Global economy April 2021-

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(Foreign Affairs) Last week, the administration of President Joe Biden announced a plan to make corporations pay higher taxes. The proposal comes after years of growing concern that the clever accounting practices of big companies—including stashing profits in overseas tax havens—are denying states their fair share of taxes. Last year, the economists Joseph Stiglitz, Todd Tucker, and Gabriel Zucman noted the troubling implications of corporations evading national tax regimes. “Unchecked, these developments will concentrate wealth among a smaller and smaller number of people, while hollowing out the state institutions that provide public services to all,” they wrote.
…momentum for reform is building on both sides of the Atlantic. Klaus Schwab, the executive chair of the World Economic Forum, lamented the “deterioration of the bond between business and society” and the tax evasion that deprives governments of badly needed income. Recent events give the Biden administration and other governments the impetus for action, according to Robin Niblett and Leslie Vinjamuri: “Liberal democracies should . . . use the current fiscal stress and unprecedented government borrowing during the pandemic as an opportunity to rethink outdated national tax structures.”

7 April
G20 takes step towards global minimum corporate tax rate
Meetings of finance ministers follow change in US stance, with consensus growing on tackling tax avoidance
(The Guardian) The virtual meetings between the group of 20 major industrial nations come after the US made the case for an international base rate this week, in a move by the Biden administration to end US resistance to international tax reforms.
According to Reuters, France and Germany have signalled support for the US approach, which could after years of political wrangling pave the way for an agreement on global tax changes this summer.

6 April
IMF upgrades forecast for 2021 global growth to a record 6%
(AP) — The rollout of COVID-19 vaccines and vast sums of government aid will accelerate global economic growth to a record high this year in a powerful rebound from the pandemic recession, the International Monetary Fund says in its latest forecast.
The 190-country lending agency said Tuesday that it expects the world economy to expand 6% in 2021, up from the 5.5% it had forecast in January. It would be the fastest expansion for the global economy in IMF records dating back to 1980.
In 2022, the IMF predicts, international economic growth will decelerate to a still strong 4.4%, up from its January forecast of 4.2%.Transcript of April 2021 World Economic Outlook Press Briefing

5 April
Janet Yellen calls for global minimum corporate tax rate
(The Guardian) The treasury secretary, Janet Yellen, made the case for a global minimum corporate tax rate on Monday as the Biden administration faces opposition to its plans to raise rates on US businesses.
Yellen’s comments come as Republicans and some Democrats have pushed back on Joe Biden’s proposed $2.3tn infrastructure investment bill. The bill would be funded in part by raising rates on US business and closing loopholes that allow domestic and foreign corporations to take advantage of lower taxes overseas.
“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in remarks to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
The Organization for Economic Cooperation and Development (OECD) has been working on a new set of cross-border tax rules that would include a global minimum tax rate for multinational corporations.

Yellen warns that slow vaccine rollout in poor countries poses threat to U.S., global economies
Treasury Secretary Janet Yellen on Monday called for speeding up the distribution of the coronavirus vaccine in poorer nations, arguing the U.S. and global economies are threatened by the impact of covid-19 on the developing world.
(WaPo) While the United States and other rich countries are hoping for a return to normalcy as soon as this fall, many parts of the developing world are not on pace to have widespread vaccination of their populations until 2023 or 2024. Those countries have largely suffered more devastating economic impacts from covid, in part because they do not have the fiscal capacity to authorize the levels of emergency spending approved in the United States.
… Yellen’s remarks come at a pivotal juncture for her ambitious international agenda. In a reversal from the decision of the Trump administration, the Treasury Department under Yellen will this month authorize a new allocation of an emergency form of aid to developing nations known as “Special Drawing Rights.”

April 2021 update to TIGER: The world economy stumbles toward a two-track recovery
Brookings Editor’s Note:
In collaboration with the Financial Times (FT), Eswar Prasad of Brookings and Aryan Khanna and Darren Chang of Cornell have constructed a set of composite indexes that track the global economic recovery. The Tracking Indexes for the Global Economic Recovery (TIGER) is also featured in the Financial Times. A version of this article appears in Project Syndicate.
The Global Economy’s Uneven Recovery
While the US, China, and other leading economies are on their way to a robust recovery, many others are struggling to return to pre-pandemic GDP levels. In most regions, including Europe and Latin America, the 2020 recession will most likely leave long-lasting scars on both GDP and employment.
Eswar Prasad
(Project Syndicate) The US and China are shaping up to be the main drivers of global growth in 2021. Household consumption and business investment have surged in both economies, along with measures of private-sector confidence. Industrial production has rebounded in most countries, firming up commodity prices and international trade. Nonetheless, the US, China, India, Indonesia, and South Korea will probably be the only major economies to exceed pre-pandemic GDP levels by the end of this year. In most other regions, the 2020 recession will most likely leave longer-lasting scars on both GDP and employment.
… The world economy has thus arrived at a pivotal moment. Many countries are grappling with whether to open up their economies despite the continued spread of the virus, and whether to unleash additional macroeconomic stimulus, which could expose them to an unfavorable tradeoff between short-term benefits and longer-term vulnerabilities. Uncertainties are rife, the stakes are high, and indecisive policymaking would hurt consumer and business confidence in the weaker economies, adding to economic strains.
The recipe for a strong and durable recovery remains the same: resolute measures to control the virus, coupled with balanced monetary and fiscal stimulus and policies that both support demand and improve productivity. In economies that are recovering strongly, it would be premature to ease up in either dimension; elsewhere, policymakers will need to redouble their efforts in both.

2 April
Mohamed A. El-Erian: Ensuring a Stronger and Fairer Global Recovery
Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations. Rich nations must either help developing countries fight Covid or live in a fortress

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