IMF warns of dangerous divergences in post-pandemic recovery
Kristalina Georgieva, the managing director of the International Monetary Fund. EFE/EPA/ERIK S. LESSER/File
By Alfonso Fernandez
Washington, Mar 30 (efe-epa).- International Monetary Fund Managing Director Kristalina Georgieva on Tuesday warned that global economist prospects are "diverging dangerously" with the world economy currently in an unequal recovery with unequal access to anti-Covid vaccines, especially in emerging markets.
Although global economic prospects have geneally improved, they are diverging dangerously not only within countries but also among countries and regions, Georgieva said in a speech before the Council on Foreign Relations, adding that the recovery is a "multi-speed" one headed by the US and China.
She said that the world's two largest economies are part of a small group of countries who will have broadly exceeded their GDP levels by the end of the year, but she added that "they are the exception, not the rule."
The IMF chief said that, in the aggregate, world economic growth is expected to be above 5.5 percent for this year and 4.2 percent for 2022, figures that will be presented next week at the spring assembly held by the IMF along with the Workd Bank, the meeting to be virtual due to the pandemic.
The IMF pegged the global economic contraction last year at 3.5 percent, the biggest since the Great Depression in the 1930s.
But Georgieva acknowledged that the projections are being made within the context of "increased uncertainty," and the key is the "irregular progress" in vaccinating the public and the new virus varients that are putting the brakes on growth, especially in Europe and Latin America.
In the US, President Joe Biden has said that by late April 90 percent of all adults will have been vaccinated, while the European Union has set the target of having 70 percent of the public inoculated by the end of the summer.
Developing economies, hoever, will not be able to attain that vaccination level until at least the end of the year or possibly sometime in 2022.
Thus, Georgieva emphasized that the world needs a "fair mechanism" for redistributing vaccine from countries with an excess of the drugs to countries with a deficit, thus enabling the poorer nations to increase their vaccination rate.
She also said that insofar as the pandemic recedes, the programs of governmental support could be dismantled, something that will have to be carefully managed to mitigate the impact on workers.
Regarding emerging economies, Georgieva's message was one of alarm at potential potholes in the economic recovery.
Among those, she cited the possibility that a speedy US recovery could cause a rapid rise in interest rates, which could lead to an acute contractions in financial conditions and significant outflows of capital from the emerging economies.
This scenario, she said, would mean enormous challenges for the medium-income countries with big financing needs and elevated debt, adding that "many" countries will need more support.
Last year, the IMF offeredmore then $107 billion in financial assistance to 85 countries, and just in Subsaharan Africa the entity provided 13 times more financing than the yearly average for the previous decade.
Given the lack of resources that developing countries are facing, that will add to the need to invest to develop a more sustainable growthmodel based on renewable energy and the transition to digital, something that only the rich countries have the capability to do.
The poorest nations are at risk of losing out on what will be an historic transformation to a global economy based on green and digital foundations, Georgieva said.