Gap between rich and poor widening due to unequal access to vaccines, says IMF

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While the global economy continues to grow, the unequal distribution of vaccines is widening inequalities as rich countries pick up pace and leave developing countries behind, the IMF warned Tuesday.

“Vaccine access has emerged as the key fault line along which the global recovery is splitting into two blocs,” the International Monetary Fund said in its updated World Economic Outlook.

But the IMF warned of the danger to the whole world if new virus variants are allowed to make their appearance.

Recovery “is not assured even in countries where infection rates are currently very low, as long as the virus is circulating elsewhere,” the report said.

Global GDP is set to grow 6% this year, unchanged from April’s forecast, but IMF chief economist Gita Gopinath signaled the “bigger gap” as advanced economies grow faster and developing countries, especially in Asia, slow.

The United States is expected to grow much faster this year than previously forecast, growing seven percent thanks to massive government spending and widespread Covid-19 vaccinations, but the IMF lowered its forecast for India, which faces a resurgence in infections. .

The Washington-based lender reiterated that “the immediate priority is to deploy vaccines equitably worldwide,” and implemented a $50 billion plan that “provides achievable costs to end the pandemic.”

Advanced countries have vaccinated nearly 40 percent of the population, compared with just 11 percent in emerging markets and a small proportion in low-income countries, the report said.

Gopinath said that “by 2021, at least 1 billion vaccine doses should be shared among countries with vaccine surpluses.”

If widespread vaccinations are not achieved, highly contagious virus variants can gain a foothold, such as the Delta variant which has become widespread. That could derail the recovery and wipe out a cumulative $4.5 trillion of global GDP by 2025, more than half of the loss suffered by rich countries, the fund estimates.

And this is not only a “tail risk” that is highly unlikely, but also “a realistic downside risk,” said Petya Koeva-Brooks, deputy director of the IMF’s research division.

More worried now

While some emerging markets, such as Brazil and Mexico, are poised to show stronger growth this year, developing countries as a group are struggling to return to their pre-pandemic levels.

“I would say we are more concerned than we were in April,” Koeva-Brooks told AFP.

Vaccinations enabled an economic reopening and led to upgrades for the United States for this year and next, when growth is expected to reach 4.9 percent.

That assumes, however, that the US Congress will approve another round of spending of about $4 trillion on President Joe Biden’s infrastructure and employment programs later this year.

The IMF also raised 2021 estimates for Canada and Britain to 6.3 percent and seven percent respectively, while eurozone GDP is expected to grow by 4.6 percent, slightly ahead of April’s WEO.

India’s growth forecast was cut three points to 9.5 percent, and even China was cut three-tenths of a percentage point to 8.1 percent.

In Latin America, Mexico is expected to show higher growth, helped by positive spillovers from the recovering US economy and increasing domestic demand, while Brazil also received a boost amid rising commodity prices, which will ease next year, the company said. report. .

Temporary or permanent?

Rising prices are another factor weighing on the global recovery and posing a challenge to policymakers.

And while the recent spike in inflation is the result of the pandemic’s unprecedented and uneven turnaround and should prove temporary, the IMF has raised the possibility that price increases could become “sustained.”

“The unprecedented convulsions in the global economy last year continue to cause aftershocks,” the IMF said, pointing to a shortage of computer chips and a lack of shipping containers where they are needed, which has slowed the supply of materials.

Koeva-Brooks said some bottlenecks and price increases were to be expected and should be temporary, but acknowledged that the situation is difficult to measure.

“We’ve never seen how we can reopen economies after a crisis like this,” she said.

The IMF said inflation should return to pre-pandemic levels by 2022 and urged central banks to wait to respond to the temporary price pressures but be ready to take “preventive action”.

(AFP)