Global Economic Outlook and Policy Priorities

IMF News, February 6, 2021

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Global growth projected at 5.5 percent in 2021 (IMF latest forecast).
Global contraction of 3.5 percent in 2020 (the worst peacetime recession since the Great Depression).
Tremendous uncertainty surrounds the forecast, driven by the race between the mutating virus and vaccines and the need for continued policy support until herd immunity is achieved.
Fiscal and monetary support deployed globally:
- $14 trillion in fiscal support to households and firms.
- $9 trillion in monetary support through interest rate cuts and other measures by central banks.
IMF operational response since the start of the pandemic:
- Approved over $105 billion in total financing for 85 countries.
- Expanded concessional financing for low-income countries and provided immediate debt relief to 29 of the poorest, most vulnerable countries.
- Provided real‑time policy advice and capacity development support to over 175 countries.

Vaccination and medical access for low- and middle-income economies is essential to a sustainable global recovery.
Actions required:
- Ramp up vaccine production.
- Bolster funding for the COVAX facility.
- Improve logistics of vaccine delivery.
Estimated economic benefit:
- Faster vaccinations would raise global income cumulatively by $9 trillion over 2020‑2025.

Maintain economic lifelines and policy support where the virus is surging to:
- Protect households.
- Prevent bankruptcies of otherwise viable firms.
- Enable a faster rebound once constraints are lifted.
Prioritization where fiscal space is limited:
- Spending prioritized for health and transfers to the poor.
- Gradual roll back of lifelines only when infections are durably declining and economic activity is normalizing, while cushioning impacts on the most vulnerable.

Concern: around half of all emerging markets and developing economies—previously converging in per capita income—are now expected to diverge from advanced economies.
Policy responses to reverse divergence:
- Provide grants, highly concessional loans, and debt relief.
- Address unsustainable sovereign debt where it may arise, including through coordinated frameworks and bilateral debt service relief.

The IMF calls for synchronized investment in green and digital infrastructure as the pandemic comes under control.
Green investment and policy examples:
- Efficient mass transit systems.
- Smart electricity grids.
- Phasing out harmful subsidies.
- Combine green investments with appropriate carbon pricing to pursue net zero emissions by mid-century and create millions of new jobs (IMF estimate).
Digital investment priorities:
- E‑commerce, e‑learning, e‑government, digital money and payments.
Labor and human capital:
- Increased investment in training, re‑skilling and high-quality education to support worker transitions from shrinking to expanding sectors.

Incorporating climate change into country and financial risk assessments.
Scaling up capacity development on climate policy.
Working with countries on policies to enable the digital paradigm as an engine of growth and financial inclusion.

Keynote Speech by Deputy Managing Director Antoinette M. Sayeh, February 6, 2021