WASHINGTON, D. C.: New, highly infectious Covid-19 variants could inflict a double blow on emerging markets in a downside scenario, leading to significant losses in output over the coming years, an International Monetary Fund (IMF) official has said.
"I wish we could be talking about upside risks... Unfortunately, it's not where we are," Petya Koeva Brooks, deputy director of the IMF's Research Department, told Xinhua in a remote video interview earlier this week.
In the latest update to its World Economic Outlook released on Tuesday, the IMF maintained its global economic growth forecast at 6 percent for 2021, highlighting widening gaps in global recovery and warning of downside risks amid vaccine inequality.
The projection showed growth prospects for advanced economies this year have improved by 0.5-percentage point to reach 5.6 percent while those for emerging market and developing economies are downgraded by 0.4-percentage point to 6.3 percent.
"The access to vaccines and the ability of countries to provide policy support are the main reasons why we're seeing this divide," Brooks said. "Unless we solve that problem, I think it would be hard to talk about durable global recovery going forward."
Close to 40 percent of the population in advanced economies have been fully vaccinated compared with 11 percent in emerging market economies and a tiny fraction in low-income developing countries, according to the IMF.
On the global vaccination front, Brooks said there is "a mixture of good news and bad news," stressing that a lot more work needs to be done to solve the problem.
IMF staff recently outlined a $50-billion plan, which has been endorsed by the World Health Organization (WHO), World Bank, and World Trade Organization, and aims for faster vaccine rollout and accelerated recovery.
Brooks noted that additional funding has been provided to fully fund Covax, a WHO-backed international platform, which donates vaccines to countries in need, and there have been some positive developments on lifting export restrictions so that vaccines can be produced.
Despite the progress, more efforts are needed in some other aspects, said the IMF official.
The multilateral lender has called on countries with surplus vaccines to provide at least 1 billion doses this year to countries with less access. "And we've seen some pledges, but by and large, that is an area which still needs to be worked on," Brooks said.
"And perhaps the area where there's been the least progress has been on ensuring that there is grant, there's financing also for testing and therapeutics to be made available in low-income and emerging countries," she added.
While more widespread vaccine access could improve the outlook, risks on balance are tilted to the downside, according to the IMF, which estimated that the emergence of highly infectious virus variants could derail the recovery and wipe out $4.5 trillion cumulatively from global gross domestic product by 2025.
In one downside scenario, new variants are assumed to lead to a new infection wave in emerging markets and developing economies in the coming months with tightening financial conditions amid concerns over inflation in advanced economies, particularly the United States.
"As a result of that, emerging markets are dealt this double blow and in that scenario, they could see significant losses in output over the coming years," Brooks told Xinhua.