The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, anticipated an improvement in the outlook for the world economy on Tuesday thanks to stimulus plans and the advance of vaccination against covid-19, but warned of the risk of a uneven recovery between countries.
“In January, we project global growth of 5.5% in 2021. Now we expect a further acceleration,” Kristalina Georgieva said in a speech before the IMF and World Bank semi-annual meetings that will take place next week.
The managing director of the agency did not advance figures before the publication on April 6 of the institution’s report on the new prospects for the world economy.
Georgieva explained that part of this upward revision is due to the new economic relief package promoted by the Joe Biden government for 1.9 trillion dollars and also to the boost that vaccination gave to the recovery in several advanced economies.
In her speech, the official praised the “extraordinary effort” of health personnel and researchers around the world and also of governments, who took exceptional measures totaling 16 billion dollars.
He noted that without this aid, the contraction of global GDP in 2020 (-3.5%) would have been “three times worse.”
The IMF again warned of “a multi-speed recovery driven by two engines: the United States and China.”
– “Extreme uncertainty” –
Georgieva noted that the context is one of “extreme uncertainty.”
“It all depends on the path taken by the pandemic,” he explained, noting the inequalities in vaccination levels between countries and that the new strains slow down growth prospects, “particularly in Europe and Latin America.”
However, he predicted that growth in Europe should pick up strongly in the second half of this year.
For emerging markets, the official warned that the most “vulnerable” countries with limited budgetary capacities could face “more pressure.”
“Many of them are very exposed to very affected sectors, such as tourism,” said the official.
The IMF noted that these countries are now faced with less access to vaccines and less budget space, when some of them are facing a “high risk” of over-indebtedness.
Georgieva warned of the uncertainty surrounding financial conditions, for example whether an accelerated recovery in the United States leads to a rise in interest rates and this leads to significant capital migration out of emerging markets.
“This would imply major challenges for middle-income countries with great external financing needs and with a high level of debt,” explained the directive.
Under these conditions, Georgieva recommended that countries concentrate on getting out of the crisis by accelerating the production and distribution of vaccines.
The IMF director recommended continuing to support the most vulnerable households, investing in the future, especially in infrastructure, education and health. “Everyone benefits from a historic transformation towards greener and smarter economies,” he said.
In his speech, he also called for increasing international aid for the most vulnerable countries.
Georgieva pointed out that according to a study by the IMF, low-income countries will need to allocate 200,000 million dollars in five years to fight the pandemic.
Georgieva recalled that the Fund has provided 107,000 million dollars in new credits for 85 countries and decided on debt service relief for 29 of its poorest members.
The IMF wants to increase its reserves and its lending capacity by $ 650 billion.