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11 June 2021

Leaders Gather for G7 Summit

With the G7 Summit taking place between seven of the world’s most advanced economies this weekend, all eyes are on Cornwall.

Among the points of discussion for Joe Biden, Justin Trudeau, Angela Merkel, Emmanuel Macron, Yoshihide Suga, Mario Draghi and Boris Johnson will be recovery from the pandemic, vaccines, the economy and the environment.

The pandemic has impacted every country in the world and the economies of some of the G7 nations have been particularly hard hit. According to the Office for National Statistics, the UK witnessed the “largest fall in volume or ‘real’ gross domestic product (GDP) over Q1 2020 to Q3 2020 of the G7 economies, reflecting the effects of the COVID-19 virus itself, the imposition of public health restrictions and voluntary social distancing to contain its spread.” However, by February 2021, the UK’s GDP price fall had slowed and was broadly comparable to G7 economies, a lower fall than Canada, Italy and Germany.

The fall in household expenditure caused by the pandemic, unlike in previous economic downturns, saw a sharp contraction in the consumption of services. This was most harshly felt in the UK where spending on sporting and cultural services including gyms, sports events, cinema and concerts drastically fell after lockdown measures were introduced on 23rd March 2020. Similarly, the closure of the hospitality industry and work from home orders also contributed.

Spending on services in the average UK household fell by 8.4% between Q4 2019 and Q3 2020 due to the service sector playing a key role in the country’s wider economic picture, with social consumption (culture and hospitality services) accounting for 20.8% of the average’s UK household’s spending in 2018. In the US, spending on services fell by 5% while in France it dropped by 2.3%.

It is clear that the pandemic has hit G7 nations and their citizens hard. However, the climate crisis has been forecast to hit G7 economies “twice as much” as the pandemic according to research published by Oxfam and the Swiss Re Institute. In fact, G7 countries stand to lose as much as US$5tn per year by 2050 if temperatures rise by 2.6OC.

The report suggests that the G7 nations will see 8.5% of their annual GDP wiped from their economies if this rise in temperature, which the report describes as “likely”, does indeed happen. The economies of the G7 have already contracted by 4.2% on average during the pandemic.

The UK’s economy could be set to lose 6.5% of its GDP if it sticks with its current policies, while special quests of this weekend’s G7 Summit in Cornwall, South Korea, Australia and South Africa, could lose 9.7%, 12.5% and 17.8%, respectively, if they continue on their current courses.

The global vaccination drive is also being discussed over the weekend as leaders consider donating vaccines to developing nations. US President Joe Biden has already pledged 500 million doses to 92 low-and-middle-income countries, while UK Prime Minister Boris Johnson has said 100 million of the UK’s surplus doses will be delivered next year. This is on top of the 25 million doses to be donated by the UK by the end of 2021 with the Prime Minister hoping for his fellow G7 leaders to make similar pledges and work towards vaccinating the entire world by the end of 2022.
Leaders Gather for G7 Summit
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