Pushing back COVID-19 key to global economic growth this year - IMF

The January 2021 World Economic Outlook Report issued by the International Monetary Fund (IMF) is projecting a 5.5% growth in the global economy this year, though its projection is underpinned by a distinct hedging of bets arising out of what is now believed to be fresh chameleon-like assaults from the global COVID-19 pandemic.

The Fund is proffering its 2021 growth projection against the backdrop of “exceptional uncertainty” following the near simultaneous realisation of the long-awaited vaccine on the one hand and the news that the seeming mutation of the virus could threaten if not nullify altogether the effect of the vaccine.

The IMF’s 2021 forecast is revised upward by 0.3% relative to the Fund’s previous forecast which it says reflects expectations of “a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.”

While the forecast is not exactly brimming with certainty, however, the projected global 2021 growth recovery this year follows “a severe collapse in 2020” which the Fund said “has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors.” The Fund puts the global growth contraction for 2020 at -3.5 per cent, 0.9 percentage point higher than projected in the previous forecast.

Not unexpectedly, the IMF says that the strength of this year’s recovery will be uneven, varying significantly across countries. Some of the factors that will weigh heavily in influencing the rate of recovery will be “access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis.”

The Fund says that such growth as occurs in individual countries will depend strongly on policy actions that “ensure effective support until the recovery is firmly underway, with an emphasis on advancing key imperatives of raising potential output, ensuring participatory growth that benefits all, and accelerating the transition to lower carbon dependence.”

The IMF, meanwhile, is advocating “strong multilateral cooperation” which it says is required in order to bring COVID-19 under control globally. Such efforts include bolstering funding for the COVID-19 Vaccines Global Access (COVAX) Facility through which countries have the opportunity to afford their populations early access to effective vaccines. Last week the Ethiopian-born Director General of the World Health Organization Tedros Adhanom Ghebreyesus openly criticised what is widely believed to be a weighted country access to vaccines that favours rich nations. The IMF says it wants to see an acceleration of “access to vaccines for all countries, ensuring universal distribution of vaccines, and facilitating access to therapeutics at affordable prices for all.”

Meanwhile, the Fund says that several low-income developing countries entered the current crisis with high debt which it says is set to rise further during the pandemic. “The global community will need to continue working closely to ensure adequate access to international liquidity for these countries. Where sovereign debt is unsustainable, eligible countries should work with creditors to restructure their debt under the Common Framework agreed by the G20,” the Fund adds.