Group of Twenty IMF Note — Finance Ministers and Central Bank Governors' Meetings

G-20 Surveillance Note

February 26, 2021

The following executive summary is from a note by the Staff of the IMF prepared for the February 26, 2021 G-20 Finance Ministers and Central Bank Governors' Meetings, Virtual Meeting.
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Executive Summary

A global recovery from the crisis hinges on making rapid progress against the pandemic and providing effective economic support until the virus is beaten back. Excellent news from multiple vaccine trials and ongoing inoculation campaigns in some countries raise the potential for ending the Covid-19 crisis. Yet, continued fast transmission of a mutating virus makes the outlook very uncertain. Moreover, prospects vary tremendously across countries, reflecting vast differences in access to vaccines and other medical interventions; the ability for policies to effectively cushion economies; exposures to activities that are hindered by the pandemic; and preexisting trends. Currently, advanced and some emerging market economies are expected to gain widespread access to vaccinations during 2021, whereas others face a much longer wait.

The crisis will not end without ambitious national and cooperative multilateral action:

  • Durably end the pandemic. To ensure a strong, shared recovery and to get ahead of any further virus mutations, scaling up vaccine production is essential, and policymakers must work together to raise financing—including for COVAX—to quickly produce and distribute vaccines globally. The development of affordable therapies needs to be sped up. Actions to support the free flow of medical supplies and equipment would help all countries deal effectively with the disease.
  • Preserve emergency policy support. To limit scarring and avoid a further deepening of inequalities, monetary policy support and well-targeted fiscal and liquidity lifelines will need to be maintained until constraints on activity ease meaningfully. Macroprudential tools should be used to keep rising financial risks at bay. In countries with limited fiscal space, spending should be prioritized for health and help to the poor. Once infections are durably declining with broadening immunity, lifelines can be gradually rolled back to avoid disincentives to reallocation.
  • Ensure a strong, green, and inclusive recovery. A synchronized public investment push would provide a much-needed impetus to growth and jobs. Priorities include spending on health, education, and digitalization to reverse the harm wrought by the pandemic and support inclusion. Moreover, with the window of opportunity for keeping global temperature increases at safe levels closing fast, a strong boost is needed for green public infrastructure; which, combined with steadily rising carbon prices, could direct future private investments toward greener and more sustainable choices. Improving resilience to climate shocks and providing safeguards and opportunities for those threatened by the transition toward a low carbon economy are key.
  • Arrest and reverse the dangerous divergence between rich and poor countries. Many developing economies are hit particularly hard by the crisis and have little policy space to respond. They need the support of the international community to prevent a major setback in development gains, to ensure access to food and healthcare, and to invest in climate resilience and digital infrastructure. Unprecedented financial support is needed for some, including by confronting complex debt-related issues. Implementation of the Common Framework for Debt Treatments Beyond the DSSI would also be helpful in this regard. Strengthening the global rules- based trading system, including through WTO reform, would support the global recovery.

Prepared under the guidance of Oya Celasun by a team led by Lone Christiansen, comprising Ashique Habib, Eric Bang, Jaden Kim, and Bryan Zou. Ilse Peirtsegaele provided administrative support.

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