The Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva on Wednesday said ending the coronavirus crisis faster could add almost $9 trillion to global GDP by 2025, warning, however, that “this window of opportunity is closing fast” with unfair distribution of vaccines around the world that may prolong the global health emergency in some countries.
“The scientists have given us vaccines in record time—now governments must show the same sense of urgency and collaboration to provide vaccines to everyone—everywhere,” Georgieva said in her opening remarks at the 2021 Spring Meetings Press Conference in Washington D.C.
She called for a ‘fair’ economic recovery from the fallout of the coronavirus pandemic, urging governments around the world to scale up public investment. That means investing in their people, especially the most vulnerable in the population, and providing them with the help they need.
Georgieva said a fair shot at the vaccine means “ramping up vaccine production and distribution and steering clear of export controls. It also means fully funding the COVAX facility and ensuring that surplus vaccines are transferred to poorer countries.”
For a fair shot at the recovery, the IMF chief said the key is to support vulnerable households and viable firms so long as the crisis is with us.
“This requires targeted fiscal measures and maintaining favorable financial conditions. Given diverging recoveries, we need both careful communication by major central banks and prudent policies in emerging and developing countries to minimize harmful financial spillovers,” she said, adding that “policymakers must take the right actions now by giving everyone a fair shot—not just into people’s arms, but also in people’s lives and in vulnerable economies.”
IMF this week forecast global growth to be 6 percent in 2021 and 4.4 percent in 2022. However, that hopeful projection is highly unequal around the world.
For instance, low-income countries still have to deploy some $450 billion over the next five years. “As part of a comprehensive effort, they need more domestic revenue mobilization —but also more external concessional financing, and more help to deal with debt,” Georgieva said.
Today, Georgieva warned that the economic fortunes are diverging “dangerously,” with a small number of economies, led by the U.S. and China, “powering ahead—while poorer countries are falling behind in this multi-speed recovery.”
According to her, giving everyone a fair shot “is perhaps the most consequential decision that any government can make this year.”
“The focus should be on scaling up public investment—in green projects and digital infrastructure, in people’s health and education—to ensure that everyone can benefit from the historic transformation to greener, smarter, and more inclusive economies,” she said. “Once the health crisis is over, governments should gradually scale back support programs— while scaling up targeted hiring subsidies and retraining and reskilling. This is particularly important for young people and women, who have borne the brunt of the crisis. Viable small businesses need more help through equity injections and better restructuring procedures. And once the recovery is firmly underway, governments need to ground fiscal policy in credible medium-term frameworks.
In her remarks, Ms. Georgieva quoted a 19th century Russian poet, Leo Tolstoy, “All the variety of life is made up of light and shadow” to describe the current world economy.
“The good news is that there is light at the end of the tunnel. After the worst global recession since the second world war, the recovery is underway,” the Bulgarian economist said.
She described the global economic outlook as “brighter”, explaining that this is “because millions of people are benefiting from vaccines and because of further policy support, especially in the United States. This is adding to the exceptional and coordinated actions taken over the past year.”
Georgieva commended governments and global institutions for taking prompt actions to tackle the coronavirus crisis with fiscal and monetary measures.
“Without these fiscal and monetary measures, the global contraction last year would have been three times worse—this could have been another Great Depression. And yet, while there is light, the crisis continues to cast a dark shadow,” she added.
As for the IMF role in tackling the coronavirus crisis, Georgieva said the Fund has so far supported 86 countries with over $110 billion, with lending to Sub-Saharan Africa in 2020 being 13 times more than the annual average over the previous decade.
“So far, we have supported 86 countries with over $110 billion, using a variety of instruments. Our lending to Sub-Saharan Africa last year was 13 times more than the annual average over the previous decade. We have supported 160 countries through technical assistance and training—and 29 of our poorest members through debt service relief that has recently been extended,” she said. “And we will propose a new SDR allocation of $650 billion. This will help address the long-term global need for reserve assets and provide a substantial liquidity boost to all our members, especially the most vulnerable.”
“This crisis has shown just how inescapable our shared destiny is. Now we must build on this broader sense of responsibility to foster a fair recovery, a post-pandemic world that works for all,” Georgieva added.