The International Monetary Fund (IMF) expects global economic growth in 2021 to fall slightly below its July forecast of 6%, IMF chief Kristalina Georgieva said on Tuesday, citing risks associated with debt, inflation and divergent economic trends in the wake of the Covid-19 pandemic.
Georgieva said that the global economy was bouncing back but the pandemic continued to limit the recovery, with the main obstacle posed by the “Great Vaccination Divide” that has left too many countries with too little access to Covid vaccines.
In a virtual speech at Bocconi University in Italy, Georgieva said next week’s updated World Economic Outlook would forecast that advanced economies will return to pre-pandemic levels of economic output by 2022 but most emerging and developing countries will need “many more years” to recover.
“We face a global recovery that remains ‘hobbled’ by the pandemic and its impact. We are unable to walk forward properly – it is like walking with stones in our shoes,” she said.
The United States and China remained vital engines of growth, and Italy and Europe were showing increased momentum, but growth was worsening elsewhere, Georgieva said.
Inflation pressures, a key risk factor, were expected to subside in most countries in 2022 but would continue to affect some emerging and developing economies, she said, warning that a sustained increase in inflation expectations could cause a rapid rise in interest rates and tighter financial conditions.
While central banks could generally avoid tightening for now, they should be prepared to act quickly if the recovery strengthened faster than expected or risks of rising inflation materialised, she said.
Published in The Express Tribune, October 6th, 2021.
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