Observing that the global economic recovery remains "hobbled" due to the COVID-19 pandemic, the International Monetary Fund (IMF) said on Tuesday that the US and China remain vital engines of growth even as their momentum slows.
Ahead of the release of the updated World Economic Outlook (WEO) next week, the IMF Managing Director Kristalina Georgieva said that she now expects growth to moderate slightly this year. The WEO is the IMF''s report of financial developments and policies in member countries.
"We face a global recovery that remains "hobbled" by the pandemic and its impact. We are unable to walk forward properly - it is like walking with stones in our shoes! The most immediate obstacle is the ''Great Vaccination Divide'' - too many countries with too little access to vaccines, leaving too many people unprotected from COVID,” Georgieva said.
"At the same time, countries remain deeply divided in their ability to respond - in being able to support the recovery, and in their ability to invest for the future. But we can secure a stronger recovery everywhere and shape a better post-pandemic world for all. We can only do it by working together to overcome these divides," she said in her address ahead of the Annual Meetings of the IMF and the World Bank next week.
This will be the focus of the Annual Meetings in Washington next week, she noted at the curtain raiser speech at Bocconi University and T20 National (Think20 Summit).
"But the risks and obstacles to a balanced global recovery have become even more pronounced: the stones in our shoes have become more painful," Georgieva said.
"The United States and China remain vital engines of growth even as their momentum is now slowing. A few advanced and emerging economies are still gaining momentum, including Italy and Europe more broadly,” she said.
By contrast, in many other countries growth continues to worsen, hampered by low access to vaccines and constrained policy response, especially in some low-income nations. This divergence in economic fortunes is becoming more persistent, the IMF chief explained.
"Economic output in advanced economies is projected to return to pre-pandemic trends by 2022. But most emerging and developing countries will take many more years to recover. This delayed recovery will make it even more difficult to avoid long-term economic scarring, including from job losses, which hit young people, women, and informal workers especially hard," she said.
She noted that headline inflation rates have increased rapidly in a number of countries, again some more affected than others.
"While we do expect price pressures to subside in most countries in 2022, in some emerging and developing economies price pressures are expected to persist," she said.
The IMF estimates that global public debt has increased to almost 100 per cent of GDP. "Much of this reflects the necessary fiscal response to the crisis as well as the heavy output and revenue losses due to the pandemic. Here we see yet another deep divide, with some countries more affected than others - especially in the developing world," she said.
"Many started the pandemic with very little fiscal firepower. Now they have even less room in their budgets - and very limited ability to issue new debt at favourable terms. In short, they face tough times and are caught on the wrong side of the fiscal financing divide,” said the Bulgarian economist, who has served in a number of key positions at the World Bank.
Georgieva called for sharply increasing delivery of COVID-19 vaccine doses to the developing world and that richer nations must deliver on their donation pledges immediately.
"And, together, we must boost vaccine production and distribution capabilities; and remove trade restrictions on medical materials. In addition to vaccines, we must also close a USD-20 billion gap in grant financing for testing, tracing, and therapeutics,” she said.
"If we don’t, large parts of the world will remain unvaccinated, and the human tragedy will continue. That would hold the (economic) recovery back. We could see global GDP losses rise to $5.3 trillion over the next five years,” she said.
The coronavirus has killed over 48 lakh people, along with 23.5 crore confirmed infections, across the world so far, according to Johns Hopkins University.