Cumulative per capita income is expected to decrease by 18 percent for low-income countries and by 22 percent for emerging and developing countries excluding China, according to the Managing Director of the International Monetary (IMF) Fund Kristalina Georgieva.
Georgieva made her comments on Wednesday on the occasion of the G-20 group meeting that is anticipated to be held in the current week.
She said that the projected hit to per capita income will increase by millions the number of extremely poor people in the developing world.
“Convergence between countries can no longer be taken for granted. Before the crisis, we forecast that income gaps between advanced economies and 110 emerging and developing countries would narrow over 2020-22. But we now estimate that only 52 economies will be catching up during that period, while 58 are set to fall behind,” said Georgieva.
Georgieva attributed this to the uneven access to vaccines, adding that even in the best-case scenario, most developing economies are expected to reach widespread vaccine coverage only by the end of 2022 or beyond, while some are especially exposed to hard-hit sectors such as tourism and oil exports, and most of them are hindered by the limited space in their budgets.
The IMF sees an accelerated divergence within countries, as the young, the low-skilled, women, and informal workers have been disproportionately hit by job losses amid the pandemic, while millions of children are still facing disruptions to education.
“Allowing them to become a lost generation would be an unforgiveable mistake. It would also deepen the long-term economic scars of the crisis, which would make it even more difficult to reduce inequality and boost growth and jobs,” Georgieva warned
For challenges ahead, Georgieva noted that G20 economies, excluding India and Saudi Arabia, due to data limitations, are expected to witness a total employment loss projected at 25 million in 2021 and close to 20 million in 2022.
“We stand at a fork in the road. If we are to reverse this dangerous divergence between and within countries, we must take strong policy actions now,” Georgieva urged.
In this regard, Georgieva called for adopting three priorities amid the ongoing challenging time, including stepping up efforts to end the health crisis through stronger international collaboration to fast track the vaccine rollout, especially in poorer countries.
She also called for allocating additional financing to secure doses and pay for logistics and ensure greater access to therapies and testing, including virus sequencing, while steering clear of restrictions on exports of medical supplies.
Georgieva expected that faster progress in ending the health crisis could add to the global income $9 trillion cumulatively from 2020 through 2025, which would benefit all countries.
Georgieva also urged countries across the world to ramp up efforts against the economic crisis caused by the pandemic, saying that the world has taken unprecedented measures, including nearly $14 trillion in fiscal actions in this respect.
She also stressed that the considerable easing adopted by major central banks has enabled several developing economies to regain access to global capital markets and borrow at record low rates to support spending.
“Given the gravity of the crisis, there is no alternative to continued monetary policy support. But there are legitimate concerns around unintended consequences, including excessive risk taking and market exuberance,” Georgieva illustrated.
Supporting vulnerable countries is also imperative, especially in dealing with the elevated debt issue, according to Georgieva.
In this regard, Georgieva unveiled that the IMF has so far provided 85 countries globally with over $105 billion in new financing and debt service relief for the fund’s poorest members.
“We aim to do even more to support our 190 member countries in 2021 and beyond,” she asserted.