Scars from the pandemic will prevent the global economy from making a full recovery, though the impact over the rest of the decade will not be as severe as that of the 2008 financial crisis , the International Monetary Fund has said.
Tourism-dependent countries in the Pacific Islands and in the Caribbean – such as Barbados – would be among those to suffer the most, the Washington-based organisation said. It expected global output to be about 3% lower in 2024 than projected before the Covid-19 pandemic.
A speedy rollout of Covid-19 vaccines in the US, China and the UK among others is expected to raise the forecast for growth when the IMF provides a fresh outlook for this year and next, despite a third wave of the virus spreading across Europe and parts of south America that will dampen the rebound.
In its most recent economic update in January, the IMF said the global economy was on course to recover from a 3.5% fall in GDP in 2020 with growth of 5.5% in 2021, up slightly compared with October’s forecast.
However, in a summary of its twice-yearly world economic outlook, to be published next week, the IMF said a freeze on business investment in the early months of the pandemic and the hit to consumer spending that still affects most countries for business failures and job losses would have longer term repercussions for the recovery.
In a separate report, the World Trade Organization revised up its forecast for growth this year of global goods trade after a decline in 2020 that was far less severe than its expectation when the coronavirus first struck.
The WTO said it expected merchandise trade would grow this year by 8.0% after a fall of 5.3% in 2020. That compared with figures in October of respectively 7.2% growth and a 9.2% decline.
The Geneva-based trade body said that trade growth should slow to 4.0% in 2022, below its pre-pandemic trend.
IMF managing director Kristalina Georgieva warned that the effects of the disruption would be uneven and most damaging in emerging markets, which could become caught in debt crisis.
She warned that a flight of funds out of local currencies into dollar assets “would pose major challenges, especially to middle-income countries with large external financing needs and elevated debt levels.”
The IMF said in a blogpost to accompany its forecast that the path to recovery would also remain challenging for poorer countries that relied heavily on some of the hardest hit industries such as tourism.
“Unlike what happened during the global financial crisis, emerging market and developing economies are expected to have deeper scars than advanced economies, with losses expected to be the largest among low-income countries,” it said.
This was true for the Caribbean or the Pacific Islands, with gross domestic product in the latter estimated to be 10% lower in 2024 than pre-pandemic projections, the IMF said.
The pandemic could also have a bigger impact on the labour market over the medium- and longer term as workers are forced to leave sectors that shrink because contact industries fall out of favour or digital processes become more prevalent, the IMF said.