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Published: 22:11, July 27, 2021 | Updated: 08:23, July 28, 2021
IMF: Global recovery gap widens on unequal vaccine access
By Bloomberg
Published:22:11, July 27, 2021 Updated:08:23, July 28, 2021 By Bloomberg

In this Oct 15, 2019 photo, Gita Gopinath, IMF Chief Economist and Director of the Research Department, speaks at a briefing during the IMF and World Bank Fall Meetings in Washington, DC, USA. (Olivier Douliery / AFP)

The International Monetary Fund maintained its outlook for the biggest rebound in global economic growth in four decades while changing underlying regional forecasts, with unequal access to vaccines further widening the recovery gap between advanced and developing economies.

World output is still expected to grow 6 percent in 2021 following last year’s 3.2 percent drop, the fund said in an updated World Economic Outlook released Tuesday. It reduced the forecast for emerging-market expansion to 6.3 percent compared with the 6.7 percent increase projected in April, and raised the estimate for advanced economies by 0.5 percentage point to 5.6 percent.

The UK got the biggest bump among major economies, with the IMF now forecasting a growth rate of 7 percent in 2021, a touch lower than Bank of England estimates.

For 2022, the IMF now sees global growth of 4.9 percent, up from 4.4 percent.

“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year -- almost all advanced economies -- and those that will still face resurgent infections and rising COVID-19 death tolls,” the IMF said. “The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.”

World output is still expected to grow 6 percent in 2021 following last year’s 3.2 percent drop, the fund said in an updated World Economic Outlook released Tuesday. It reduced the forecast for emerging-market expansion to 6.3 percent compared with the 6.7 percent increase projected in April, and raised the estimate for advanced economies by 0.5 percentage point to 5.6 percent

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To address the widening gap, the Washington-based fund urged advanced economies -- which have inoculated about 40 percent of their populations -- to share their vaccine surplus with poorer nations.

“Multilateral action is needed to ensure rapid, worldwide access to vaccines, diagnostics, and therapeutics,” IMF Chief Economist Gita Gopinath said in a related blog. “This would save countless lives, prevent new variants from emerging and add trillions of dollars to global economic growth.”

In May, the fund proposed a US$50 billion plan to end the pandemic, in which 40 percent of people in every country would be vaccinated by the end of the year. The World Health Organization, the World Bank and the World Trade Organization all endorsed the proposal.

Emerging Asia saw the biggest downgrade among regions, with the IMF trimming the growth projection for this year by 1.1 percentage points to 7.5 percent.

A 3 percentage-point cut in the annual growth rate for India -- hurt by a severe second COVID-19 wave from March to May -- led the drop. Despite this, gross domestic product there is set to expand 9.5 percent in 2021.

The forecast for sub-Saharan Africa is unchanged relative to April, with worsening pandemic developments expected to weigh on the region’s recovery. A 0.9 percentage-point increase in South Africa’s forecast offset downward revisions in other countries.

On the other hand, the fund raised its GDP expansion outlooks for the US, the euro area, Latin America and the Middle East and Central Asia.

Inflation is expected to return to its pre-pandemic ranges in most countries in 2022 once these disturbances work their way through prices, the fund said. Elevated inflation is also expected in some emerging-market and developing economies, related in part to high food prices.

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The IMF said risks tilt to the downside, with uncertainty surrounding the global baseline remaining high. Delays in administering vaccines would allow new variants to spread, “with possibly higher risks of breakthrough infections among vaccinated populations.”

“Concerted, well-directed policies can make the difference between a future of durable recoveries for all economies or one with widening fault lines -- as many struggle with the health crisis while a handful see conditions normalize, albeit with the constant threat of renewed flare-ups,” the IMF said.

 


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