Kristalina Georgieva_IMF_Policy Agenda_oct2021

Worldwide vaccination and narrowing the economic divide, key to resume growth path in rich countries, IMF Georgieva warns

Hike in energy prices is just one risk for growth and inflation. Extending worldwide vaccination also to developing countries and narrowing the economic gap between poor and rich economies are key for the developped world to resume growth at pre-pandemic levels, Kristalina Georgieva (Managing Director of the International Monetary Fund) warns.

“Why we should care about this divergence in economic fortunes between advanced economies, some emerging markets, and the rest of the world? Because as long as it persists and especially if it widens, this risk of interruptions in global supply chains is going to be higher and therefore the pressure on prices, the pressure on inflation would be higher.,” underscores Kristalina Georgieva IMF Managing Director) in her virtual press briefing on the Global Policy Agenda.
“And let’s remember that we are watching also other factors that can hit on prices and lift them up, such as more frequent natural disasters that have lifted up food prices in so many places. Again, I repeat at this point, we expect to be transitory, but that hangs on an expectation that we will accelerate vaccinations and accelerate recovery where it is falling behind,” said Georgieva.

“…let’s remember that we are watching also other factors that can hit on prices and lift them up, such as more frequent natural disasters that have lifted up food prices in so many places. Again, I repeat at this point, we expect to be transitory, but that hangs on an expectation that we will accelerate vaccinations and accelerate recovery where it is falling behind,” she added

$9 trill increase in cumulative income by 2025, should medical solutions are made available faster than expected

“One of the major risks remains that there could be new variants of the virus that could further slow back the recovery. We’re seeing major supply disruptions around the world that are also feeding inflationary pressures, which are quite high and financial risk taking also is increasing, which poses an additional risk to the outlook,” explained Gita Gopinath (IMF Chief Exonomist).

Gita Gopinath_IMF WEO_Oct 2021
Gita Gopinath (Economic Counsellor and Director of the Research Department at the International Monetary Fund) during the IMF WEO press briefing on 12th October 2021. © IMF

“Greater international collaboration is needed to end this health crisis. Tremendous progress is being made in developing tests, treatments and vaccines, but only if countries work closely together. Will there be enough production and widespread distribution to every part of the world to end this pandemic,” Gopinath said.
“We estimate that if medical solutions can be made available faster and more widely relative to our current baseline, it could lead to a cumulative increase in global income of almost nine trillion dollars in 2025, benefiting all economies and reducing divergence,” she added.

“As a result of eased lockdowns and rapid deployment of both monetary and fiscal policy support, the world is coming back from the depths of its collapse. In the peak of this crisis, which was the first half of this year. Employment levels have partially rebounded after having plummeted to historic lows. That said, this crisis is far from over,” said Gopinath, the first woman ever to hold the position of IMF Chief Economist.

WEO Oct 2021_IMF growth projections by regionsjpg
IMF WEO October 2021. © IMF

“The foremost priority is to vaccinate the world. Much greater multilateral action is needed to vaccinate at least 40% of the population in every country by the end of this year and 70% by the middle of next year. We also need much greater action to address climate change. Individual countries will need to tailor their fiscal and monetary policy to the country’s specific conditions, to the health conditions in their country, to their economic conditions, while also maintaining the credibility of their fiscal and monetary frameworks,” she underscored.

IMF reduced worldwide growth forecast

“The global recovery continues, but momentum has weakened, hobbled by the pandemic. We have a slight downward revision for global growth for this year to 5.9 percent for next year, our projection remains unchanged at 4.9 percent. The divergences in growth prospects across countries, however, persist and remains a major concern,” said Gita Gopinath, Economic Counsellor and Director of the Research Department at the International Monetary Fund.

WEO Oct 2021_IMF growth projections global advanced vs emerging
IMF WEO October 2021. © IMF

The IMF is lowering its global growth projection for 2021 slightly to 5.9% while keeping it unchanged for 2022 at 4.9%. However, this modest headline revision masks large downgrades for some countries the Fund reports in its World Economic Outlook released Tuesday (October 12) in Washington, DC.

Excluding China, cumulative growth goes in the red

“If you exclude China from our 2021 numbers, then we have that cumulative growth between 2020 and 2021 is going to be negative for the global economy. For most countries or many countries in the world we are seeing a return back to 2019 levels. And remember, this is levels, not per capita terms, but just in terms of levels by 2022. But then there are some regions of the world where it’s projected to take even longer. And Latin America, for instance, we have that going into 2023 for it to return back to pre-pandemic levels. Now there’s variation. You know, China is already exceeding 2019 levels this year and continuing to grow cumulatively by 10 percent between this year and next. But for many, many other countries in the world, the return is gradual, 2022 or 2023,” Gopinath explained.

WEO-Chart-OCT-21
IMF WEO chart October 2021. © IMF

Strength in the Chinese economy helped boost global figures, as did a stronger than feared US economy in the second and third quarter, the IMF found. But that hides an underlying uncertainty for many smaller countries, and it will be years before they recover even to pre-pandemic levels, she ended.

Image over the headline.- Kristalina Georgieva (IMF Managing Director) during the press briefing on IMF Global Policy Agenda.© IMF

Related external links:

IMF World Economic Outlook (update released on October 2021)

Related Eastwind links:

IMF Georgieva.- Three points to take into account for digital currencies acting as economic booster rather than as an economic risk

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