IMF calls for rich countries to fulfil promises on vaccines and climate

A dangerous diversion in economic prospects around the world is a big worry, latest report warns

The International Monetary Fund has told rich countries to make good on their vaccine and climate change promises to developing nations as it warned of a dangerous divergence in economic prospects around the globe.

The IMF revised down its growth forecasts for many western countries – including the UK – but said its real concern was low-income countries where the picture had become markedly worse.

Publication of the Washington-based organisation’s half-yearly world economic outlook (WEO) showed recovery from last year’s collapse in activity was continuing but the momentum had weakened.

The release of the WEO came at the start of the IMF’s annual meeting, with the agenda dominated by concerns about risks to global growth and the cloud hanging over the fund’s managing director, Kristalina Georgieva.

The IMF’s executive board said there was no conclusive information to support allegations that Georgieva acted improperly when she was deputy president of the World Bank in 2018 and reaffirmed “its full confidence” in her leadership.

Gita Gopinath, the IMF’s economic counsellor, said the global growth projection for 2021 had been revised down marginally from 6% in July to 5.9% and was unchanged for 2022 at 4.9%. The UK is expected to be the fastest growing of the G7 group of leading industrial nations, although the IMF’s estimate was cut from 7% to 6.8%. The US, Germany, Japan and Canada also had their growth estimates revised down.

Gopinath said the impact of the pandemic had been much harder on low-income countries, which were also at greater risk of being affected by climate change.

“The dangerous divergence in economic prospects across countries remains a major concern,” Gopinath said in a blog accompanying the WEO. “Aggregate output for the advanced economy group is expected to regain its pre-pandemic trend path in 2022 and exceed it by 0.9% in 2024.

“By contrast, aggregate output for the emerging market and developing economy group (excluding China) is expected to remain 5.5% below the pre-pandemic forecast in 2024, resulting in a larger setback to improvements in their living standards.”

Gopinath said these divergences were a consequence of the “great vaccine divide” and large disparities in policy support. While more than 60% of the population in advanced economies were fully vaccinated and some were now receiving booster shots, about 96% of the population in low-income countries remained unvaccinated.

“The foremost policy priority is therefore to vaccinate at least 40% of the population in every country by the end of 2021 and 70% by mid-2022. This will require high-income countries to fulfil existing vaccine dose donation pledges, coordinate with manufacturers to prioritise deliveries to Covax [the global initiative to make access to vaccines more equitable] in the near-term and remove trade restrictions on the flow of vaccines and their inputs.”

Looking ahead to next month’s UN climate change conference in Glasgow, Gopinath said another urgent priority was the need to slow the rise in global temperatures and contain the growing adverse effects of the climate crisis. This required more ambitious commitments to reduce greenhouse gas emissions.

“A policy strategy that includes an international carbon price floor adjusted to country circumstances, a green public investment and research subsidy push, and compensatory, targeted transfers to households can help advance the energy transition in an equitable way. Just as importantly, advanced countries need to deliver on their earlier promises of mobilising $100bn [£73bn] of annual climate financing for developing countries.

The IMF cited the UK as an example of the effectiveness of large-scale vaccination campaigns.

Although the number of confirmed UK daily Covid-19 cases in July 2021 was higher than that in December 2020 for most of the month, hospitalisation and death rates were only 10–20% of the levels registered last winter.

“The key difference between the two points in time is that the UK had fully vaccinated about half of its population (two-thirds at least partially vaccinated) by July 2021, whereas in 2020 there was no vaccine protection available,” the IMF said.

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