By Xinhua writers Xiong Muling and Gao Pan
WASHINGTON, July 27 (Xinhua) The International Monetary Fund on Tuesday maintained its forecast for global economic growth at 6% for 2021, calling attention to widening gaps in the global recovery and warning of downside risks amid vaccine inequality.
The International Monetary Fund said in its latest World Economic Outlook (WEO) report, that the global growth outlook for this year did not change from the April forecast, but the composition changed, as it raised the expectations of advanced economies and lowered that for emerging and developing economies.
The escalating differences stem largely from inequality in access to a vaccine and varying capacities to provide political support, according to economists at the International Monetary Fund, who have called first and foremost for multilateral action to ensure rapid and universal access to vaccines.
The latest forecasts of the International Monetary Fund showed that the growth prospects of advanced economies this year improved by 0.5 percentage points to 5.6 percent, while the forecasts of emerging markets and developing economies were reduced by 0.4 percentage points to 6.3 percent.
These reviews largely reflect differences in pandemic developments with the delta variable taking charge, according to WEO statistics.
Nearly 40 percent of the population in advanced economies has been fully vaccinated, compared to 11 percent in emerging market economies, and a tiny percentage in developing countries, Gita Gopinath, chief economist at the International Monetary Fund, said in a virtual press briefing on Tuesday. low income.
“Faster-than-expected vaccination rates and a return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades,” she said.
Gopinath also noted that differences in policy support are the second source of the deepening divide, as advanced economies have continued to provide significant fiscal support with $4.6 trillion in announced pandemic-related measures available in 2021 and beyond.
On the other hand, in emerging markets and developing economies, most of the measures ended in 2020, and is looking forward to rebuilding the precautionary fiscal margins, she said, adding that some emerging markets such as Brazil, Hungary, Mexico, Russia and Turkey have begun to hoist monetary policy. rates to avoid upward price pressures.
Photo taken on April 6, 2021 shows an outside view of the International Monetary Fund headquarters in Washington, DC, United States. (Xinhua/Ting Shen)
“Developing countries in general have continued difficulty, with low vaccination coverage, lofty delta variable (transmission), little fiscal space. And low-income countries swaying,” said Jeffrey Sachs, Columbia University economics professor and senior adviser to the United Nations. Via e-mail to Xinhua News Agency.
“We need the leadership of the G-20,” the famous economist said, urging the United States and China to strengthen their cooperation on universal vaccine coverage, economic recovery, massive unused lending to low-income countries, and a global green and digital growth path.
In response to a interrogate from Xinhua at the press conference, Gopinath said the thing that needs to be done “first of all” is to make sure that one billion doses of vaccine are made available from excess countries to countries that need it now.
“About half a billion vaccines have been announced, but we still need to load that gap,” said the IMF’s chief economist. We also need to make sure that deliveries happen now rather than later in the year or even next year.
Surviving side risks
According to the IMF, “while widespread access to a vaccine can improve the outlook, the stakes in the balance tilt to the downside,” which has estimated that the emergence of highly contagious virus variants could hamper recovery and wipe out a cumulative $4.5 trillion from the global whole. . GDP by 2025.
In one negative scenario, the unused variables are supposed to trigger a unused contagion wave in emerging markets and developing economies in the coming months, with tightening financial conditions amid concerns about inflation in advanced economies.
“As a result, emerging markets have been hit by this double whammy, and in this scenario, they may experience significant production losses over the coming years,” Petya Cueva Brooks, deputy director of the IMF’s Research Department, told Xinhua.
Nick Penbrook and Brendan McKenna, economists at Wells Fargo Securities, write in an analysis that they do not expect governments to re-impose widespread restrictions, nor do they see consumers voluntarily limiting their own activities to a significant degree in response to the latest COVID-19 developments. .
However, they were warned that if the latest outbreak persists for a lengthy time, possibly until the end of this year, “there will be a greater likelihood that governments will reimpose restrictions and central banks will delay their tightening plans.”
Describing the delta variable as an “significant concern,” Gopinath said it had led to ratings downgrades in emerging Asia, such as India, Indonesia and Malaysia, where recent waves of infections have hampered activity. Meanwhile, increasing numbers of cases are observed in many parts of the world, including the United States.
“I think even though we did include some of it in our projections, there is still a significant downside risk, depending on how that develops in the coming,” Gopinath said.
The IMF also emphasized the urgency of removing trade restrictions under the current circumstances. The WEO showed that global trade volumes are expected to expand 9.7% in 2021, 1.3 percentage points higher than the April forecast. This comes following a contraction of 8.3 percent in 2020.
“Overall, I think this is an area where we can all do better,” Brooks told Xinhua.
“The final thing one needs in this phase of the recovery is trade tensions and anything related to that,” she added.
While demand bottlenecks and pent-up supply chains put upward pressures on prices, the IMF expects inflation to recede to pre-pandemic ranges in 2022 in most advanced economies.
The estimate, according to the IMF, is from the following: a big part of abnormally lofty inflation readings is discretionary; Aggregate employment rates remain well below pre-pandemic levels in most countries, and aggregate wage growth remains within average ranges; Long-term inflation expectations remain solid.
A woman walks former the headquarters of the International Monetary Fund in Washington, DC, United States, March 30, 2021. (Xinhua/Ting Shen)
This assessment is, however, subject to a distinguished deal of uncertainty given the unknown nature of this recovery, Gopinath said. “More persistent supply disruptions and a sharp rise in home prices are some of the factors that could lead to persistently lofty inflation.”
She said inflation is expected to remain lofty until 2022 in some emerging market and developing economies, in part related to persistent food price pressures and currency depreciation – creating another gap.
Noting that the IMF’s baseline shows that inflationary pressures are temporary, Brooks said, however, that “if we were to see some of these factors not propagate, ‘in a unique situation,’ especially if we were to see a pullback of inflation expectations, it would be a grave problem.” .
The significant thing to preserve in mind is that this is what central bank credibility is all about, the IMF official said, stressing that what central banks say and do is “really significant”, as it affects inflation expectations.
“We think central banks have the tools to make sure that doesn’t happen,” Brooks said. Which is why we also recommend acting when there are signs that we are getting into this type of situation. (Video Reporters: Xiong Maoling, Gao Pan, Hu Yousong and Tan Yixiao; Video Editor: Liu Ruoshi)■