Developing countries will further lag behind the rich world as they struggle to recover from the economic impact of the pandemic due to the spread of coronavirus variants and their limited capacity for stimulus efforts, the World Bank warned.
In new economic forecasts published on Tuesday, the Washington-based institution said it expects the world economy to experience a two-speed recovery in 2022 that will fuel growing inequality. While output in rich countries will return to pre-pandemic levels by 2023, developing countries will still be on average 4 percent below their pre-pandemic level.
The poor recovery from the impact of coronavirus will be particularly severe among the most vulnerable countries, the bank said; by next year, output among fragile, conflict-affected and small island states will still be 7.5 to 8.5 percent below its pre-pandemic level.
David Malpass, president of the World Bank, said there was a “gap” between growth rates in rich and poor countries. While per capita income in advanced economies rose 5 percent last year, in low-income countries it rose just 0.5 percent, he said.
“We are going in the opposite direction of what you would want for good development,” he said. “We have a big problem ahead that could take years.”
Ayhan Kose, head of the bank’s economic forecasting unit, said developing countries face a plethora of risks that have increased the likelihood of a hard landing, including outbreaks of new variants, rising inflation, financial market stress as interest rates rise, and climate-related disasters. He called for more aggressive action by the world community against vaccines, debt and climate change.
“These problems are not going anywhere,” he said. “It is not the case that we do not know what the problems are or do not have the frameworks to deal with them. . . The question is whether the world community and national policymakers can implement the prescriptions we have at the overall level. ”
Kose said emerging and developing economies have been unable to deliver the fiscal and monetary response to the pandemic launched in advanced economies, and many are already being forced to withdraw stimulus by raising interest rates to to tackle the boom in inflation.
“[They] did as much as they could, but it was nowhere near what advanced economies were capable of doing. “Now they are withdrawing support faster,” he said. “This is a pandemic of inequality that will spill over over generations.”
Kose called on the G20 group of major economies to move faster with debt relief and to do more to ensure participation by lenders in the private sector. In particular, he noted the need for more ambitious action to protect developing economies from the virus.
“In the case of vaccines, the problem is very clear and not addressing it has consequences,” he said. “We pretend that we can overcome the pandemic without vaccinating large populations around the world. It is not true.”
The bank’s warning reflects similar calls from other world institutions.
Rebeca Grynspan, secretary general of the UN Conference on Trade and Development, said the distribution of vaccines worldwide was “poor and irrational”, with advanced economies securing supply agreements for 3 billion more vaccine doses than they needed for their own people. , or almost enough to provide two doses to the whole of Africa.
“The cost of the pandemic is rising beyond anything we’ve seen before, and not just in terms of debt and the health of millions of citizens,” she said.
She said the proliferation of new variants “already affects the recovery and erodes the legitimacy of governments and democratic institutions everywhere. . . If we do not find the political will and space for negotiation, the reality will unfortunately lead us to very bad results ”.
Kristalina Georgieva, managing director of the IMF, warned last year that the world is “facing a deteriorating two-track recovery”, driven by differences in vaccine availability, infection rates and countries’ varying ability to provide policy support. She calls it “a critical moment that requires urgent action by the G20 and policymakers”.