Despite The Dark Start Of The Year, Optimism Has Improved In The Medium Term

2021-01-26   |   by CusiGO

Over the past 12 months, the mood carousel, in which citizens around the world have settled down for the work and grace of the coronavirus, has infected economists at the International Monetary Fund. The latest world economic outlook report released on Tuesday is a continuation of a string of good and bad news.

On the one hand, it is clear that with the spread of the third wave of the virus, the situation is getting worse, which forces almost all western countries to issue new restrictions, which will undoubtedly bring a price to the activities. At the same time, however, the prospect of vaccinating most of the population this year reveals a health crisis that is used to leaving only darkness behind. Between these lights (medium) and shadows (short), the experts swim in the background.

“In the past three months, the death toll of covid-19 has doubled to more than 2 million; a new wave of viruses has increased the infection rate. But in the past three months, many vaccines have achieved unexpected success, some countries have started ambitious vaccination programs, and now everything depends on the competition between mutated viruses and vaccines, as well as the ability of policy support until the end of the pandemic. ” Gita Gopinath, chief economist of the International Monetary Fund, started blogging about the latest report. That’s why “great uncertainty” dominates, and forecasts vary widely from country to country, the Indian American economist added.

The first good news is obvious: the global economy will not grow by 5.2% this year, as the IMF predicted in October, but by 5.5%. The main reason for the improvement in the outlook is the rise in the US forecast from 3.1% to 5.1%. “This improvement reflects the positive impact of vaccine deployment in some countries, the additional support policies approved by the United States or Japan, and the expected improvement in activities requiring close contact as the health crisis spreads,” gopinat said. But the eurozone, Spain in particular, has not benefited from this improvement.

As the chief analyst of the International Monetary Fund said in this short article, this message is accompanied by a negative message: “however, the deterioration of the outlook in the short term partly offsets the positive impact because of the damage that will be caused by measures to curb the spread of the virus.” And, as is already common in this crisis, the whole document is tirelessly repeating the same word: “uncertainty.”.

According to IMF calculations, the global economy will be hit less hard in 2020 than expected: global GDP will fall by 3.5%, rather than the 4.4% forecast a few months ago. The other opponent, however, is the biggest peacetime recession since the Great Depression of the 1930s. The other bad news is that by the end of this year, per capita income in more than 150 countries will be lower than at the end of 2019. Another: by 2022, 110 more countries, including Spain, Italy and France, will continue to face this situation. The opposite happened in China, the birthplace of the epidemic, which unexpectedly achieved GDP growth of 2.3% in 2020.

In addition to alerting people to the risks of the crisis, the fund’s chief economist made four recommendations to the international community: ensure rapid and comprehensive access to vaccines – “the epidemic will not end until it ends anywhere,” she recalled; Where the virus continues to spread, continue to support family and business policies; ensure financial stability in this uncertain era; and do more to help the poorest countries fight the virus.

There is no ambiguity in the IMF’s recipe for financial stability. Because, while reiterating the need to maintain stimulative monetary policy, it also warns of the risk of keeping interest rates too low for too long. These suggestions can be summed up as nitpicking. “When the measures related to the epidemic are removed, bankruptcies and credit defaults are expected to increase, which will put more pressure on some financial systems that have already shown weakness,” the economist warned. He also called on governments with worse finances, such as Spain, which he has not mentioned at any time, to develop a medium-term strategy to ensure debt sustainability.

Finally, gopinat warns of the disturbing fact that the virus has succeeded in breaking the global trend of reducing extreme poverty over the past two decades. On the contrary, about 90 million people are expected to become one of the poorest people on earth from last year to this year. The blow will be particularly severe for groups such as women, youth, the poor, those working in the underground economy and those working in sectors more vulnerable to public treatment.