A dangerous level of divergence is about to come between and within economies, with developing countries excluding china estimated a cumulative per capita income loss of 22 percent, versus 13 percent in advanced economies by 2022, says International Monetary Fund (IMF) by urging strong G20 policies to counter it.
During a virtual meeting of the G20 Finance Ministers and Central Bank Governors, the managing director of IMF, Kristalina Georgieva highlighted the forum’s progress in vaccinations and strong monetary policy and fiscal actions, which supported the world economy to get into the path of recovery.
“Growth prospects for this year, enhanced by a sizable additional stimulus in some large economies, are possibly even above our January 5.5 percent projection. Yet, uncertainties remain very high, as vaccinations still have a long way to go against new waves and variants of the virus,” Ms. Georgieva stated.
The IMF expects a dangerous divergence between and within economies and it forecasts that only half of the countries that were narrowing their income gaps relative to advanced economies will do so over 2020-22. Within countries, the young, the low-skilled, and women have been disproportionately affected by job losses. A major threat from climatic changes also needs to be addressed.
To ensure impactful support for the world’s recovery, the first thing to be focused on is accelerating vaccinations, for that international collaboration is required to improve production and make vaccines available everywhere as fast as possible.
The second is to provide lifelines to businesses and households by considering countries’ circumstances until there is a durable exit from the health crisis and prepare for risks and unintended consequences once policy support is gradually withdrawn. Bankruptcies and financial stresses are likely to increase, including excessive volatility in financial markets.
The final step is to enhance support to vulnerable countries. By associating with World Bank, IMF is working with countries to implement strong reforms, address debt transparency and sustainability, and expand concessional financing. The fund is also reviewing the case for extending the Debt Service Suspension Initiative.
“We must deploy all tools at our disposal. I am very encouraged by the growing support for a new Special Drawing Right (SDR) allocation, to boost the reserves of all members in a transparent and accountable manner. And by the calls for an additional mechanism to enable our wealthier members to support low-income countries through the on-lending part of their SDRs. We stand ready to present to our membership a robust assessment of long-term reserve needs and implementation modalities.”
During the meeting, Ms.Georgieva also highlighted the need for aligning the use of public resources with the goal to shape a climate-resilient, digital, and inclusive future.
“We strongly support the Presidency’s proposal on global climate risks and environmental taxation. We will play our part in the areas of our comparative strength, such as integrating climate in public revenues and spending policies, climate-related financial stability risks and data,” Ms.Georgieva added.