The IMF released its latest World Economic Outlook in October 2021 that offers an oversight of the global economic situation amidst uncertainty of the pandemic in which it did not reveal the status of the economic scene for Lebanon.
Overall, persistent supply chain disruptions, slow vaccination rollout, and soaring inflation are vital concerns for the global economy’s recovery. In details, worldwide growth projection for 2021 has been stated to be 5.9% for 2021, and 4.9% for 2022. The revision projected downgrades for the low income developing country group that has been impaired significantly as the pandemic dynamics worsened. As for the advanced economy group, the report claimed further difficulties for short-term prospects mainly due to supply interruptions and rising commodity prices. However, economic activity for the advanced economy countries is estimated to recover to its pre-pandemic levels in 2022 and surpass it by 0.9% in 2021. Meanwhile, economic activity for the emerging market and developing economy countries, excluding China, is expected to stay on 5.5% below the pre-pandemic forecast in 2024.
A tale of Two Worlds: Advanced economies are the only income group expected to return to pre-pandemic trends by 2022
Source: IMF, World Economic Outlook and IMF staff calculations.
Note: Bars show the difference in real output four years after the crisis and anticipated output for the same period prior to the crisis for the indicated income group.
The dissimilarities in the countries’ economic outputs are a result of the vaccination processes, large inequalities in policies support, and mostly supply shortages. The report also highlighted another burden to monetary policy from soaring risk-taking in financial markets and increasing instabilities in the nonbank financial institutions sector.
In other term, several policies are prioritized by the report. Vaccinations rollout and grant funding those targets to vaccinate at least 40% of the population in every country by end of 2021 and 70% by the end of 2022. Another urgent global priority is the need to contain the effects of climate change which require more commitments to green economy. Moreover, intensive efforts to ensure adequate international liquidity for constrained economies, and enacting a framework to restructure unsustainable debt which is illustrated in the $650 B special drawing right (SDR) allocations distributed by the IMF for poverty reduction and growth trust.
At the national level, policies should be adjusted to local pandemic and economic conditions, aiming to lower financing costs for countries and increasing fiscal space in the short-term. Same for the monetary policy that must be critically monitored in order to tackle the inflation pressures and financial risks, and supporting the economic recovery. Noting that inflation would likely return to pre-pandemic levels by mid-2022 for the group of advanced economies and emerging and developing countries. However, Central Bank in some countries like the US and the UK should be prepared to act quickly if the risks of rising inflation expectations become more serious in this unfamiliar recovery. Importantly, avoiding unnecessary policy accidents, like the failure in the US debt ceiling lift or the disorderly debt restructurings in China’s property sector, is a must for preventing a shake in financial markets and pull down the global recovery.
Lastly, the pandemic is not over yet and its prolonged impact could further shrink the global GDP by a cumulative $5.3 Trillion over the next five years relative to the IMF’s current projection. In this context, international communities must ensure fair and rightful vaccination for every country and secure well restored economic visions for all.
Latest World Economic Outlook Growth Projections:
Source: IMF, World Economic Outlook October, 2021.