits and confectionery (Caobisco) said it had contacted the EU authorities to seek an “immediate solution” to the issue.
“Our EU-UK supply chains are so interdependent . . . especially businesses that have factories across the Channel and use the facilities to store goods and re-ship them,” she added.
The problem has started to hinder food importers in Ireland. “Companies are beginning to raise this across the industry,” said Paul Kelly, director of Food Drink Ireland, the main lobby group for the sector. “There’s still a lot of clarity that needs to be brought to the issue so people can make any necessary changes to their supply chain.”
Trade experts said the problem had arisen because the basic, Canada-style trade deal sought by the UK did not take into account the integration of supply chains and close proximity of the UK to the EU.
Under the terms of the UK-EU Trade and Co-operation Agreement, goods must “originate” in the EU or the UK in order to qualify for zero tariff treatment.
Source: FT