The latest听听补苍诲听听reports show a global economic boom gathering steam. This is thanks to听听in fiscal stimulus packages spent mostly across the world鈥檚 rich nations since the pandemic began.听
After the reversal of 2020, the global economy is now projected to听, powered by strong growth in the US and China, which are forecast to grow by 6% and 8%, respectively.听
Australians are not missing out, thanks to听听in public spending. The听鈥檚 GDP growth forecast is 4.25% in 2021. Unemployment is forecast to fall to below 5% by mid-2023.听
Before we get ahead of ourselves, however, we should consider the risks the pandemic continues to pose, not only to our recovery but the global boom the world鈥檚 rich nations have generated.听
NEW VARIANTS COULD LEAD TO COVID SURGE
As a rich nation surrounded by developing countries, Australia can see these risks around its region, not only in India, but also Southeast Asia and the Pacific.听
The first of these risks is that all our forecasts and projections assume the progress of successful vaccination programs, not only in Australia but around the world. Yet, the virus is potentially adapting more quickly than developing countries are able to vaccinate their populations.听
The B.1.617 virus variant has become the dominant strain in India and听, including many in Southeast Asia.听
Indonesia is particularly vulnerable. The vaccine rollout here has been sluggish, with听听having received their first dose so far. The government has set an ambitious target of vaccinating听听by next March, but it will struggle to reach this target.听
Although the government prohibited travel during the recent Eid holiday, data suggests at least听, causing one epidemiologist to warn of a听coronavirus disease 2019 (COVID-19)听鈥渢imebomb鈥 in the country.听
The government is already warning the appearance of the B.1.617 variant (and others) could cause the country to听听of between 4.5% and 5.3% this year, if the poor are unable to work due to new mobility restrictions.听
MILLIONS MORE HAVE FALLEN INTO EXTREME POVERTY
The second risk to a post-pandemic global recovery is many developing nations are simply not benefiting from the start of the economic rebound.听
COVID-19 has reduced per capita GDP by听听in these countries.听
Last year,听听鈥 mostly in South Asia 鈥 were on the brink of extreme poverty. This could rise to as many as听听this year. As a result, millions of children could drop out of school this year around the world.听
The Pacific Island countries have been badly affected, not only by the economic effects of border closures, but in the case of听Papua New Guinea, by the virus itself. With many reliant on tourism, commodities, and remittances, the Pacific Island countries鈥 economies听听by 11% in 2020 collectively.听
Fiji鈥檚 GDP contracted by a massive 19%, while in typhoon-affected Vanuatu, the economy shrank by 10%.听
The effects on human development outcomes are immediately obvious. In PNG,听听surveyed by the World Bank in 2020 indicated they were sending fewer children to school because of reduced incomes.听
More broadly, across East Asia and the Pacific, students are听听0.8 Learning-Adjusted Years of Schooling (LAYS) 鈥 a measure that combines quantity and quality of schooling 鈥 between January 2020 and December 2021. This is almost half their school time over two years.听
AUSTRALIA鈥橲 AID SPENDING STILL NOT ENOUGH
Unlike Australia, many developing countries cannot free up large amounts of public money to invest in stimulating their economies. For them to join in the global recovery, they will need assistance.听
Australia鈥檚 response is helping to some extent. Australia invested an extra听听in international development spending in 2020鈥21 above its notional baseline allocation of听.听
In 2021鈥22, it is projecting a total investment of听. This is still extra, but it represents a cut in real terms of 5% on the previous year.听
Compared to other wealthy nations, however, Australia is still not giving much. Australia鈥檚 investment in Official Development Assistance (ODA) as a proportion of gross national income听, much lower than the听.听
Given the scale of need and the pace of developments in our region, Australia will very likely offer more as the financial year progresses.听
GREATER STIMULUS SPENDING AND SOCIAL PROTECTION SCHEMES
But Australia also needs to do much more to听mobilize听other forms of funding to assist its听neighbors鈥櫶齟conomic recoveries.听
One thing Canberra is doing right is investing some of its听ODA听in social protection schemes around the region, including an听听for the Pacific that will scale up assistance to vulnerable households.听
Australia has also issued a听, which it stipulates includes money for strengthening Indonesia鈥檚 health and social protection systems.听
On top of this investment, Australia should use its access to global forums to advocate for more assistance to developing countries, especially in Asia and the Pacific.听
One such forum is the听, where Australia says it wants to promote prosperity and security in the Indo-Pacific.听
Another is the coming听听in Italy in October, where Australia will have an opportunity to advocate for debt relief and restructuring for developing countries. This will allow them to free up cash for stimulus schemes like JobKeeper and JobSeeker, which protected many of us in Australia over the past year.听
Australia is already meeting with the United States鈥 new aid administrator, Samantha Power, to discuss more cooperation on this front, including through the informal Quad alliance (which also includes Japan and India).听
Australia should also continue to advocate to multilateral banks and funding agencies to invest real cash in new and additional stimulus packages and social protection systems around the region.听
These systems could fund universal child benefits to keep children schooled and properly fed, protecting the advances our听neighbors听have made over the past 40 years of economic development.听
Key to our own security and prosperity is our听neighbors’听resilience to shocks like the COVID-19 pandemic and economic downturn.听
Australia will need to allocate more money from its own coffers 鈥 and encourage more giving from the rest of the developed world 鈥 to stimulate our听neighbors鈥櫶齟conomies. Only then will we see a global economic recovery where everyone benefits 鈥 not just the wealthy.听鈥斕Amrita Malhi/The Conversation听
Amrita Malhi is Visiting Fellow, Coral Bell School of Asia Pacific Affairs; Senior Adviser Geoeconomics, Save the Children, Australian National University听
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