The International Monetary Fund forecasts a slow and uncertain recovery from the Covid-19 crisis in its latest update to the World Economic Outlook forecast, the Fund’s chief economist Gita Gopinath said Tuesday (October 13) in Washington, DC.
“The ascent out of this calamitous 'Great Lockdown' is likely to be long, uneven, and highly uncertain. It is therefore essential that fiscal and monetary policy support are not prematurely withdrawn as best possible,” said Gopinath on the launch day of the IMF and World Bank’s Annual Meetings.
Despite rising debt, now is not the time to withdraw measures supporting the global economy, she said.
“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 to hold the position of IMF chief economist.
The ultimate shape of the recovery will be determined by how the world tackles the health crisis, Gopinath said.
“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,” said the Indian-born Harvard professor.
“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.
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.
“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.”
The full report is available at IMF.org/WEO.