## 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening

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### Overview and projection changes
- The projected global growth recovery for 2021 follows a severe collapse in 2020 that had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors.
- The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).
- The 2021 growth forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting additional policy support in a few large economies and expectations of a vaccine-powered strengthening of activity later in the year.
- The upgrade is particularly large for the advanced economy group, reflecting additional fiscal support—mostly in the United States and Japan—and earlier widespread vaccine availability relative to the emerging market and developing economy group.

### Pandemic, vaccines, and baseline assumptions
- Baseline vaccine and therapy assumptions:
  - Broad vaccine availability in advanced economies and some emerging market economies in summer 2021.
  - Broad vaccine availability across most countries by the second half of 2022—an accelerated timeline relative to expectations at the time of the previous forecast.
  - Vaccine rollout speed is assumed to vary across economies based on country-specific factors.
  - Therapies are expected to gradually become more effective and more accessible worldwide over the course of 2021–22.
  - The baseline assumes the possibility of lockdowns, including to contain transmission of new variants, before vaccines become widely available.
- Path of the pandemic:
  - With growing vaccine availability, improved therapies, testing, and tracing, local transmission of the virus is expected to be brought to low levels everywhere by the end of 2022.
  - Some regions and countries will get to low local transmission sooner than others depending on country-specific circumstances.

### Near-term dynamics and risks
- Infections and restrictions will soften momentum in early 2021; renewed lockdowns and surging infections (including new variants) counterbalance vaccine progress.
- Third-quarter GDP mostly surprised on the upside; private consumption rebounded the most while investment picked up relatively slowly except in China.
- High-frequency indicators suggested some tapering into Q4 2020 (new orders, industrial production, global trade); the US December employment report showed the first net decline in nonfarm payrolls since April 2020.
- Services output remains subdued and is likely to soften further with renewed restrictions.
- Three key questions for the global outlook:
  1. How will restrictions needed to curb transmission affect activity in the near term before vaccines deliver effective society-wide protection?
  2. How will vaccine-rollout expectations and policy support affect activity?
  3. How will financial conditions and commodity prices evolve?

### Policy support and multilateral actions
- Additional fiscal policy support announced for 2021 in some countries (notably the United States and Japan), together with the unlocking of Next Generation EU funds, will help lift activity among advanced economies with favorable spillovers to trading partners.
- Most countries are expected to experience lower deficits in 2021 as revenues rise and expenditures decline automatically with the recovery (per the January 2021 Fiscal Monitor Update).
- Strong multilateral cooperation is required:
  - Bolster funding for the COVAX facility to accelerate access to vaccines for all countries.
  - Ensure universal distribution of vaccines.
  - Facilitate access to therapeutics at affordable prices for all.
- For low-income developing economies and other countries with high or rising debt, the global community must continue working to ensure adequate access to international liquidity.
- Where sovereign debt is unsustainable, eligible countries should work with creditors to restructure their debt under the Common Framework agreed by the G20.
- Policy imperative priorities: raise potential output, ensure participatory growth that benefits all, and accelerate the transition to lower carbon dependence.
- As noted in the October 2020 WEO, a green investment push coupled with initially moderate but steadily rising carbon prices would yield needed emissions reductions while supporting the recovery.

### Financial conditions and commodity prices
- Major central banks are assumed to maintain their current policy rate settings throughout the forecast horizon to the end of 2022; financial conditions are expected to remain broadly at current levels for advanced economies and gradually improve for emerging market and developing economies.
- Differentiation between investment-grade sovereigns and high-yield borrowers is expected to subside as the recovery takes hold.
- Oil and commodity price outlook:
  - Oil prices are expected to rise in 2021 just over 20 percent from the low base for 2020, but remain well below their average for 2019.
  - Non-oil commodity prices are also expected to increase, with metals projected to accelerate strongly in 2021.
  - The average price of oil in US dollars a barrel was $41.29 in 2020; the assumed price, based on futures markets (as of January 4, 2021), is $50.03 in 2021 and $48.82 in 2022.

### Key projections and statistics (selected, as presented)
- Global output and growth revisions:
  - 2020: World growth estimated at -3.5 percent.
  - 2021: World growth projected at 5.5 percent.
  - 2022: World growth projected at 4.2 percent.
  - The estimate for 2020 is 0.9 percentage point higher than projected in the October WEO forecast.
  - The 2021 growth forecast is revised up 0.3 percentage point relative to the previous forecast.
- Global trade:
  - Global trade volumes are forecast to grow about 8 percent in 2021 and 6 percent in 2022.
  - Services trade is expected to recover more slowly than merchandise volumes.
- Inflation:
  - Advanced economies: inflation projected to remain generally below central bank targets at 1.5 percent in 2021–22.
  - Emerging market and developing economies: inflation projected just over 4 percent in 2021–22.
- Notes and assumptions:
  - Real effective exchange rates are assumed to remain constant at the levels prevailing during October 23–November 20, 2020.
  - Major central bank policy rates are held at current settings through end-2022 in the baseline.

*International Monetary Fund, World Economic Outlook Update, January 2021*

### 2022. The wide divergence reflects to an important extent differences across countries in

### Diverging recovery paths and revisions to forecasts
- The 2021 forecast for the United States is revised up 2 percentage points relative to the October 2020 WEO projection, reflecting carryover from the strong momentum in the second half of 2020 and additional support from the December 2020 fiscal package.
- The 2021 forecast for Japan is revised up 0.8 percentage point largely because of the additional boost from the fiscal measures introduced at the end of 2020.
- Downward revisions to the 2021 forecast for the euro area reflect an observed softening of activity toward the end of 2020, anticipated to continue into early 2021 amid rising infections and renewed lockdowns.
- Emerging market and developing economies are projected to trace diverging recovery paths:
  - Considerable differentiation is expected between China—where effective containment measures, a forceful public investment response, and central bank liquidity support have facilitated a strong recovery—and other economies.
  - Oil exporters and tourism-based economies face particularly difficult prospects given slow normalization of cross-border travel and the subdued outlook for oil prices.
  - Close to 90 million people are likely to fall below the extreme poverty threshold during 2020–21.
  - Notable revision: India’s forecast revised by 2.7 percentage points for 2021, reflecting carryover from a stronger-than-expected recovery in 2020 after lockdowns were eased.

### Scarring (persistent damage to supply potential) and labor market impacts
- Projections assume economies adapt to social distancing until local transmission is brought to a low level.
- Although employment in some countries appears to have recovered more quickly from the trough, large numbers remain unemployed and underemployed:
  - In the United States, there are 9 million fewer employed people than in February 2020.
- The burden of the crisis has fallen unevenly across groups: workers with less education, women, youth, those in contact-intensive sectors, and those informally employed have suffered disproportionate livelihood and income losses.
- Economies heavily reliant on contact-intensive industries, commodity exporters, and those with large setbacks to human capital from school closures are particularly exposed to persistent damages to supply potential.

### Exceptional uncertainty and risk channels
- The December agreement on the terms of the United Kingdom’s exit from the European Union has eliminated a key downside risk (i.e., a “no-deal Brexit”).
- Upside risks:
  - Further favorable news on vaccine manufacture, distribution, and effectiveness of therapies could increase expectations of a faster end to the pandemic, boosting confidence, consumption, investment, and employment.
  - More fiscal policy support than assumed in the baseline, with favorable spillover effects, would further lift global activity.
- Downside risks:
  - A virus surge (including from new variants) that is difficult to contain could lead to higher infections and deaths before vaccines are widely available, stronger voluntary distancing or lockdowns, and weaker growth.
  - Slower-than-anticipated progress on medical interventions could dampen recovery expectations; specific concerns include vaccine rollout delays, widespread hesitancy, shorter-lived immunity, and limited advances on therapies.
  - Premature withdrawal of policy support could produce bankruptcies of viable but illiquid firms, tighter financial conditions, increased rollover risks for vulnerable borrowers, an increase in economies in debt distress (January 2021 Fiscal Monitor Update), and more insolvencies among corporates and households (January 2021 Global Financial Stability Report Update).
  - Intensifying social unrest due to higher inequality and unequal access to vaccines and therapies could further complicate recovery.

### Scenario analysis (IMF’s G20 Model)
- Scenarios focus on incidence of COVID infections and efficacy of vaccine rollout.
- Upside scenario:
  - Level of global output increases above baseline by roughly ¾ percent in 2021, widening to almost 1 percent above baseline in 2022.
  - Vaccine rollout assumed earlier than baseline; advanced economies receive vaccines before many emerging economies, so activity accelerates sooner in advanced economies in 2021 and in emerging market economies in 2022.
- Downside scenario:
  - Vaccine rollout assumed to go less smoothly than in baseline, with widespread availability occurring later and more resistance to take-up.
  - Global activity falls below baseline by roughly ¾ percent in 2021 but starts to return toward baseline in 2022.
  - Deviation from baseline is more pronounced in advanced economies in 2021 and in emerging market economies in 2022.
  - Emerging vulnerable economies assumed to see mild increases in risk premia, although some emerging and most advanced economy central banks are assumed able to prevent tightening in financial conditions.

### Policy effectiveness during the recession
- Aggressive and swift monetary, fiscal, and financial sector policies have helped prevent worse outcomes; transfers to households boosted consumer spending where liquidity-constrained.
- Transfers to firms, credit guarantees, and funding-for-lending programs have prevented bankruptcies that might otherwise have occurred (but may keep some unviable firms afloat with potential future productivity drag).
- IMF staff analysis of a sample of 13 advanced economies spanning 1990 to the COVID crisis finds bankruptcies have fallen during this recession unlike during past recessions (Figure 6); moratoria on bankruptcy filings in some countries may contribute to this decline.
- Efficient corporate bankruptcy frameworks that apportion losses across investors, creditors, and owners will be central to dealing with potential backlogs; special out-of-court restructuring frameworks may need to be strengthened or established to expedite processing.

### Policy objectives and recommendations
- Overarching objective: ensure effective support until vaccine-powered normalization is underway and limit persistent damage from the deep recession while advancing medium-term objectives for resilient and equitable growth.
- Resources for health care:
  - Secure adequate funding for vaccine purchases and distribution, testing, therapies, personal protective equipment, and investment in health care facilities.
  - International assistance with know-how and equipment for low health-care capacity countries remains vital.
  - Bolster funding for the COVAX facility and ensure universal distribution of vaccines.
- Economic policies to limit persistent damage:
  - Continue public health measures reinforced with well-designed economic policies tailored to pandemic stage.
  - Where local transmission is high, maintain lifelines including transfers to displaced workers and otherwise viable firms that experience revenue losses.
  - Where transmission is low and activity normalizes, gradually roll back lifelines by making parameters less generous over time (example: reduced government share of wages under short-time work programs), complemented with hiring subsidies.
  - Deploy broader stimulus where needed; priority areas: education spending to remedy human capital setbacks, digitalization to boost productivity growth, and green investment to enhance reliance on renewables and increase energy conservation.
  - A green investment push coupled with initially moderate but steadily rising carbon prices would yield needed emissions reductions while supporting recovery.
- Policies to address inequality:
  - Invest in retraining and reskilling programs, strengthen social assistance (conditional cash transfers, medical payments for low-income households), and expand social insurance (relax eligibility for unemployment benefits, extend paid family and sick leave).
- Policy space varies across countries:
  - Advanced economies: extremely low borrowing costs; can provide fiscal support as needed and keep monetary policy accommodative until recovery is firm.
  - Emerging market economies: maintain fiscal and monetary support where debt sustainability is not at risk and inflation expectations are anchored; clearly communicate objectives of asset purchase programs; exchange rate flexibility can absorb shocks where appropriate; foreign exchange intervention and temporary capital flow management measures may be useful in some circumstances but should not substitute for macroeconomic adjustment.
  - Low-income developing countries: far less policy space with high preexisting debt; international support through grants, concessional loans, and debt relief will be essential.
- Debt restructuring:
  - Debt restructuring may be unavoidable for some countries; eligible countries should work with creditors under the new Common Framework agreed by the G20.
  - Improving the international debt architecture to support orderly debt restructuring would benefit these countries and the system as a whole.

### Addressing crisis legacies and multilateral cooperation
- Policymakers must prioritize addressing enduring legacies: slow productivity growth, rising inequality, higher absolute numbers in poverty, higher debt, and setbacks in human capital accumulation.
- A synchronized public investment push by the largest economies with fiscal space can enhance effectiveness and boost cross-border spillovers through trade linkages; emphasizing green infrastructure and digitalization would raise productivity growth and lift medium-term global output more than uncoordinated spending.
- Closer multilateral cooperation is needed to:
  - Accelerate climate change mitigation efforts.
  - Resolve economic issues underlying trade and technology tensions and gaps in the rules-based multilateral trading system.

*Source: Excerpt from IMF WEO chapter text (January 2021 update).*

### 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening

### text - 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening

### Overview and projection changes
- The projected global growth recovery for 2021 follows a severe collapse in 2020 that had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors.
- The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).
- The 2021 growth forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting additional policy support in a few large economies and expectations of a vaccine-powered strengthening of activity later in the year.
- The upgrade is particularly large for the advanced economy group, reflecting additional fiscal support—mostly in the United States and Japan—and earlier widespread vaccine availability relative to the emerging market and developing economy group.

### Pandemic, vaccines, and baseline assumptions
- Baseline vaccine and therapy assumptions:
  - Broad vaccine availability in advanced economies and some emerging market economies in summer 2021.
  - Broad vaccine availability across most countries by the second half of 2022—an accelerated timeline relative to expectations at the time of the previous forecast.
  - Vaccine rollout speed is assumed to vary across economies based on country-specific factors.
  - Therapies are expected to gradually become more effective and more accessible worldwide over the course of 2021–22.
  - The baseline assumes the possibility of lockdowns, including to contain transmission of new variants, before vaccines become widely available.
- Path of the pandemic:
  - With growing vaccine availability, improved therapies, testing, and tracing, local transmission of the virus is expected to be brought to low levels everywhere by the end of 2022.
  - Some regions and countries will get to low local transmission sooner than others depending on country-specific circumstances.

### Near-term dynamics and risks
- Infections and restrictions will soften momentum in early 2021; renewed lockdowns and surging infections (including new variants) counterbalance vaccine progress.
- Third-quarter GDP mostly surprised on the upside; private consumption rebounded the most while investment picked up relatively slowly except in China.
- High-frequency indicators suggested some tapering into Q4 2020 (new orders, industrial production, global trade); the US December employment report showed the first net decline in nonfarm payrolls since April 2020.
- Services output remains subdued and is likely to soften further with renewed restrictions.
- Three key questions for the global outlook:
  1. How will restrictions needed to curb transmission affect activity in the near term before vaccines deliver effective society-wide protection?
  2. How will vaccine-rollout expectations and policy support affect activity?
  3. How will financial conditions and commodity prices evolve?

### Policy support and multilateral actions
- Additional fiscal policy support announced for 2021 in some countries (notably the United States and Japan), together with the unlocking of Next Generation EU funds, will help lift activity among advanced economies with favorable spillovers to trading partners.
- Most countries are expected to experience lower deficits in 2021 as revenues rise and expenditures decline automatically with the recovery (per the January 2021 Fiscal Monitor Update).
- Strong multilateral cooperation is required:
  - Bolster funding for the COVAX facility to accelerate access to vaccines for all countries.
  - Ensure universal distribution of vaccines.
  - Facilitate access to therapeutics at affordable prices for all.
- For low-income developing economies and other countries with high or rising debt, the global community must continue working to ensure adequate access to international liquidity.
- Where sovereign debt is unsustainable, eligible countries should work with creditors to restructure their debt under the Common Framework agreed by the G20.
- Policy imperative priorities: raise potential output, ensure participatory growth that benefits all, and accelerate the transition to lower carbon dependence.
- As noted in the October 2020 WEO, a green investment push coupled with initially moderate but steadily rising carbon prices would yield needed emissions reductions while supporting the recovery.

### Financial conditions and commodity prices
- Major central banks are assumed to maintain their current policy rate settings throughout the forecast horizon to the end of 2022; financial conditions are expected to remain broadly at current levels for advanced economies and gradually improve for emerging market and developing economies.
- Differentiation between investment-grade sovereigns and high-yield borrowers is expected to subside as the recovery takes hold.
- Oil and commodity price outlook:
  - Oil prices are expected to rise in 2021 just over 20 percent from the low base for 2020, but remain well below their average for 2019.
  - Non-oil commodity prices are also expected to increase, with metals projected to accelerate strongly in 2021.
  - The average price of oil in US dollars a barrel was $41.29 in 2020; the assumed price, based on futures markets (as of January 4, 2021), is $50.03 in 2021 and $48.82 in 2022.

### Key projections and statistics (selected, as presented)
- Global output and growth revisions:
  - 2020: World growth estimated at -3.5 percent.
  - 2021: World growth projected at 5.5 percent.
  - 2022: World growth projected at 4.2 percent.
  - The estimate for 2020 is 0.9 percentage point higher than projected in the October WEO forecast.
  - The 2021 growth forecast is revised up 0.3 percentage point relative to the previous forecast.
- Global trade:
  - Global trade volumes are forecast to grow about 8 percent in 2021 and 6 percent in 2022.
  - Services trade is expected to recover more slowly than merchandise volumes.
- Inflation:
  - Advanced economies: inflation projected to remain generally below central bank targets at 1.5 percent in 2021–22.
  - Emerging market and developing economies: inflation projected just over 4 percent in 2021–22.
- Notes and assumptions:
  - Real effective exchange rates are assumed to remain constant at the levels prevailing during October 23–November 20, 2020.
  - Major central bank policy rates are held at current settings through end-2022 in the baseline.

*International Monetary Fund, World Economic Outlook Update, January 2021*

### 2022. The wide divergence reflects to an important extent differences across countries in

### 2022. The wide divergence reflects to an important extent differences across countries in

### Diverging recovery paths and revisions to forecasts
- The 2021 forecast for the United States is revised up 2 percentage points relative to the October 2020 WEO projection, reflecting carryover from the strong momentum in the second half of 2020 and additional support from the December 2020 fiscal package.
- The 2021 forecast for Japan is revised up 0.8 percentage point largely because of the additional boost from the fiscal measures introduced at the end of 2020.
- Downward revisions to the 2021 forecast for the euro area reflect an observed softening of activity toward the end of 2020, anticipated to continue into early 2021 amid rising infections and renewed lockdowns.
- Emerging market and developing economies are projected to trace diverging recovery paths:
  - Considerable differentiation is expected between China—where effective containment measures, a forceful public investment response, and central bank liquidity support have facilitated a strong recovery—and other economies.
  - Oil exporters and tourism-based economies face particularly difficult prospects given slow normalization of cross-border travel and the subdued outlook for oil prices.
  - Close to 90 million people are likely to fall below the extreme poverty threshold during 2020–21.
  - Notable revision: India’s forecast revised by 2.7 percentage points for 2021, reflecting carryover from a stronger-than-expected recovery in 2020 after lockdowns were eased.

### Scarring (persistent damage to supply potential) and labor market impacts
- Projections assume economies adapt to social distancing until local transmission is brought to a low level.
- Although employment in some countries appears to have recovered more quickly from the trough, large numbers remain unemployed and underemployed:
  - In the United States, there are 9 million fewer employed people than in February 2020.
- The burden of the crisis has fallen unevenly across groups: workers with less education, women, youth, those in contact-intensive sectors, and those informally employed have suffered disproportionate livelihood and income losses.
- Economies heavily reliant on contact-intensive industries, commodity exporters, and those with large setbacks to human capital from school closures are particularly exposed to persistent damages to supply potential.

### Exceptional uncertainty and risk channels
- The December agreement on the terms of the United Kingdom’s exit from the European Union has eliminated a key downside risk (i.e., a “no-deal Brexit”).
- Upside risks:
  - Further favorable news on vaccine manufacture, distribution, and effectiveness of therapies could increase expectations of a faster end to the pandemic, boosting confidence, consumption, investment, and employment.
  - More fiscal policy support than assumed in the baseline, with favorable spillover effects, would further lift global activity.
- Downside risks:
  - A virus surge (including from new variants) that is difficult to contain could lead to higher infections and deaths before vaccines are widely available, stronger voluntary distancing or lockdowns, and weaker growth.
  - Slower-than-anticipated progress on medical interventions could dampen recovery expectations; specific concerns include vaccine rollout delays, widespread hesitancy, shorter-lived immunity, and limited advances on therapies.
  - Premature withdrawal of policy support could produce bankruptcies of viable but illiquid firms, tighter financial conditions, increased rollover risks for vulnerable borrowers, an increase in economies in debt distress (January 2021 Fiscal Monitor Update), and more insolvencies among corporates and households (January 2021 Global Financial Stability Report Update).
  - Intensifying social unrest due to higher inequality and unequal access to vaccines and therapies could further complicate recovery.

### Scenario analysis (IMF’s G20 Model)
- Scenarios focus on incidence of COVID infections and efficacy of vaccine rollout.
- Upside scenario:
  - Level of global output increases above baseline by roughly ¾ percent in 2021, widening to almost 1 percent above baseline in 2022.
  - Vaccine rollout assumed earlier than baseline; advanced economies receive vaccines before many emerging economies, so activity accelerates sooner in advanced economies in 2021 and in emerging market economies in 2022.
- Downside scenario:
  - Vaccine rollout assumed to go less smoothly than in baseline, with widespread availability occurring later and more resistance to take-up.
  - Global activity falls below baseline by roughly ¾ percent in 2021 but starts to return toward baseline in 2022.
  - Deviation from baseline is more pronounced in advanced economies in 2021 and in emerging market economies in 2022.
  - Emerging vulnerable economies assumed to see mild increases in risk premia, although some emerging and most advanced economy central banks are assumed able to prevent tightening in financial conditions.

### Policy effectiveness during the recession
- Aggressive and swift monetary, fiscal, and financial sector policies have helped prevent worse outcomes; transfers to households boosted consumer spending where liquidity-constrained.
- Transfers to firms, credit guarantees, and funding-for-lending programs have prevented bankruptcies that might otherwise have occurred (but may keep some unviable firms afloat with potential future productivity drag).
- IMF staff analysis of a sample of 13 advanced economies spanning 1990 to the COVID crisis finds bankruptcies have fallen during this recession unlike during past recessions (Figure 6); moratoria on bankruptcy filings in some countries may contribute to this decline.
- Efficient corporate bankruptcy frameworks that apportion losses across investors, creditors, and owners will be central to dealing with potential backlogs; special out-of-court restructuring frameworks may need to be strengthened or established to expedite processing.

### Policy objectives and recommendations
- Overarching objective: ensure effective support until vaccine-powered normalization is underway and limit persistent damage from the deep recession while advancing medium-term objectives for resilient and equitable growth.
- Resources for health care:
  - Secure adequate funding for vaccine purchases and distribution, testing, therapies, personal protective equipment, and investment in health care facilities.
  - International assistance with know-how and equipment for low health-care capacity countries remains vital.
  - Bolster funding for the COVAX facility and ensure universal distribution of vaccines.
- Economic policies to limit persistent damage:
  - Continue public health measures reinforced with well-designed economic policies tailored to pandemic stage.
  - Where local transmission is high, maintain lifelines including transfers to displaced workers and otherwise viable firms that experience revenue losses.
  - Where transmission is low and activity normalizes, gradually roll back lifelines by making parameters less generous over time (example: reduced government share of wages under short-time work programs), complemented with hiring subsidies.
  - Deploy broader stimulus where needed; priority areas: education spending to remedy human capital setbacks, digitalization to boost productivity growth, and green investment to enhance reliance on renewables and increase energy conservation.
  - A green investment push coupled with initially moderate but steadily rising carbon prices would yield needed emissions reductions while supporting recovery.
- Policies to address inequality:
  - Invest in retraining and reskilling programs, strengthen social assistance (conditional cash transfers, medical payments for low-income households), and expand social insurance (relax eligibility for unemployment benefits, extend paid family and sick leave).
- Policy space varies across countries:
  - Advanced economies: extremely low borrowing costs; can provide fiscal support as needed and keep monetary policy accommodative until recovery is firm.
  - Emerging market economies: maintain fiscal and monetary support where debt sustainability is not at risk and inflation expectations are anchored; clearly communicate objectives of asset purchase programs; exchange rate flexibility can absorb shocks where appropriate; foreign exchange intervention and temporary capital flow management measures may be useful in some circumstances but should not substitute for macroeconomic adjustment.
  - Low-income developing countries: far less policy space with high preexisting debt; international support through grants, concessional loans, and debt relief will be essential.
- Debt restructuring:
  - Debt restructuring may be unavoidable for some countries; eligible countries should work with creditors under the new Common Framework agreed by the G20.
  - Improving the international debt architecture to support orderly debt restructuring would benefit these countries and the system as a whole.

### Addressing crisis legacies and multilateral cooperation
- Policymakers must prioritize addressing enduring legacies: slow productivity growth, rising inequality, higher absolute numbers in poverty, higher debt, and setbacks in human capital accumulation.
- A synchronized public investment push by the largest economies with fiscal space can enhance effectiveness and boost cross-border spillovers through trade linkages; emphasizing green infrastructure and digitalization would raise productivity growth and lift medium-term global output more than uncoordinated spending.
- Closer multilateral cooperation is needed to:
  - Accelerate climate change mitigation efforts.
  - Resolve economic issues underlying trade and technology tensions and gaps in the rules-based multilateral trading system.

*Source: Excerpt from IMF WEO chapter text (January 2021 update).*

---


_Source: https://www.imf.org/-/media/files/publications/weo/2021/update/january/english/text.pdf_