IMF: High uncertainty remains regarding global economy development

Uncertainty about the development of the global economy remains extremely high, despite the recovery pace in countries around the world, said Kristalina Georgieva, managing director of the International Monetary Fund (IMF), speaking at a video conference organized by the US Council on Foreign Relations, Report informs.

“Extremely high uncertainty is one of the biggest threats we face. So much depends on the pandemic, which is being affected by uneven progress in vaccination and new strains of the virus that are holding back economic growth prospects, especially in Europe and Latin America,” she noted.

Uneven recovery

She also listed a number of other dangers to the global economy.

“The economic development [of many countries] differs. Vaccines are not yet available to everyone and everywhere. Too many people continue to face job loss and growing poverty. Too many countries are lagging behind [in terms of economic recovery],” Georgieva said.

She added that although the prospects for the development of the world economy have generally improved, dangerous divergences are observed not only within countries, but also between countries and regions.

“Basically, what we see is a recovery at varying rates, which increasingly relies on two forces - the US and China. They are among a small group of countries that will well outstrip pre-crisis level of [their] GDP by the end of 2021. However, they are the exception, not the rule,” she noted.

Thus, “the total loss of per capita income in comparison with pre-crisis forecasts will amount to 11 percent in developed countries by next year.” “For emerging market economies and developing countries, with the exception of China, the losses will be much worse – 20 percent,” continued the IMF managing director. The loss of income, she explained, “means that millions of people will suffer from poverty, hunger and homelessness.”

The problems will only grow for developing countries.

“Pressure may also intensify on vulnerable emerging economies, low-income countries and fragile states,” she added. “Their financial capacity to deal with the crisis is already [severely] limited. Many of them are heavily dependent on these hardest hit sectors [of economy] as tourism. Such countries also face limited access to vaccines, budget problems and debt crises.”

So, low-income countries should spend about $200 billion over five years only to combat the consequences of the pandemic, and then another $250 billion to return to pre-crisis levels, she said.