- The International Monetary Fund has predicted a stronger worldwide economic recovery.
- But amidst a recovery, the IMF warns of an “exceptionally” uncertain outlook amid a widening gap between advanced and emerging economies.
- The IMF also predicts the future will see lingering coronavirus risks, including the emergence of mutations and uneven distribution of vaccines.
WASHINGTON D.C.: The International Monetary Fund (IMF) has predicted a stronger worldwide economic recovery, but warned of an “exceptionally” uncertain outlook amid a widening gap between advanced and emerging economies and lingering coronavirus risks, including the emergence of mutations and uneven distribution of vaccines.
In view of the additional stimulus measures in the US, the IMF will, in early April, revise its January forecast of 5.5 percent global growth, according to first deputy managing director Geoffrey Okamoto, as reported by Reuters.
Although there are signs of a stronger rebound, there are also indications of a growing imbalance between advanced and emerging economies, with cumulative income per capita in 2020-2022 in emerging and developing nations, excluding China, projected to be 22 percent lower than the level it would have reached without the pandemic, he said.
This is expected to push some 90 million people into extreme poverty, he added.
Even though China has out-paced other large economies in restoring growth to pre-pandemic levels, its recovery has lacked balance, with private consumption trailing investment, Okamoto pointed out, while speaking at the China Development Forum.
As it is still not clear how long the pandemic will last, given the fact that access to vaccines across advanced and emerging nations has remained highly unequal, and the overall growth outlook remains “exceptionally” uncertain, he said.
Adding to the uncertainly is the global response to the pandemic, which has also remained widely divergent.
Some countries, particularly those with low incomes and high debt, have little fiscal room to increase spending to contain the pandemic and deal with its economic impact, Okamoto noted.
Tighter fiscal conditions could also leave countries with high levels of public and private debt highly vulnerable, as made evident by the recent rise in bond yields, amid improving outlooks in some advanced economies, which have fueled hopes of an earlier rollback of fiscal stimulus measures, he added.
Warning that the current crisis could leave deep scars, he said that in the past, advanced economies have seen output dip nearly 5 percent below pre-recession levels, five years after entering a recession.
The situation could well be worse for countries which cannot afford a strong macroeconomic response or have large services sectors, making them more vulnerable to pandemic disruptions, he cautioned.
