Monitoring fragilities

 COVID-19 

is resurging in some parts of the world, the global economy still finds itself in major disequilibrium and the costs of fighting climate change are starting to come into view.

 While a one-size-fits-all approach to fiscal and monetary policy was optimal across economies in the early stages of the pandemic, the ensuing disruption has evolved in such disparate ways across global markets and economies 

that national-level policy tools can no longer address the current challenges in homogeneous ways.

 Instead, policy-makers are faced with complex domestic and international trade-offs in their policy choices, with one exception: accelerating vaccinations.

The deepest fault line has emerged between economies with vaccine access and fiscal support and those without. Limited vaccine access is still forcing prolonged lockdowns and deepening the health toll in some parts of the world, while lack of fiscal resources is exacerbating economic and social scars from bankruptcies and unemployment. 

Workers and businesses in economies with large informal sectors have been particularly hard hit. Almost one year after vaccination campaigns began, only 3.7% of the population in low-income countries have received at least one dose versus 61% of the population in high-income countries.

Until the pandemic has been conquered everywhere, there continue to be major risks from the virus trajectory and therefore the global economic recovery for all. On account of such a new, more aggressive variant that spread rapidly across the world, growth forecasts had to be revised downwards in the latest projections.

 The distribution of projections by Chief Economist Survey respondents has also shifted downward since the June edition and uncertainty has increased.

The IMF predicts 5.9% global growth for this year, down from 6% (with some major downward adjustments for individual countries).

The OECD revised its 2021 forecasts down to 5.7% in its September Interim Outlook.

Beyond the virus trajectory, the top risks to the recovery have started to change from a feared delayed wave of bankruptcies to policy mistakes in managing evolving inflation dynamics, especially the repercussions on financial markets in emerging economies.

                                                                                                      -EARLIER AS WEF SAID...