Hope amid uncertainty: On IMF’s World Economic Outlook
IMF in its latest World Economic Outlook has called for more international cooperation as the world economy recovers slowly.
COVID-19 has already claimed over a million lives. The pandemic has led to the loss of livelihoods and a fall in output in economies.
IMF sums up the challenges ahead in the report’s title: ‘A long and difficult ascent’.
The Fund’s economists have sought to make forecasts for world output through 2020, 2021 and into the medium term.
While the global economy is projected to shrink 4.4% in 2020-21, reflecting a less severe contraction than the 5.2% drop estimated in June 2020, the output is seen rebounding at a marginally slower 5.2% pace in 2021.
The IMF has based its revision on “better-than-anticipated second-quarter GDP out-turns, mostly in advanced economies” where activity improved after lockdowns were eased, as well as signs of a stronger recovery.
IMF Chief Economist contends that global growth will gradually slow to about 3.5% in the medium term.
It is pointed out that the pandemic is set to leave scars well into the medium term as:
Labour markets take time to heal.
Investment is held back by uncertainty and balance sheet problems.
Lost schooling impairs human capital.
The IMF has pointed out that even as the world economy rises out of the depths it had plunged to; there remains the danger of resurgence in infections.
This has prompted countries in Europe to reimpose at least partial closures.
The uncertainty is magnified by the risks associated with predicting the pandemic’s progression, the unevenness of public health responses, and the extent to which domestic activity can be disrupted.
With the cumulative loss in output relative to the pre-pandemic projected path, efforts to improve average living standards are certain to be severely set back.
The pandemic is set to widen inequality between economies and within nations, the Fund has, therefore, urged greater international cooperation.
All countries must work closely to ensure that new treatments and vaccines are made available to all.
Wider and faster availability of medical solutions could boost global income by almost $9 trillion by end-2025, reducing income divergence.
IMF has stressed the need for policymakers to plan out direct income support for the most vulnerable.
It has suggested that regulatory restraint is necessary to save stressed but viable firms.