Most advanced economies will emerge from the coronavirus crisis with little lasting damage, thanks to the relatively rapid launch of vaccines and their willingness to dramatically increase public spending and loans, according to the IMF.
The likely success in managing the economic consequences of the pandemic will not be replicated in emerging economies, however, highlighting the divergence in economic fortunes, the fund said.
Even with different fortunes, the global economic outlook has improved markedly since the fund’s previous forecasts earlier this year, he said on Tuesday, revising upward expectations for almost all countries.
The global economy is expected to enjoy two years of rapid growth in 2021 and 2022 of 6% and 4.4%, predicts the IMF. It also revised downwards the estimated scale of the contraction in global production caused by the advent of the pandemic last year.
The fund’s projections suggest that the pandemic’s economic legacy will be nothing like the 2008-09 financial crisis, which left countries with a weak growth hangover for a decade later.
In 2024, advanced economies will produce about 1% less output than their growth path before the pandemic, according to IMF forecasts. In contrast, after the 2008-09 recession, they experienced a difference of more than 10 percent.
Overall, the economic impact of the pandemic is “much less than the [2008-09] global financial crisis, “said Gita Gopinath, chief economist of the fund, adding that advanced economies” are receiving very little [economic] scars and [in] the USA [there is] effectively without scars ”.
The IMF revised its forecast for US growth in 2021 up 1.3 percentage points from previous January projections. Canada’s projection rose 1.4 percentage points, Italy rose 1.2 percentage points and the United Kingdom rose 0.8 percentage points.
The fund was particularly optimistic about the prospects for a rapid recovery in the US without inflationary pressures. Gopinath said: “The United States is really the only big economy whose [economic output] by 2022 it is projected to exceed what it would have been in the absence of this pandemic. “
However, the IMF noted that the economic and social pain of the crisis has hit certain countries, and groups of people within countries, with far more strength than others. Parts of Europe that are suffering another wave of coronavirus are likely to take longer to recover, but the IMF was optimistic that the EU would catch up with other advanced economies like the US in just a few years.
In 2024, the IMF expects that even many of these backward European economies will almost return to their pre-pandemic growth trajectory.
This is mainly because the advanced countries and their companies have proven to be much more resistant to blockages than the fund had previously expected.
In contrast, the IMF expects the crisis to be a persistent obstacle for emerging economies, where, with the exception of China, economic production in 2024 is expected to be almost 8% below the level the IMF expected before the pandemic.
The nations most at risk of a slow recovery are emerging economies with little access to Covid-19 vaccines, those with weak public finances and those that rely heavily on tourism, the IMF said.
The blow to emerging economies in the short term will be exacerbated by the disruption of schooling during the pandemic, which took what the fund described as a “severe toll” on education in the poorest countries, because they have only a limited capacity to deliver education online. .
Gopinath said there is little reason for immediate concern about unprecedented levels of fiscal stimulus on both sides of the Atlantic, leading to an increase in inflation, as global forces are likely to maintain control over price increases and there is no sign yet of that central banks or governments would lose control.
But he highlighted the risk that the United States might need to lead the world in tightening monetary policy quickly if inflationary pressures increase rapidly. This could hit emerging markets particularly hard, driving capital flight back to developed economies.
However, there is no sign yet that the $ 1.9 trillion stimulus from US President Joe Biden has destabilized international markets, Gopinath said, signaling this as an encouraging sign.