Welcome to our virtual 2021 Spring Meetings!
“All the variety of life is made up of light and shadow”: Tolstoy’s words describe so well the world economy today.
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. Yesterday we lifted our global growth forecast to 6 percent for this year and 4.4 percent in 2022.
The outlook is brighter 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.
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.
Economic fortunes are diverging dangerously. A small number of advanced and emerging market economies, led by the U.S. and China, are powering ahead—weaker and poorer countries are falling behind in this multi-speed recovery.
We also face extremely high uncertainty, especially over the impact of new virus strains and potential shifts in financial conditions. And there is the risk of further economic scarring from job losses, learning losses, bankruptcies, extreme poverty and hunger.
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.
Our Global Policy Agenda, released today, highlights three priorities:
(1) First, a fair shot at the vaccine. This means ramping up vaccine production and distribution and steering clear of export controls. It means fully funding the COVAX facility and ensuring that surplus vaccines are transferred to poorer countries.
Vaccine policy is economic policy! Faster progress in ending the health crisis could add almost $9 trillion to global GDP by 2025—best value for public money in our times—but this window of opportunity is closing fast. 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.
(2) Second, a fair shot at recovery. 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 careful communication by major central banks and prudent policies in emerging and developing countries to minimize harmful financial spillovers.
Once the health crisis is over, governments should gradually scale back support programs—and scale up targeted hiring subsidies and retraining and reskilling. This is particularly important for low-skilled workers, youth 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.
(3) Third, a fair shot at the future. This 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.
To unlock this potential, countries will need sufficient public revenues and more efficient spending. In many cases, this will mean more progressive taxation, and an agreement on questions like minimum taxation for companies and international tax rights. This has to be coupled with stronger support for poorer countries as they fight the crisis and seek to invest in the future.
Low-income countries 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.
The further extension of the Debt Service Suspension Initiative —just announced by the G20—and the new Common Framework for orderly debt restructuring will help.
The Role of the IMF
The IMF continues to step up in an unprecedented way. 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.
And as indicated by the G20 today, 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 common responsibility to foster a fair recovery and a resilient post-pandemic world.