The global economy could fall three times more, were it not for the monetary stimulus injected by central banks during the coronavirus pandemic, but the persistence of surprising numbers depends on mass vaccination. The conclusion is in the new edition of the report “World Economic Outlook”, of the International Monetary Fund (IMF), released this Tuesday (6).
With these monetary stimuli still irrigating the economies, the IMF revised upward the global growth projections for 2021 and 2022. The increase is expected to be 6% this year and 4.4% next year. The increase is 0.8 and 0.2 percentage point in relation to the October report, respectively.
Brazil is below average, with an expected growth of 3.7% this year and 2.6% next year. Compared to the October edition, there was an increase of 0.9 and 0.3 percentage point for the projection of the country in each year, respectively.
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On the other hand, the country performs better than the region in which it operates, in Latin America and the Caribbean. With a 4.1% drop in 2020, the country suffered less than the 7% of the area to which it belongs. The 4.6% and 3.1% increases expected for the region, therefore, come from a more intense fall base.
In a letter published in the report, the IMF’s chief economist, Gita Gopinath, reinforces that uncertainties remain in the global economic environment, but a way out becomes “increasingly visible”.
The IMF points out, however, that vaccination against Covid-19 is a key factor for the numbers to become reality. The variable is so important that the fund warns that a better-than-expected performance can give vigor to the recovery worldwide, but new variants that call into question the effectiveness of vaccines would cause a severe downward revision.
Expected performance of the IMF’s global GDP – Photo: G1 Economy
The IMF made a series of upward revisions throughout 2020, as economies responded to the coronavirus pandemic. The organism’s greatest optimism a year into the pandemic has as its background, in addition to monetary action and vaccines, a certain adaptation to “life in a pandemic”.
The expected fall for the global economy in 2020 is 3.3%, with an uneven impact depending on the profile of each country and its workforce. The consequences will be particularly acute in tourism-dependent countries, with higher public debt and less capacity for comprehensive health care.
“Young people, women, workers with relatively low levels of education and informal employees were hit hardest,” says the agency.
Gita Gopinath, chief economist at the IMF: “Monetary policies will have to become more targeted to maintain the capacity to sustain economic activity during this uncertain period.” – Photo: REUTERS / Rodrigo Garrido
In the report, Gita Gopinath acknowledges that the resumption force is clearer in developed economies. Except for China, which already recovered its pre-pandemic GDP levels in 2020, the economist recalls that the United States is in an advanced stage of recovery and should reach the milestone by 2021.
In addition to historic stimulus packages, which have poured more than $ 5 trillion into the economy, Americans have the most comprehensive and fastest vaccination in the world.
Other important economies, such as the European ones, which have vaccination in arrears, will only return to the level in 2022, says the IMF. Emerging countries should not reach this milestone until 2023.
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Gopinath recalls that per capita income is another factor of concern for the IMF, with an impact on the entire global chain. In the 2020-2022 biennium, the expectation is to lose 20% of GDP per capita in emerging countries – excluding China again – and 11% in developed economies.
“This reversed the gains in poverty reduction, with an additional 95 million people expected to fall into the categories of extreme poverty in 2020, and 80 million more malnourished than before,” she says.
The situation is even more serious, as the job market is punishing workers with no previous experience or with low training, groups that already have a lower income as a characteristic.
“Policies, therefore, will have to become more targeted to maintain the capacity to sustain economic activity during this uncertain period as the race between the virus and vaccines unfolds,” says the economist.
International cooperation, says the IMF, will also be vital to ensure that emerging economies and developing countries can bridge the gap between their standards of living compared to high-income ones.
G-20 GDP grows 2.1% in the last three months of 2020
With a watchful eye on vaccinations around the world, the IMF suggests that government officials be cautious in the next steps. The organization even indicates some points of attention so that decision-making is accurate while the effects of the pandemic around the world persist.
- Priority to health spending, including hospital care, treatment for Covid-19, vaccine production and application;
- Strengthen social protection policies, from informal workers to expanding the criteria for access to unemployment insurance;
- With the normalization of the labor market, to cool possible impacts on companies, invest in training the workforce, provide subsidies for hiring and creating job vacancies;
- Bankruptcy facilitation policies, in order to accelerate the efficient allocation of capital;
- Investment in education to compensate for the losses in child training during the pandemic.
Once the health crisis is resolved, the IMF also recommends a special focus on targeting the sustainable development.
“Priorities should include investing in green infrastructure to help mitigate climate change, strengthening social assistance and social security to stem the increase in inequality, the introduction of initiatives to increase productive capacity and adapt to a more economical economy. scanned and resolve the debt excesses, “says Gita Gopinath’s letter.
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