[Paris – 7 July 2021] The International Chamber of Commerce (ICC) has issued a warning that the world’s richest economies risk imposing major costs to the global economy absent of a step-change in their approach to managing the Covid-19 pandemic.
In a statement issued ahead of this week’s meeting of G20 Finance Ministers, ICC Secretary General John W.H. Denton AO said: “The finance ministers of the world’s richest economies are taking a huge gamble with their domestic economic fortunes if they fail to take concerted action to vaccinate the world. As demand rebounds in many western economies, we’re already seeing damaging supply shortages in many important sectors – stunting growth and fueling a worrying spike in domestic inflation.
“The only way for any government to guarantee a durable economic recovery from the Covid-19 crisis is to invest in a major collaborative effort to vaccinate the world. The business case for the investment needed to do this is crystal clear.”
While G7 leaders last month committed to provide one trillion doses of proven vaccines to emerging economies over the next two years, ICC – the institutional representative of more than 45 million businesses – has cautioned that these commitments still fall short of the major collaborative effort needed to lift the grip of the virus on the global economy.
Mr Denton said: “A coordinated global action plan is urgently needed to get the virus under control. To mitigate the clear downside risks to the global economy of a prolonged pandemic, G20 finance ministers must deliver something far more credible than the gestures on offer from G7 leaders last month.
“A good place to start this week would be a cast iron commitment to provide up-front financing to support a further scaling of vaccine production capacity and accelerate roll-out across the developing world. The IMF has estimated that US$50 billion is required to do this – a minor investment compared to the potential returns from expeditiously defeating the pandemic.”
The global business institution also called for the G20 to set out a comprehensive action plan to enable emerging markets to recover from the effects of the pandemic – encompassing both short-term liquidity support and longer-term debt relief.
Mr Denton concluded: “The fiscal position of many emerging market governments remains a first-order concern for global business. It’s vital that the G20 provides its full backing to get a new issuance of Special Drawing Rights completed in August. We remain firmly of the view that this must incorporate a transparent mechanism to enable advanced economies to reallocate their allowances to countries in need: the liquidity on offer to developing nations otherwise risks being nothing more than a drop in the ocean compared to their genuine fiscal needs.
“The issue of sovereign debt may have faded from the headlines in recent months but it would be a mistake for the G20 not to double down on its earlier efforts to avert the risk of a – potentially contagious – emerging market bond crisis. We are deeply concerned about the potential effect of a possible tightening of US monetary policy on the fiscal position of emerging market sovereigns with dollar denominated debt – including a range of middle-income countries that don’t currently qualify for the G20’s debt relief programs.
“Preemptive action on debt is needed from the world’s largest economies to set the foundations for a durable recovery from the pandemic in the years ahead.
ABOUT THE INTERNATIONAL CHAMBER OF COMMERCE (ICC)
The International Chamber of Commerce (ICC) is the voice of the real economy and the institutional representative of more than 45 million companies in over 100 countries. ICC’s core mission is to make business work for everyone, every day, everywhere. Through a unique mix of advocacy, solutions and standard setting, we promote international trade, responsible business conduct and a global approach to regulation, in addition to providing market-leading dispute resolution services. Our members include many of the world’s leading companies, SMEs, business associations and local chambers of commerce.