WASHINGTON (Reuters) – The second International Monetary Fund official on Saturday pointed to emerging signs of a stronger global economic recovery, but warned that significant risks remain, including the emergence of coronavirus mutations.
The IMF’s first deputy managing director, Geoffrey Okamoto, said that in early April the Fund would update its January forecast for 5.5% global growth to reflect additional spending on fiscal stimulus in the United States, but did not elaborate.
In a speech to the China Development Forum, Okamoto expressed concern about the growing divergence between advanced economies and emerging markets, with some 90 million people falling below the extreme poverty line since the pandemic began.
Okamoto said that China had already recovered to pre-pandemic growth levels earlier than all major economies, although private consumption still lagged in investment there.
Outside of China, he said, there were worrying signs of a widening gap between advanced economies and emerging markets.
The IMF projects that accumulated per capita income in emerging and developing countries excluding China between 2020 and 2022 will be 22% lower than it would have been without the pandemic, pushing more people into poverty, he said. .
The overall outlook remains “exceptionally” uncertain, Okamoto said, adding that it was unclear how long the pandemic would last and access to vaccines remained highly uneven, in both advanced and emerging economies.
Okamoto said that some countries also had little scope to boost spending to combat the pandemic and mitigate its economic impact, especially low-income countries with high levels of debt.
He said tighter financial conditions could exacerbate vulnerabilities in countries with high public and private debt, citing recent increases in bond yields triggered by market expectations of an early withdrawal of monetary stimulus.
He said the crisis could also leave deep scars.
In the past, advanced economies have seen their output fall nearly 5% below pre-recession trends five years after the start of a recession, and it could be worse in countries that cannot afford a robust macroeconomic response. and / or had large service sectors most affected by the pandemic, he said.
Reporting by Andrea Shalal; Edited by Daniel Wallis