IMF trims 2021 GDP forecast, citing 'vaccine divide,' inflation
The International Monetary Fund expects global economic growth in 2021 to fall slightly below its July forecast of 6%, IMF chief Kristalina Georgieva said on Tuesday, citing risks associated with debt, inflation and divergent economic trends in the wake of the COVID-19 pandemic.
Georgieva said the global economy was bouncing back but the pandemic continued to limit the recovery, with the main obstacle posed by the “Great Vaccination Divide” that has left too many countries with too little access to COVID-19 vaccines.
The United States and China remained vital engines of growth, and Italy and Europe were showing increased momentum, but growth was worsening elsewhere, Georgieva said.
Inflation pressures, a key risk factor, were expected to subside in most countries in 2022 but would continue to affect some emerging and developing economies, she said, warning that a sustained increase in inflation expectations could cause a rapid rise in interest rates and tighter financial conditions.
RISING DEBT BURDENS
Global debt levels, now at about 100% of world gross domestic product, meant many developing countries had very limited ability to issue new debt at favorable conditions, Georgieva said.
Asked about rising debt levels in Europe, Georgieva said growing economic momentum had put Europe on a sound footing to avoid another sovereign debt crisis like the one faced by Greece in the aftermath of the global financial crisis of 2007–08.
But she said countries would have to plan carefully how to shift course to medium-term fiscal consolidation to erase the increased pandemic-related debt burden.
ACCELERATE VACCINE DELIVERIES
Georgieva urged richer nations to increase delivery of COVID-19 vaccines to developing countries, remove trade restrictions and close a $20 billion gap in grant funding needed for COVID-19 testing, tracing and therapeutics.
While nearly 46% of people around the world have received at least one dose of a COVID-19 vaccine, the rate is just 2.3% for people in low-income countries, according to Our World in Data at the University of Oxford.
Failure to close the massive gap in vaccination rates between advanced economies and poorer nations could hold back a global recovery, driving cumulative global GDP losses to $5.3 trillion over the next five years, she said.
A shift to renewable energy, new electricity networks, energy efficiency and low carbon mobility could raise global GDP by about 2% this decade, creating 30 million new jobs, she said.
Reference: Reuters
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