With the global death toll as a result of the coronavirus peaking 2.5 million and nations in the developed and developing world looking at the second and third spikes of the deadly pandemic, a light at the end of the tunnel is “increasingly visible,” says the International Monetary Fund in its World Economic Outlook (WEO) prepared for the Spring Meetings. At a time when close to 3,000 delegates from member countries descend on Washington DC along with hundreds of observer organisations, press corps and civil society members, it is once again reduced to a virtual meet minus all the hoopla and protests.
“Thanks to the ingenuity of the scientific community, we have multiple vaccines that can reduce the severity and frequency of infections. In parallel, adaptation to pandemic life has enabled the global economy to do well despite subdued overall mobility leading to a stronger than anticipated rebound, on average, across regions,” the Fund has said, pointing out that additional fiscal support particularly in a country like the United States along with unprecedented fiscal response and monetary accommodation has further uplifted the economic outlook.
“We are now projecting a stronger recovery in 2021 and 2022 for the global economy compared to our previous forecast with growth projected to be 6 per cent in 2021 and 4.4 per cent in 2022,” the IMF has said. The projection is that an advanced economy like the US will surpass its pre-COVID GDP in 2021, but many others in the group will return to their pre-COVID levels only in 2022. China, which showed a growth of 2.3 per cent in 2020, will see it rise to 8.4 per cent this year and 5.6 per cent in 2022. As far as India is concerned, IMF statistics show that the economy contracted by 8 per cent in 2020 but will sharply rise to 12.5 per cent in 2021 and to 6.9 per cent in 2022, even as many in the emerging market and developing economies fold are not expected to do well until 2023. But the bottom line has been clearly spelt out: there is the persisting potential of economic damage from the crisis and the daunting challenges are related to divergencies in the speed of recovery, both from within and across nations.
There has not been a facet of life that the pandemic has left untouched. In its Executive Summary, IMF’s WEO stresses that youth, women, and workers with lower educational background and the informally employed have been the hardest hit with about 95 million more people falling below the threshold of extreme poverty in 2020, compared with the pre-pandemic projections. The assessment on the educational sector is even more telling. “…learning losses have been more severe in low income and developing countries which have found it harder to cope with school closures, and especially for girls and students from low income households. Unequal setbacks to schooling could further amplify income inequality,” the Fund has maintained.
A preview to this week’s meeting of the Fund and the Bank came from none other than the Managing Director of the IMF, Kristalina Georgieva, who argued that the world was at another turning point, or in the words of Franklin Delano Roosevelt, at the point of time in history that is full of promise and danger.
“The good news is that the global economy is on a firmer footing. Millions of people are benefitting from vaccines that hold the promise of a normal life, of embracing friends and loved ones. But there is danger as well. Economic fortunes are diverging. Vaccines are not yet available to everyone and everywhere. Too many people continue to face job losses and rising poverty. Too many countries are falling behind. We must not let our guard down!. What we do now will shape the post crisis world. So we must do the right thing. This means, above all, giving everyone a fair shot—a shot in the arm, everywhere, to bring the pandemic to a durable end; and a shot at a better future for vulnerable people and vulnerable countries to pave the way to inclusive and sustainable recovery,” Georgieva told the Council on Foreign Relations.
Both the IMF chief and the international organisation made it abundantly clear that seeing any light at the end of the tunnel did not mean that the pandemic and the crisis are over and hence slump back into a state of complacency.
According to Georgieva, there are at least three things that need to be done is there is to be a sustainable recovery: first, keep the focus on escaping the crisis by doing the necessary things to step up vaccine production, distribution and deployment as ending the health crisis could add some US$ 9 trillion to the global GDP by 2025; second, ensuring that the recovery is carefully managed in the transition especially on workers that could come by way of income support, targeted hiring subsidies, retraining and re-skilling; and third, by investing in future to make the international system more resilient to things like climate shocks.
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“A new momentum is building towards greener, smarter and more inclusive economies. So far only a small fraction of fiscal stimulus has been directed to climate and green finance. But the tide is turning, and rightly so,” the IMF Managing Director noted.
While it would be fair to assume that much of the virtual meet of the 190-odd countries this week will be pandemic related, the IMF has also made it clear that the world should not take its eyes off on trade and technology tensions as also on a host of issues like climate change, digitalisation, modernisation of international corporate taxation, and tax avoidance, to name some.
According to Gita Gopinath, IMF’s Economic Counsellor and Director of Research, advanced economies have been able to afford these initiatives at the national level, but an “ambitious effort” is needed at the multilateral level over and beyond the assistance that has been given to countries by the IMF during this pandemic. “Without additional efforts to give all people a fair shot, cross country gaps in living standards could widen significantly and decades long trends of global poverty reduction could reverse,” Gopinath has warned.
(A former senior journalist in Washington covering North America and United Nations, the writer is currently a Professor of Journalism and Mass Communication in the College of Science and Humanities at SRM Institute of Science and Technology, Chennai)