The global economy will expand by 6% this year, but disparities between nations are widening as advanced economies accelerate and developing countries fall behind, the International Monetary Fund (IMF) said this week.
Although the forecast for global growth is unchanged from the previous estimate in April, the United States is projected to see a faster 7% growth thanks to government spending and widespread Covid-19 vaccinations, while the IMF slashed the forecast for India, which is facing a resurgence of infections.
“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs,” the IMF said in its updated World Economic Outlook, warning of the danger to the economy if new virus variants are allowed to take hold.
It again stressed that “the immediate priority is to deploy vaccines equitably worldwide”. Advanced nations have vaccinated nearly 40% of the population, compared to 10% in emerging markets and fewer in low-income countries.
“The emergence of highly infectious virus variants could derail the recovery and wipe out $4.5-trillion cumulatively from global GDP by 2025,” IMF chief economist Gita Gopinath warned in a blog post.
More than half of that lost wealth would come from rich nations if new variants of the coronavirus spread.
This is not just a “tail risk” that is highly unlikely, “this is a realistic downside risk”, said Petya Koeva-Brooks, deputy director of the IMF research department.
Although some emerging market nations such as Brazil and Mexico are poised to show stronger growth this year, developing nations as a group are lagging and struggling to return to their pre-pandemic levels.
The IMF is pushing for a $50-billion plan that offers a “feasible cost to end the pandemic” by distributing vaccines and addressing needs in lower-income countries. — AFP