Coronavirus: United Kingdom, facing worst recession on record, sees GDP drop 20.4% in Q2

The UK has seen its economy, hit by the coronavirus crisis, suffer a "record" contraction of 20.4% in the second quarter, and is officially facing its worst recession on record, agency figures show National Statistics (ONS), published Wednesday 12 August. 
Economists consider that a country enters a technical recession when it accumulates two consecutive quarters of contraction in its economy. According to the ONS, most of the contraction, which began to be felt in March, occurred in April, an entire month of containment and almost total cessation of activity in the country, which saw production collapsed by 20%.

With a very early recovery in construction sites and manufacturing activity, gross domestic product (GDP) rebounded in May by 2.4% (revised figure), followed by an acceleration in June (+8.7 %) thanks in particular to the reopening of all shops. This is the biggest contraction in the UK economy since the ONS began these quarterly statistics in 1955, he said…

G20 debt moratorium: a strong push for multilateralism in an increasingly fragmented world

By advocating G20 debt relief at the recent G5 Sahel summit in Mauritania, France confirmed its multilateral convictions. When French President Emmanuel Macron traveled outside of Europe for the first time since the end of the lockdown imposed by the Covid-19 pandemic, he chose to travel to Mauritania for the G5 Sahel summit. The Sahel region in West and Central Africa faces persistent terrorism and security threats that have international implications. However, listening attentively to President Macron's first speech in Nouakchott, it became clear that he was also using this visit to promote a sovereign debt relief initiative put in place in April during the IMF's spring meetings and from the World Bank. The G20 then agreed to suspend the debt service of low-income countries for eight months in order to allow them to redirect funds to the health and economic costs of the Covid-19 pandemic. Mauritania will be a beneficiary of this initiative.
G20 debt moratorium: a strong push for multilateralism in an increasingly fragmented world

As we saw at this weekend's G20 meeting, France continues to play a central role in supporting the suspension of debt service for the poorest countries in the world, mainly by Africa. In so doing, she made a frank push for multilateralism amid geopolitical tensions between the superpowers, increasingly entrenched isolationism in the United States, repercussions of Brexit, and growing criticism of the China's handling of the coronavirus epidemic. The message is clear: the world will face over-indebtedness due to COVID-19 and the world should work together to find solutions. At the heart of the debt relief efforts is the French Treasury, which hosts the Paris Club, an ad hoc negotiating forum of 22 creditor governments. The Paris Club secretariat coordinates the implementation of the debt service suspension with the G20 participants.

There is no doubt that many African countries will face a serious debt problem in 2020. Already by the end of 2019, the end of the debt financing cycle had been reached. Borrowing countries had taken advantage of high commodity prices, a low inflation environment and excess savings in developed markets in search of high yield investments. The arrival of COVID-19 in early 2020 has drained national budgets and hampered new funding, exposing debt service vulnerabilities in several countries. In such a context, the G20 initiative is not seen as a panacea. Suspending debt payments will allow countries with growing primary deficits to finance COVID-19 prevention and treatment. It will help stimulate economic activity. But the real impact of the G20 initiative is paving the way for stronger multilateralism in a world of growing political disengagement.

At the heart of the G20 initiative is a comprehensive review of countries' sovereign debts, including debts to China. There is very little information on the terms of Chinese bilateral and commercial loans, and China is not a member of the OECD Creditor Reporting System. By making debt transparency key to the success of the G20 initiative, a multilateral framework has been created to examine in more detail the composition and risks of sovereign debt. The initiative also serves to pave the way for a more equitable sharing of the costs of debt relief among all groups of creditors. This is even more important considering the crucial role of China in sovereign financing today and the difficulty of assessing the debt relief it could provide. For example, how do you convince hesitant private creditors, another vital source of hard currency, to participate in sovereign debt restructurings if they fear their efforts will subsidize China's debt collections?

By advocating G20 debt relief at the recent G5 Sahel summit in Mauritania, France confirmed its multilateral convictions. Countries can work together to collectively address security and terrorism issues as well as to find better and more sustainable solutions for sovereign debt sustainability. By strengthening the role of the Paris Club, France is breathing new life into multilateralism at a crucial time.