The big story from recent IMF and World Bank meetings is that the world economy is on Significantly faster recovery than expected even six months ago. But the overall recovery in the global economy overshadows what’s happening with the people of the world. Both in the countries and among them, the disadvantaged seem to have suffered the slowest recovery. What’s more, this house division may not stand: what’s going on – on top of that, slow global vaccine rollout – will worsen the outlook for everyone.
The outstanding feature of the new forecasts from the IMF is that the growth of global gross domestic product per capita between 2019 and 2022 is now forecast to be only 3 percentage points below the January forecast. 2020. This is much better than 6.5 percent. shortage last year and a 4 percent shortage forecast for this year. This is a picture of a world economy recovering stronger and better than expected. (See chart.)
Even more striking, however, is the divergence. Advanced economies are now projected to enjoy per capita GDP growth from 2019 to 2022, just 1 percentage point lower than January 2020. But emerging markets and other Low-income developing countries are forecast to be affected by per capita GDP growth of 4.3 (5.8, respectively, without China) and 6.5 percentage points. For those who do, it will be returned. But, from those who don’t have it, even a little bit they have: in January, World Bank reported an increase in the number of people in extreme poverty last year as a result of Covid-19 that ranged from 119 million to 124 million. With dire forecasts, this disaster seems unlikely to be reversed anytime soon.
In essence, the IMF now forecasts that the advanced economies and China will come out of the crisis virtually unharmed, with the US economy even slightly larger than that. Previous forecast, while emerging and developing countries suffer a large and long-term impact. But remember that two-thirds of humanity lives in the second world.
This is the flip side of what happened after the 2007-09 global financial crisis. That’s partly because it originated in high-income countries. It is also due to the strong recovery of China in 2009. But the biggest reason for the current difference is that high-income countries all own and use this ability to manage the shock in a way that few other countries (China is the main exception) can: Rich countries can suffer economic and social damage. with exceptional fiscal and monetary policy responses; and they can develop, produce, and deliver vaccines at high speed.
According to IMF’s Financial supervision, “Over the past 12 months, countries have announced 16 billion dollars in fiscal action”. But much of this is in the advanced countries. Advanced economies’ fiscal deficits have grown by 8.8% of GDP between 2019 and 2020, to 11.7%. It will still be 10.4% by 2021. In the emerging economies, fiscal deficits have grown by 5.1% of GDP between 2019 and 2020, to 9.8%. But in low-income developing countries, it only increased by 1.6% of GDP, to 5.5%. Furthermore, the Supervisor emphasizes, “the increase in deficits in advanced and some emerging market economies is due to the same increase in spending and revenue declines, while in many The emerging market economy and low-income developing countries, it mainly stemmed from a collapse in revenues caused by the economic recession ”.
It would be unwise to make strong recovery forecasts for advanced economies. It is possible that new non-invasive variants of today’s vaccines will spill over the world. It’s very likely it won’t be able to reopen the border anytime soon. It is also possible that the monetary and fiscal policies will become too strong, especially in the United States, Larry Summers does argument, creating a strong increase in inflation, inflation expectations and real interest rates. If so, this would force policymakers to brake and could create a debt crisis for vulnerable borrowers both at home and abroad.
Furthermore, even as high-income countries, China and others recover strongly, many emerging and developing countries may still face major difficulties, due to slow vaccine deployment. amazingly, problems in debt managementtensions caused by worsening poverty and limited policy space. Economies that depend on tourism and tourism will see a particularly slow recovery, especially if new variations continue to emerge. None of this is helped by the fact that many governments are corrupt, ineffective, or both. This is always important. In unusual times, such as this, it’s even more important.
There is nothing more foolish than policymakers in rich countries breathe a sigh of relief and turn a blind eye to the global challenges they face. Instead, they have to do whatever it takes to get the world vaccinated by the end of next year and support the development of repeat shots for everyone, if necessary. They must do what is necessary to ensure that all nations have the resources they need to deal with these health and economic shocks. They also have to do what is necessary to ensure that, if a debt crisis occurs, they know who creditors – officially and privately – are and how to manage the outcome of negotiations.
Last but not least, they must learn lessons from this pandemic. So far, it has killed 3 million people and caused a major economic shock. The next thing can be pretty easily much worse in both of these sad aspects. Islands that were supposed to be safe would not thrive in a world full of threatening diseases.