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Pandemic likely to darken in developing countries, warns International Monetary Fund

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IMF chief economist Gita Gopinath attributed the shock to the “great vaccine divide” (File)

Washington:

The IMF said on Tuesday that the ongoing hit by the Kovid-19 pandemic and the failure to distribute vaccines around the world is worsening the economic divide and darkening the prospects for developing countries.

Global economic growth is expected to continue this year and beyond as recovery broadly strengthens, but the overall figures mask major downgrades and ongoing conflicts for some countries.

“The outlook for the low-income developing country group has deepened as the pandemic worsens,” said IMF chief economist Gita Gopinath.

She warned, the setbacks she imposed on the “great vaccine divide” would affect the restoration of living standards, and a prolonged pandemic recession “could reduce global GDP by $5.3 trillion over the next five years, ” he warned.

Meanwhile, advanced economies face “more difficult near-term prospects … partly due to supply disruptions.”

According to the International Monetary Fund’s latest World Economic Outlook, this threatens to push up prices, especially in the United States, where growth this year will be slower than previously expected, even as large-scale spending Considering the bills.

Worldwide production is expected to grow by 5.9 percent this year, slightly lower than projected in July, before slowing to 4.9 percent in 2022, the report said.

But the wave of infections from the delta version of Covid-19 and very low vaccination rates in developing countries, coupled with supply constraints, have slowed or pushed back the recovery in many economies.

“The alarming divergence in economic prospects across countries remains a major concern,” Gopinath said in a blog post on the new forecasts.

He added that advanced economies are expected to follow a “pre-pandemic trend path in 2022 and over 0.9 percent in 2024”.

However, in emerging market and developing economies, excluding China, production is “expected to be 5.5 percent lower than the pre-pandemic forecast in 2024.”

Amid the threat of a long-term mark, “therefore the most important policy priority is to vaccinate every country at least 40 percent of the population by the end of 2021 and 70 percent by the middle of 2022.”

– Delicate American Balancing Act –

The world’s largest economy has largely benefited from fiscal stimulus, but a delta wave has curtailed progress, and the IMF has slashed the United States’ growth forecast for this year to six percent, which That’s a full percentage point from the July figure.

US growth is expected to slow to 5.2 percent next year, slightly faster than previously expected, but policymakers will face a delicate balancing act between rising inflation and the risk of lower employment, the fund said.

Once the recovery began, production had slowed, creating bottlenecks, particularly in semiconductors, and pushing prices higher, while wages were also at risk of rising as employers competed for scarce workers.

Central banks should be prepared to act quickly to meet worsening inflation risks.

“Monetary policy will need to walk a fine line between tackling inflation and financial risks, and supporting economic recovery,” the IMF said.

The IMF supported the Federal Reserve’s stated intention to pull back on stimulus by the end of the year, and prepare to lift interest rates in 2022.

But higher US interest rates will have a spillover effect for other countries, increasing the cost of borrowing.

Gopinath cautioned that policymakers should avoid “unnecessary policy crashes that affect financial markets and impede global recovery.”

These include failing to raise the US debt limit in “timely fashion” or “increased cross-border trade and technology tensions”.

The report added that the trade frictions before the pandemic are yet to be resolved and “are at risk of hindering recovery.”

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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