Global Economy to See Multi-Speed Recovery

March 30, 2021 by Daniel Mollenkamp
FILE - In this Feb. 14, 2020, file photo, Kristalina Georgieva, Managing Director of the International Monetary Fund, attends a session on the first day of the Munich Security Conference in Munich, Germany. The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damage from the coronavirus than it did just two months ago. (AP Photo/Jens Meyer, File)

The pandemic has caused profound and long-lasting changes to the global economy. However, the world also has a narrow window to avoid throwing lots of people into more uncertainty, insecurity, and poverty, said an executive from the International Monetary Fund this week.

The picture of the global recovery that is emerging is a complicated one with what economists call a multi-speed recovery, IMF Managing Director Kristalina Georgieva said in a discussion on Tuesday about the economic outlook for the post-pandemic world.

The overall picture has improved significantly, and the IMF has updated its predictions in light of recent events. The hit taken by the global economy last year would have been three times as bad without the exceptional coordinated measures taken by governments around the world, including about $16 trillion in loans by central banks, Georgieva said.

The multi-speed recovery aspect to this means that rich countries are recovering at a quicker pace than poor countries, creating a “dangerous convergence” of factors that threatens to push the economy to new levels of inequality.

Rich countries that can issue debt freely have found a path through the crisis. And places like the United States, China, and the European Union are poised to be ahead of their pre-crisis GDP levels by the end of 2021, Georgieva argued. 

The ability to issue debt, or to sell promissory notes to investors in the market, allows governments to access money it can use however it wants. The other major method of securing financing is bank loans which can be more restrictive about how that money can be used. Governments often issue debt to pay for infrastructure or social projects.

In the U.S., coordinated policies such as the most recent $1.9 trillion economic stimulus package deserve some of the credit for these brighter economic predictions. The IMF says that the U.S.’s latest stimulus package will add 5-6% growth in the US over the next three years and will have positive spillover effects for the rest of the world while avoiding inflation, Georgieva argues.  

In contrast to rich countries, emerging economies that cannot issue debt freely are looking at a different picture of recovery. These countries have little access to vaccines, very little ability to finance recovery, and high levels of debt. Consequently, Georgieva warns, the global gains in poverty reduction of the last few decades may be thrown back, and these countries will fall further behind the rest of the world. 

The answer, she says, is to ramp up global vaccine production and distribution, assist these countries in managing debt, and help them invest in measures that will allow them to embrace the profound changes COVID-19 has forced on the global economy. 

Of chief interest are the move to digitalization, green infrastructure, and private-public partnerships that contribute to higher standards of living and more dynamic societies. 

The pandemic has forced commerce and work online, she said, a trend that will not fade away. The IMF also says that a coordinated push for green infrastructure, together with carbon pricing, could actually lead to net economic growth and millions of new jobs. 

The IMF believes that now is the time for green infrastructure investments and investments in human capital, she said.

There’s also a need for mechanisms to accelerate vaccinations in poor countries and to redistribute vaccines from surplus countries to deficit ones, she commented.

“This could have been another Great Depression,” Georgieva said. 

Instead, it represents a vanishing opportunity, a “turning point,” in making a sustainable global economy where people get a “fair shot,” she said.

A recording of the event, which was part of the Center on Foreign Relations C. Peter McColough Series on International Economics, can be viewed here. It occurred in anticipation of the annual IMF and World Bank Spring Meetings next week.

Economy

Disease Experts Look to the End Of Pandemic But Aren't Sure When
Health
Disease Experts Look to the End Of Pandemic But Aren't Sure When
April 16, 2021
by Tom Ramstack

WASHINGTON -- As the U.S. death toll reached 564,000 from COVID-19, the nation’s top disease experts said Thursday normal life will return for Americans only when enough of them get vaccinated. But with more than 70,000 new infections daily, they could not predict for Congress when... Read More

US Jobless Claims Plunge to 576,000, Lowest Since Pandemic
Employment
US Jobless Claims Plunge to 576,000, Lowest Since Pandemic

WASHINGTON (AP) — The number of Americans applying for unemployment benefits tumbled last week to 576,000, a post-COVID low and a hopeful sign that layoffs are easing as the economy recovers from the pandemic recession.  The Labor Department said Thursday that applications plummeted by 193,000 from... Read More

Tourism Industry, Still Weak, Looking for Help
Travel
Tourism Industry, Still Weak, Looking for Help
April 14, 2021
by Tom Ramstack

WASHINGTON -- The U.S. economy is continuing its recovery from the COVID-19 pandemic but not fast enough for tourism officials who testified before a Senate subcommittee Tuesday. They said their industry was the hardest hit during the pandemic shutdown and will be one of the slowest... Read More

‘People can’t buy what can’t be delivered’: Addressing Global Supply Chain Vulnerabilities
Economy
‘People can’t buy what can’t be delivered’: Addressing Global Supply Chain Vulnerabilities
April 14, 2021
by Kate Michael

WASHINGTON — We all remember last year’s short-term stampede for toilet paper. But while stores were able to eventually restock personal products and cleaning supplies, will we be able to do the same with a shortage of semiconductors and other strategic priority goods essential to the... Read More

U.S. Airline Struggles Continue a Year After Onset of Pandemic
Travel
U.S. Airline Struggles Continue a Year After Onset of Pandemic
April 13, 2021
by TWN Staff

WASHINGTON - U.S. airlines carried 61% fewer passengers in February 2021 than in February 2020, according to preliminary data from the U.S. Transportation Department. The analysis, which was carried out by the department's Bureau of Transportation Statistics, suggests airlines serving U.S. passengers are still a long... Read More

‘Devil is in the Details’ of Corporate Tax Reform
Business
‘Devil is in the Details’ of Corporate Tax Reform
April 9, 2021
by Victoria Turner

Just as corporations and tax practitioners are beginning to adjust to the 2017 Tax Cuts and Jobs Act, the Biden administration’s proposed changes would introduce further complexities into an already complicated system, according to three U.S.-based tax attorneys. Biden’s proposal increases the standard corporate tax rate,... Read More

News From The Well
scroll top