IMF Managing Director Kristalina Georgieva had interactive session with the media. Here are her views for 2021 on the global economy.
2020 is the worst year since the Great Depression. But now when we are stepping into 2021, the picture is less bad for three factors. One, the decisive and sustained monetary policy and fiscal measures in advanced economies: they raised to Mario Draghi’s “whatever it takes” level. Two, because we have seen countries adjusting these measures based on rapidly changing circumstances, for example in Japan and U.S. there is now new fiscal stimulus that comes on the back of the pandemic moving from bad to worse. Three, we have been handling the pandemic better over time. Adjusting to the digital economy, like you and me meeting in this format. Adjusting to micro measures—masks, social distancing—that allows us to function with pandemic still with us. And of course, most importantly with vaccines in place and mass vaccinations starting. So that is my second message, there are reasons why, while it is bad, it is less bad.
My third message is on priorities. We see at the Fund three key priorities for the year.
One: pursuing a durable exit from the health crisis. Vaccination of the global population is going to be an uneven process across countries, across regions—meaning that some will recover faster than others. To speed the recovery would require international cooperation—particularly to ensure that vaccines cover low- and middle-income countries. We [the international community] have yet to bring full funding for COVAX. We must do that. And we need to look at redistributing of vaccine capacity for countries that have booked for their population multiple times than the size of their population to countries that are in need of support for vaccination.
The number that I always flag, and I want to repeat it, is $9 trillion. This is what we can gain between now and 2025 if we accelerate vaccination across the world. Of this, 60% would go to low income countries and emerging markets and 40% would go to advanced economies. In other words, it is great value for money for everybody to do.
The second policy priority is to purse a sustainable and inclusive recovery. We will continue to make the case for sustained policy support until the recovery is firmly underway, and a gradual move to more targeted assistance for the most vulnerable. We will also work with our members on the concept of resilient economies, accelerating the transition to the new digital and climate economy.
How we can do that? We have been advocating coordinated fiscal stimulus aimed largely at green and digital investment, and helping countries reduce high debt burdens and cope with volatile capital flows. Everywhere in poor and rich countries, we must help workers as they transition from shrinking to expanding sectors.
Three—and this is something that we have to zero in on big time in 2021—arrest and reverse the dangerous divergence between rich and poor countries. Many emerging markets and low-income nations continue to hurt badly and their capacity to act is so much smaller than in advanced economies. Advanced economies deployed the equivalent of 20% of GDP and low-income countries 2% of GDP. And of course, their GDP is much smaller than that of advanced economies. Without coordinated international support we will see that divergence becoming a problem for the countries themselves but also for security and stability of the world in the future. So, we see in that regard two very important actions. One is on the debt front. We have the Common Framework in place, we have to make sure that we press private and public lenders to engage on debt restructuring when it is necessary. And two, to provide more grants and concessional finance especially for digital infrastructure and climate resilience. That is going to be good for growth, good for jobs, and it would also be good for security and stability for the world as a whole.
At the IMF, as you know, last year we have provided $102 billion in new financing to 83 countries. We provided debt service relief to 29 countries. Internally at the Fund, I told staff that I see this as a soccer game with two halves. 2020, the first half, we did well, the world came out relatively speaking in a better shape than it could have been. But 2021 is going to be the second half and we know that in a soccer game what counts is the result in the end. So, a lot to do this year, and we at the Fund are absolutely ready to do our part in policy advice, in programs and financing, and in capacity development. So, this is my opening and welcome to 2021 it will not disappoint you as an interesting year