s a born optimist, I consider 2021 to have been a year of recovery. The COVID-19 pandemic is not yet over, but there is a ray of hope for a better tomorrow in both the health sector and the wider economy. Safe and effective vaccines have reduced COVID-19 deaths, while governments’ fiscal interventions have helped to spur economic growth. But the global recovery remains uneven, owing to countries’ varying pre-pandemic economic conditions and divergent stimulus policies.
To be sure, COVID-19 vaccines have been a game changer. Rising vaccination rates boosted herd immunity, creating opportunities to ease restrictions and jump-start the economy. Yet, while multilateral institutions have made efforts to ensure fair global distribution of vaccines, many developing countries are still struggling to secure enough doses for their citizens while advanced economies deploy vaccines at warp speed. This is underpinning an uneven global recovery and exacerbating inequity.
Because we are only as strong as our weakest link in the fight against the pandemic, global collaboration is imperative. Every country wants to control the virus and return to normal life. Multilateral institutions should therefore assume a larger role in ensuring that all of them can deliver their vaccination programs promptly.
We also need to establish an early warning system and improve our crisis preparedness – in the form of resources, governance mechanisms, decision-making processes, and information sharing – for future pandemics. Managing the frequent tensions between national sovereignty and global governance will be a key challenge. As the COVID-19 pandemic has shown, failure to do so will risk further catastrophic damage in the future.
As for the economy, countries are currently at different stages of recovery and are pursuing varying types of post-pandemic strategies, in terms of both policies and timing. But in a highly interconnected world of many different but related financial and economic systems, the easing of stimulus in one country will affect others. Notably, the normalization of monetary policy in developed economies, if not communicated transparently, can increase volatility and cause potentially destabilizing capital outflows from emerging markets.
The COVID-19 crisis has put huge pressure on many developing countries’ public finances, leaving governments struggling with rising debt levels as they try to fight the pandemic. International financial institutions and private creditors must collaborate to ensure a fair burden-sharing scheme to assist them. While the tailored approach envisaged under the common framework of the G20’s Debt Service Suspension Initiative is helpful, this relief remains a temporary measure. Multilateral institutions need to provide greater oversight and guidance to address developing economies’ growing debt problems and mitigate their elevated financial distress.
Moreover, as the economic recovery starts to take hold, global supply chains that were disrupted by the pandemic cannot adjust immediately to meet the current surge in demand. This problem may be transitory, but it is costly. The pandemic should therefore prompt businesses and policymakers to reassess current global supply chains and resource allocation – a reckoning that may generate momentum for emerging markets to gain a larger share of the global economic recovery.
Meanwhile, energy demand has surpassed its pre-pandemic level, causing a global crunch. Aside from the risk that price spikes will spur inflation, the energy crisis is also threatening our efforts to combat climate change. Like the fight against the pandemic, measures to combat global warming can succeed only if we implement them together and in a consistent way.
Today, we have an opportunity to revive the economy and combat climate change at the same time by fostering a green, resilient, and inclusive recovery. Seizing it requires us to design climate-positive economic policies and provide more sustainable financing. As part of Indonesia’s economic recovery strategy, for example, the government has introduced programs to create alternative activities that both generate income and preserve forests for local communities.
Green recovery programs are also likely to empower women, who have generally been more adversely affected than men by the pandemic and the climate crisis. In many instances, women act as agents of change for sustainable initiatives. As a country with one of the world’s largest areas of rainforest, Indonesia has a strong and clear commitment to implementing a green recovery. And in my capacity as co-chair of the Coalition of Finance Ministers for Climate Action, I firmly believe that green initiatives must not be unfunded mandates.
Indonesia will hold the G20 presidency in 2022 and the chairmanship of the Association of Southeast Asian Nations (ASEAN) in 2023. It can therefore help to set these groups’ strategic direction in ensuring a sustainable, resilient, and inclusive global recovery. In particular, G20 members must establish an effective common framework to address the major global challenges of our time, especially pandemic prevention, sustainable financing, and climate change.
None of this will be easy, of course. But, as I said, I am an optimist. By generating sufficient political will, I am confident that we can recover together, and therefore stronger, from the COVID-19 crisis.
Copyright: Project Syndicate, 2021.
a global affairs media network
Recovering Stronger Together in 2022
Photo by Getty Images.
December 25, 2021
There are reasons to be optimistic about a global recovery in 2022, but in this highly interconnected world we can only seize these opportunities through collaboration and an eye toward a sustainable future, writes Indonesian Finance Minister Sri Mulyani Indrawati.
A
s a born optimist, I consider 2021 to have been a year of recovery. The COVID-19 pandemic is not yet over, but there is a ray of hope for a better tomorrow in both the health sector and the wider economy. Safe and effective vaccines have reduced COVID-19 deaths, while governments’ fiscal interventions have helped to spur economic growth. But the global recovery remains uneven, owing to countries’ varying pre-pandemic economic conditions and divergent stimulus policies.
To be sure, COVID-19 vaccines have been a game changer. Rising vaccination rates boosted herd immunity, creating opportunities to ease restrictions and jump-start the economy. Yet, while multilateral institutions have made efforts to ensure fair global distribution of vaccines, many developing countries are still struggling to secure enough doses for their citizens while advanced economies deploy vaccines at warp speed. This is underpinning an uneven global recovery and exacerbating inequity.
Because we are only as strong as our weakest link in the fight against the pandemic, global collaboration is imperative. Every country wants to control the virus and return to normal life. Multilateral institutions should therefore assume a larger role in ensuring that all of them can deliver their vaccination programs promptly.
We also need to establish an early warning system and improve our crisis preparedness – in the form of resources, governance mechanisms, decision-making processes, and information sharing – for future pandemics. Managing the frequent tensions between national sovereignty and global governance will be a key challenge. As the COVID-19 pandemic has shown, failure to do so will risk further catastrophic damage in the future.
As for the economy, countries are currently at different stages of recovery and are pursuing varying types of post-pandemic strategies, in terms of both policies and timing. But in a highly interconnected world of many different but related financial and economic systems, the easing of stimulus in one country will affect others. Notably, the normalization of monetary policy in developed economies, if not communicated transparently, can increase volatility and cause potentially destabilizing capital outflows from emerging markets.
The COVID-19 crisis has put huge pressure on many developing countries’ public finances, leaving governments struggling with rising debt levels as they try to fight the pandemic. International financial institutions and private creditors must collaborate to ensure a fair burden-sharing scheme to assist them. While the tailored approach envisaged under the common framework of the G20’s Debt Service Suspension Initiative is helpful, this relief remains a temporary measure. Multilateral institutions need to provide greater oversight and guidance to address developing economies’ growing debt problems and mitigate their elevated financial distress.
Moreover, as the economic recovery starts to take hold, global supply chains that were disrupted by the pandemic cannot adjust immediately to meet the current surge in demand. This problem may be transitory, but it is costly. The pandemic should therefore prompt businesses and policymakers to reassess current global supply chains and resource allocation – a reckoning that may generate momentum for emerging markets to gain a larger share of the global economic recovery.
Meanwhile, energy demand has surpassed its pre-pandemic level, causing a global crunch. Aside from the risk that price spikes will spur inflation, the energy crisis is also threatening our efforts to combat climate change. Like the fight against the pandemic, measures to combat global warming can succeed only if we implement them together and in a consistent way.
Today, we have an opportunity to revive the economy and combat climate change at the same time by fostering a green, resilient, and inclusive recovery. Seizing it requires us to design climate-positive economic policies and provide more sustainable financing. As part of Indonesia’s economic recovery strategy, for example, the government has introduced programs to create alternative activities that both generate income and preserve forests for local communities.
Green recovery programs are also likely to empower women, who have generally been more adversely affected than men by the pandemic and the climate crisis. In many instances, women act as agents of change for sustainable initiatives. As a country with one of the world’s largest areas of rainforest, Indonesia has a strong and clear commitment to implementing a green recovery. And in my capacity as co-chair of the Coalition of Finance Ministers for Climate Action, I firmly believe that green initiatives must not be unfunded mandates.
Indonesia will hold the G20 presidency in 2022 and the chairmanship of the Association of Southeast Asian Nations (ASEAN) in 2023. It can therefore help to set these groups’ strategic direction in ensuring a sustainable, resilient, and inclusive global recovery. In particular, G20 members must establish an effective common framework to address the major global challenges of our time, especially pandemic prevention, sustainable financing, and climate change.
None of this will be easy, of course. But, as I said, I am an optimist. By generating sufficient political will, I am confident that we can recover together, and therefore stronger, from the COVID-19 crisis.
Copyright: Project Syndicate, 2021.
