The world economy is on “a more solid footing” thanks to the accelerated pace of immunization and strong fiscal stimulus programs, but growing inequalities, high debt levels and the discrepancies between rich and low-income countries remain issues. significant risks, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), warned.
“We will improve our growth projections for this year and the next,” Georgieva said. “But there is also a dangerous divergence in economic fortunes within countries and between countries, and we must focus on overcoming the health crisis.”
In January, the IMF projected global growth of 5.5% in 2021 and 4.2% in 2022, after a contraction of 3.5% in 2020 caused by the coronavirus pandemic. The fall in the euro area was much more pronounced, standing at 7.2%.
Speaking to Euronews, the IMF chief urged governments to “invest in a greener, smarter, more shock-resistant and more inclusive future”.
“At the moment the most important priorities remain to speed up vaccination, tackle the health crisis and ensure that support is not withdrawn prematurely and I am delighted to see that these are the top priorities of the European leaders and European citizens, “she said. , praising the EU for its historic € 750 billion stimulus fund, which will help tourism-dependent countries revive their badly damaged economies.
Unlike the United States, where President Joe Biden’s $ 1.9 trillion relief bill is already operational, the EU’s stimulus package has yet to be ratified by all 27 member states. So far, only sixteen have signed it. The European Commission wants to start distributing grants and loans before the summer.
Georgieva insisted that all Member States should benefit from the fund because “otherwise the greatest power in the European Union, which is the engine of convergence we have, would not function fully”.
“Our data shows that there is potentially a difference of three times the loss in per capita income between the best performing countries, those ahead and those behind. This cannot be the case in the Union. European. “
Debt, bankruptcy and inequalities: all on the rise
During the interview, Georgieva highlighted several major risks that governments need to watch out for in the coming months, such as sudden changes in financial conditions resulting from a strong recovery.
“If the global economy is booming and growth exceeds expectations, it can lead to higher interest rates, tighter financial conditions. We have to be ready. Fortunately, central banks, including the Bank Central European Union, have been exemplary in providing clear communication and in keeping interest rates predictably low, ”she said.
Public debt is also a significant problem, she warned. According to the IMF director, fiscal stimuli have led the world to reach an average GDP-to-debt ratio of 100%.
“We need to think about medium-term fiscal consolidation when the time is right, not yet. We still need to make sure we support the economy. But over time it’s important to recognize that, yes, growth would increase incomes. , but it may be necessary to take action also in terms of the functioning of the tax system in the 21st century. ”
Georgieva also warned that as public support is gradually withdrawn, the risk of bankruptcy for small and medium-sized enterprises will increase, “struggling to survive”.
Another threat to the post-coronavirus world is rising inequalities.
“We have seen pandemics like H1N1 in previous cases [and] Zika, this inequality is increasing and it persists for some time. We see that this crisis is hitting low-skilled workers, women, young people the hardest, “she said.
“It is very important not to forget [the] the progress we have made on gender equality, which is now crumbling, [and] make sure we make it easier for women to participate in the labor market, in the economy, to move forward, not back down, on this particular topic. “
The Suez Crisis reminds us “how interdependent we are”
On a final note, Georgieva took a moment to reflect on the recent Suez Canal crisis, where the Ever Given, a colossal 400-meter-long container ship, blocked one of the busiest trade routes in the world for six days. The prolonged obstruction has disrupted world trade and exposed the drawbacks of globalization.
“It’s an important reminder [of] how interdependent we are and how important trade is to our operation. It is also an indication that we can never take our luck for granted, when we are, and that working together is the only way to get through this crisis, ”said Georgieva.
“If you take the ship as an analogy for the future, it was brought up through ingenuity and also a little help from nature. We have to protect and develop both our ingenuity, our creativity, learned of this pandemic. But remember, we are also in the hands of Mother Nature. Protect her. “