Foreword: coming out of the tunnel

IFR IMF/World Bank 2021
3 min read

Things are still far from normal. In fact, what was once deemed to constitute normality may never return. There are signs, however, that the world is beginning to emerge from the darkest days of the past 18 months, although there is no doubting it will be an uphill struggle.

The coronavirus pandemic saw the global economy contract by 3.3% in 2020, according to IMF estimates. While this was not as steep a drop as at one time feared, it still marked the worst recession since World War II. But the fund sees a recovery in progress, with expectations of growth of 6% for 2021.

Behind these figures lie a number of stories – not least the US$16trn in global government aid that helped sustain companies and consumers during Covid-19 lockdowns. But much as countries less able to afford such measures were disproportionately affected on the way in, so will they lag on the way out. Many of these are also reliant on tourism, one of the areas that will be slower to bounce back in a world wary of international travel and the possibility of the transmission of yet more virus strains.

Ironically, success for some could be a cause of concern for others. A buoyant USA, for example, could mean higher rates that make it more difficult and expensive for emerging markets countries to raise funds. The withdrawal of easing programmes by the richest nations could disadvantage those least able to withstand it. The path to recovery may be in sight, although it could appear farther away to some than others.

In an unprecedented move, the IMF has announced a special drawing rights disbursement of US$650bn. The fact, however, that allocations are commensurate with the quota paid to the fund mean it is the richest of its 190 member states that could stand to benefit most. Measures – in this case and others – are required to try to ensure that the money can go to the most deserving.

And therein lies a tale. Where there is collaboration, results prove more generally beneficial. Isolationism is by its nature restrictive, whereas the pandemic is global. The same goes for matters such as climate change – it respects no boundaries.

Hence the benefit of institutions such as the World Bank and IMF that can stand above solitary interests and implement initiatives with a view to giving everyone the chance to emerge from the tunnel.

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