Weaker global growth, vaccine protectionism and the specter of 1970s-style inflation are haunting large economies. As the IMF prepares for its annual gathering this week, the contrast with the spring could not be starker.
In April, at the Washington-based fund’s previous virtual meeting, there were sharp upgrades for global growth amid a sense of optimism for the road ahead, led by stronger-than-expected recoveries in the US, the UK and other advanced economies.
Vaccines were expected to pave the way for the swift unlocking of COVID-19 pandemic restrictions, fueling a rapid recovery from the worst global recession since the 1930s Great Depression.
Photo: Reuters
Since then, the sprint back to economic health has slowed to a hobble, IMF managing director Kristalina Georgieva said last week.
“We are unable to walk forward properly — it is like walking with stones in our shoes,” Georgieva said.
Tomorrow, the IMF is expected to issue a downbeat economic outlook for the rest of the year, as a summer of supply-chain bottlenecks and rising inflationary pressures risks worsening this autumn.
In July, the IMF predicted 6 percent growth for the global economy this year, but Georgieva said last week that this would be scaled down in its updated World Economic Outlook report.
The IMF is expected to say that low-income nations are still not getting adequate access to COVID-19 vaccines, in a development likely to cost the world economy at large if left unaddressed.
“We need a bigger push,” Georgieva said last week, calling for a sharp increase in the delivery of vaccines to the developing world.
Taking place virtually for a second consecutive year, the meetings come as a cloud of controversy envelopes the IMF, following allegations that Georgieva artificially boosted China’s ranking in a flagship World Bank report on the best countries to do business with, in her previous job at the bank.
Georgieva met the IMF board last week in an attempt to rebut the accusations against her, issuing a statement to say that she looked forward to resolving the matter.
However, the controversy is unlikely to overshadow the storm clouds gathering for the world economy, with expectations that rising inflation could force major central banks to reduce their pandemic stimulus measures at a time when the recovery from COVID-19 remains incomplete.
With supply shortages set to persist well into next year as the SARS-CoV-2 Delta variant prevents a return to relative normality, a period of stagflation — stagnant growth and high inflation, reminiscent of the 1970s — could be on the cards.
It is all a long way from the IMF’s optimism of the spring. If the outlook were to deteriorate at anything like the pace of the past six months, a renewed winter of discontent likely lies ahead.
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