The International Monetary Fund is warning of a “dangerous divergence” in global economic prospects as it slightly downgraded its growth projections for 2021, and noted that low-income countries are facing the worst projections.
It lowered global growth projections in 2021 by 0.1 percentage points, but the low-income countries group was marked down 0.6 percentage points relative to July.
World Bank warns of record debt levels in low-income countries
Rising debt in the poorest countries is becoming unsustainable, according to World Bank President David Malpass, who called for a comprehensive global approach to the mounting crisis as the bank's annual meetings get underway.
“The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics,” according to IMF’s World Economic Outlook, released Tuesday. Since the pandemic began, 65 million to 75 million additional people worldwide are estimated to be in extreme poverty.
Missing vaccines: Global momentum in the recovery was being weighed down by the effects of COVID-19 across emerging market and developing economies, IMF said. In low-income countries, 96% of populations remain unvaccinated, driving the worsening outlook. IMF is calling this “the great vaccine divide.”
IMF called on vaccine manufacturers and high-income countries to produce more doses in developing countries “through financing and technology transfer solutions.” Production on the African continent has lagged.
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Inflation: Supply chain disruptions are among the causes of rising prices around the world, and commodity prices are rising, too. But IMF said the poorest countries are feeling the brunt the most.
“Food prices have increased the most in low-income countries where food insecurity is most acute, adding to the burdens of poorer households and raising the risk of social unrest,” according to the forecast.
What’s new on SDRs: IMF Chief Economist Gita Gopinath said Tuesday that it was still “early days” but that IMF was tracking how nations would use the Special Drawing Rights, which were issued in August to help nations shore up reserves. IMF is urging wealthy nations to rechannel their SDRs to nations in need.