Since the beginning of this year, the world economy is growing at its fastest rate in more than half a century, but differences and defects may prevent it from reaching the pre-pandemic heights in the near future.
In this week’s semi-annual virtual meeting of the International Monetary Fund, the United States is taking the lead in this work. After President Joe Biden defeated “America First” President Donald, it drew out trillions of dollars in budget stimulus packages, and Restored its role as the defender of the global economy. trump card. Friday brought news of the largest month of hiring since August.
China is also doing its part, even though it has succeeded in fighting the coronavirus last year on the basis of countering some economic aid.
However, unlike the situation after the 2008 financial crisis, the recovery looks uneven, partly due to differences in vaccines and financial support introduced across borders. The lagging countries are most emerging markets and the Eurozone, where France and Italy have expanded restrictions on activities to contain the virus.
Kristalina Georgieva, managing director of the International Monetary Fund, said last week: “Although the overall outlook has improved, the outlook is dangerous.” “Vaccines are not yet available to everyone and the world. Too many. Of people continue to face the problems of unemployment and rising poverty. Too many countries are left behind.”
The result: It may take years for a large area of the world to join the United States and China to fully recover from the pandemic. According to the International Monetary Fund, by 2024, world output will still be 3% lower than the level predicted before the pandemic, and countries that rely on tourism and services will suffer the most.
A series of latest forecasts from Bloomberg Economic Research Corporation reveal this gap. The data shows that the global growth in the first three months of 2021 is about 1.3% month-on-month, but while the United States rebounds, France, Germany, Italy, the United Kingdom and Japan are shrinking. . In emerging markets, Brazil, Russia and India are all clearly overtaken by China.
Bloomberg Economics forecasts annual growth of 6.9% for the whole year, the fastest on record since the 1960s. Behind the optimistic outlook are: the virus threat is shrinking, the US stimulus measures continue to expand, and hundreds of billions of dollars in savings have been accumulated.
This largely depends on the speed at which countries are vaccinated. The longer the risk is, the more likely the virus will become an international threat, especially if new variants emerge.
Bloomberg’s “Vaccine Tracking Report” shows that although the dose in the United States is equivalent to a quarter of its population, the EU has not yet reached the level of 10%, while Mexico, Russia and Brazil have less than 6%. In Japan, this figure is less than 1%.
Mansoor Mohi-uddin, chief economist at Bank of Singapore Ltd., said: “The lesson here is that there is no trade-off between growth and containment.”
Former Federal Reserve official Nathan Sheets said he expects the United States to use this week’s virtual meeting of the International Monetary Fund and the World Bank to argue that now is not the time for the country to withdraw aid to its economy.
This argument is mainly aimed at Europe, especially Germany, which has been implementing fiscal austerity policies for a long time. The EU’s 750 billion euros ($885 billion) joint recovery fund will not be launched until the second half of the year.
Hines said that the United States had two things when presenting the case: the strengthening of the domestic economy and the delegation of Treasury Secretary Janet Yellen (Janet Yellen) was respected internationally. The IMF meeting is no stranger. After distributing a large number of vaccines to themselves, the largest economies may be on a defensive position in terms of vaccine distribution. Sheets said: “At these meetings, we will hear a voice and a call for more equal access to vaccination.” Sheetss is now the head of global economic research in the fixed income department of PGIM.
Although the booming economy of the United States will undoubtedly promote the development of other parts of the world by attracting imports, complaints about the higher market borrowing costs brought about by rapid growth (especially from less healthy economies) may also be irritating. Some complaints.
Maury Obstfeld, former chief economist of the International Monetary Fund, said: “Biden’s stimulus is a two-edged sword.” He is now a senior researcher at the Peterson Institute for International Economics in Washington. The rise in long-term interest rates in the United States “tightened global financial conditions. For those countries that are deeply in debt in response to the pandemic, this has an impact on the sustainability of debt.”
Bruce Kasman, chief economist at JPMorgan Chase & Co., said that compared with emerging markets, in the case of the underperformance of the United States and other developed countries, he will be within 20 to 25 years Did not see such a huge gap. Part of the reason is the difference in vaccine distribution. But this also depends on the economic policy choices made by countries.
The central bank drastically cut interest rates last year and launched an asset purchase program, but due to accelerated inflation or to prevent capital outflows, some central banks in emerging markets began to raise interest rates. Turkey, Russia and Brazil all raised borrowing costs last month, while the Federal Reserve and the European Central Bank said they would not do so for a long time.
Rob Subbaraman, head of global market research at Nomura Holdings Inc. in Singapore, believes that Brazil, Colombia, Hungary, India, Mexico, Poland, the Philippines and South Africa are all at risk of implementing easing policies. .
“As the major developed market central banks try to run the economy before inflation becomes a problem, emerging market central banks will need to be extra careful so as not to fall behind the curve and may need to lead rather than follow them.” Subbaraman said: “In the next step During the interest cycle, the market is developed. “
In a video to clients on April 1, Kasman summarized the global economic outlook in this way: “Divergence conditions are very different.”