The global economy is growing strongly out of the pandemic, but there remains “danger” and uncertainty to the outlook the head of the International Monetary Fund said Tuesday (March 30)
In a speech to the Council on Foreign Relations, the IMF’s Managing Director Kristalina Georgieva outlined the key messages the Fund will focus on next week during the Spring Meetings bringing together the leadership of its 190 member countries.
Previewing the April 6th launch of the World Economic Outlook, she announced that the Fund projects an upgrade to January’s global growth prediction of 5.5 percent in 2021 due to further policy support and accelerated recovery backed by vaccination in advanced economies.
“In January, we projected global growth at 5.5 percent in 2021. We now expect a further acceleration, partly because of additional policy support, including the new fiscal package in the United States, partly because of the expected vaccine powered recovery in many advanced economies later this year. This allows for an upward revision to our global forecast for this year and for 2022,” said Georgieva.
Georgieva added that the COVID-19 crisis didn’t sink the world into another global financial crisis not only because of the extra ordinary measures countries implemented to control the pandemic, but also because countries had worked together over the past decade to make banking systems more resilient.
Yet, despite the improved outlook, prospects are diverging dangerously across countries and regions.
“In fact, what we see is a multi-speed recovery increasingly powered by two engines, the US and China. They are part of a small group of countries that will be well ahead of their precrisis GDP levels by the end of 2021. But they are the exception, not the rule.” Said Georgieva
She also discussed the less desired outcomes “accelerated recovery” might bring shaped by uneven progress in vaccination and the new virus strains that are holding back growth prospects, especially in Europe and Latin America.
“Accelerated recovery brings good news overall, but it may also create some less desired outcomes. For example, strong growth in the US can benefit many countries through increased trade. We expect inflation to remain contained. But faster US recovery could cause a rapid rise in interest rates, which could lead to a sharp tightening of financial conditions and significant capital outflows from emerging and developing economies.” Said Georgieva.
Georgieva concluded her speech by stressing on the world’s need for a fair mechanism to redistribute vaccines from surplus to deficit countries. Part of that is a fully funded COVAX facility to accelerate vaccinations in poorer countries to protect people's health and accelerate the recovery.
“Progress in ending the health crisis could add almost nine trillion dollars to global GDP by 2025. But the window of opportunity is closing fast, the longer it takes to speed up vaccine production and roll out, the harder it will be to achieve these gains.” Said Georgieva.
To watch the full speech, click here