The global economy is split into two blocs as economic growth prospects for developed and less developed economies diverge after the pandemic. According to the International Monetary Fund (IMF) in the latest World Economic Outlook.
The economic prospects for the less developed economies are much more unfavorable as they suffer from escalating infections and a rising number of covid deaths. For strong and developed countries, a solid recovery of the economy is on the horizon, among other things, through broad vaccination and monetary and political support.
The IMF is counting on global economic growth of 6 percent for this year, just as much as in the spring estimate. In addition, growth has been adjusted upwards for the strong economies, while growth expectations have been lowered for the emerging economies, especially in Asia. The growth of the world economy in 2022 is estimated at 4.9 percent.
80 million more in extreme poverty
In countries such as India, Indonesia, Malaysia, Philippines, Thailand and Vietnam, the new wave of contamination is putting a heavy burden on the economic recovery. The low and slow number of vaccinations is to blame for this, the IMF notes. It is estimated that an additional 80 million more people will fall into extreme poverty, due to the loss of work and income due to the pandemic and lack of vaccinations and political support programs.
In addition to the differences in vaccinations and political support, other factors also play a role in the economic recovery. New covid variants, such as the delta variant, lead to many new infections and lockdowns here and there.
In addition, there are all kinds of aftershocks and after-effects in supply and demand, and production and transport, which hinder the economic recovery. For example, container shipping is still at a standstill. In smaller ports there are many empty shipping containers, while in major ports there is a crying shortage of containers, which is driving up the price of container transport. As a result, supply and production chains are experiencing significant delays.
Shortages from chips to bicycles
Rising inflation is also putting pressure on the recovery. Commodity prices, food prices and house prices have risen sharply due to rising demand now that the economy has reopened, but supply and demand are often out of sync. Temporary shortages of chips to bicycle parts and from homes to cars are pushing prices up and slowing down the economy.
According to the IMF, uncertainty about the economic recovery remains quite high. Regardless of how weak economies are faring, social and societal unrest, geopolitical tensions, cyber-attacks on key infrastructure, and natural disasters such as fires and floods can weigh heavily on the economic recovery.
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