Economists believe the large SDR allocation will benefit all members in addressing the long-term global need for reserves, building confidence, and fostering the resilience and stability of the global economy.

Stephany Griffith-Jones

Stephany Griffith-Jones, an economist, financial markets director at the Initiative for Policy Dialogue at Columbia University, and former professorial fellow at the Institute of Development Studies, retweeted an article shared by Sebastien Willemart, an attaché at the Ministry of Foreign Affairs Belgium on the International Monetary Fund (IMF) approving the issuance of $650bn worth special drawing rights (SDRs) to support pandemic recovery.

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Willemart tweeted that the agency is still working on exploring ways for voluntary channelling of SDRs from richer countries to developing countries in order to help them cope with the Covid-19 virus crisis. For instance, stronger member nations can voluntarily lend part of their SDRs to low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).

Approved on 2 August, the general allocation of SDRs will come into effect on 23 August 2021. The newly created SDRs will be credited to IMF member countries as per the existing quotas in the Fund. About $275bn is expected to be allocated to emerging markets and developing countries to achieve a more resilient and sustainable growth from the pandemic.

Ludovic Subran

Ludovic Subran, chief economist at Allianz and Euler Hermes, retweeted a discussion posted by Unravel, on the bounce-back in global trade, post-pandemic supply chains, and protectionism. According to Subran, trade recovery is being driven by three main factors; firstly, due to the steady performance of the manufacturing and construction industries that were unaffected by the lockdowns, due to higher consumption levels as being stayed home, and due to the absence of trade financing holdups.

He further added the Covid shock was deep, but the rebound has been twice as fast compared to the 2008-2009 crisis. As a result, countries are now in the stage of overheating of trade because trade prices are overshooting and trade volumes have more than recovered what they had lost during the pandemic.

Subran also believes that the implications of the pandemic on supply chains is short term, and that cost competitiveness and pragmatism will eventually win. However, the implications may stick longer, as the Covid-induced supply chain disruptions are happening against the backdrop of the US-China trade war and Europe’s ambition with industrial policy.

Natixis Research CIB

Natixis Research CIB, a corporate and investment banker offering customised financial solutions to its clients, shared an article on last year’s Covid-19 containment strategy being an unsustainable strategy going forward as it was just about buying some time. Growing evidence from Asia suggests that the region is a weak link in an otherwise strong global economic recovery.

Slow vaccinations and rising cases are paralysing the economic recovery in China, which experienced an early rebound. The country is now facing its worst Covid-19 outbreaks with more than 200 cases linked to the city of Nanjing. Despite efforts to contain the virus through border restrictions and vaccinations, the Delta variant is continuing to challenge the pandemic response.

New pandemic highs are forcing factory production contracts across Southeast Asia, Indonesia and Malaysia to experience a severe blow due to rising Covid-19 cases and mortalities. Consequently, new restrictions are hindering manufacturing and slowing down export economies such as China and South Korea, which otherwise did well during the pandemic.