IMF Forecasts Survival of the Richest
Even as the fund forecasts growth across all regions, the recovery is still likely to favor those states with vaccine access and fiscal flexibility.
Here is today’s Foreign Policy brief: The International Monetary Fund releases its global growth forecast, South Koreans vote in bellwether election, and Israel damages an Iranian ship in the Red Sea.
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IMF Forecasts Uneven Growth Ahead
The United States is likely to be the only large economy to emerge even richer from the COVID-19 pandemic than if the crisis had never occurred, according to the latest global economic projections released by the International Monetary Fund yesterday.
The IMF forecasts global growth of 6 percent in 2021, an increase of 0.5 percent from its January projection. Of major countries, India is expected to see the strongest growth, 11.3 percent in 2021—after a steep 7.1 percent contraction in 2020.
The news is worse for countries further down the income ladder, as policies enacted by rich countries—namely bilateral deals that have effectively ring-fenced the global vaccine rollout—threaten to slow down their economic recovery. Indeed, out of advanced, emerging, and low-income economies, only those in the latter group are expected to see a bigger drop in GDP than they endured during the 2008 financial crisis.
It’s not 2008 anymore. In a tone that may surprise observers of the fund’s response to the 2008 crisis, the IMF yesterday praised expansionary fiscal policies, and called for more spending on health care, especially on vaccines, treatments, and health care infrastructure. Gita Gopinath, the IMF chief economist, has called for an “ambitious effort” to apply the same dramatic economic policy measures on a multilateral basis to ensure a more equal recovery.
That recovery will be under the microscope today, as G-20 finance ministers meet for a virtual summit. The agenda will also include a discussion on debt relief for poorer countries and a proposed global minimum corporate tax.
Worsening inequality. Even though economic growth is likely in the year ahead, it doesn’t mean the benefits will be universal. “Within-country income inequality will likely increase because young workers and those with relatively lower skills remain more heavily affected in not only advanced but also emerging markets and developing economies,” Gopinath said in a blog post, adding that women are more likely to lose out. The IMF also estimated that a further 95 million people have joined the ranks of the extreme poor as a result of the pandemic.
A narrow view? Given the blurry picture that figures like GDP can provide, it’s no wonder that there are calls for a more inclusive approach. Writing in Foreign Policy, Malka Older calls for an international focus on inequality rather than growth. “The international community needs to change the metrics it is using and, most of all, its vision of what success looks like,” she writes.
No thanks. The IMF itself has attempted to play its part in supporting the global economy, but countries remain wary of the political statement (and conditionality) that comes with taking an IMF loan. As the Economist points out, a new IMF tool, the Stability Liquidity Line (SLL), has been treated warily, “Last April the IMF thought take-up of the SLL could be up to $50 billion. It has, in fact, been zero.”
What We’re Following Today
Iran progress. Talks in Vienna with the remaining parties to the 2015 Iran nuclear deal were “constructive,” Abbas Araghchi, Iran’s deputy foreign minister, said on Tuesday—adding that the group plans to meet again on Friday. Russia’s representative in Vienna, Mikhail Ulyanov, said that the discussions have “passed from words about the JCPOA’s importance to actions.” Expert working groups had been established to work through the lifting of sanctions and the unwinding of Iran’s nuclear activities, Ulyanov said, adding that he hoped to see progress by late May.
Israel hits Iranian ship. An Iranian military vessel in the Red Sea was damaged by an Israeli mine on Tuesday in the latest naval confrontation involving the two countries. The incident follows a number of attacks against Iranian vessels suspected of shipping oil to Syria. Iran has responded with strikes of its own, hitting an Israeli container ship in March. Iran’s Revolutionary Guards said the ship struck in Tuesday’s attack had been stationed in the Red Sea to combat pirates in the area.
Australia-EU tension. The Australian government has accused the European Union of blocking a shipment of 3.1 million AstraZeneca vaccines, a claim an EU spokesperson denied. Australia’s government accused the European Union of “arguing semantics,” noting that it has not issued the approvals necessary to begin shipments. “If you’re not approving, it’s the same as effectively you’re blocking,” Australian Treasurer Josh Frydenberg said. Australian authorities are under pressure to deliver on a pledge to administer 4 million vaccine doses by April; it has so far given out 850,000 doses.
Seoul and Busan vote for new mayors. South Koreans in the country’s two largest cities vote today in special elections seen as a bellwether ahead of presidential elections next year. The mayoralties of both Seoul and Busan are both in play after the previous officeholders, both members of President Moon Jae-in’s party, resigned amid sexual harassment allegations. Pre-election polls predicted a landslide victory for the candidates of the conservative People Power Party.
Keep an Eye On
More AstraZeneca issues. Marco Cavaleri, the chair of the vaccine evaluation team at the European Medicines Agency, said on Tuesday that there is a link between the AstraZeneca COVID-19 vaccine and rare blood clots, countering repeated claims of the vaccine’s safety by European regulators. “In my opinion, we can now say it, it is clear that there is an association (of the brain blood clots) with the vaccine. However, we still do not know what causes this reaction,” Cavaleri told Italian daily Il Messagero.
The EMA said in a statement that a review of the vaccine was ongoing and would be published either today or Thursday. The World Health Organization has reiterated that the benefits of the vaccine outweigh any risks.
Russia-India ties. Russia is in talks to allow for “additional production of Russian military equipment” in India, Foreign Minister Sergei Lavrov said on Tuesday as Moscow seeks to deepen ties with New Delhi. Lavrov made the remarks during a two-day trip to India, where he reportedly had an unscheduled meeting with U.S. climate envoy John Kerry. According to the Russian daily Kommersant, the U.S. side requested the meeting after it was discovered they were both staying at the same hotel.
Nile dam talks. Both Egypt and Sudan said that three-party talks with Ethiopia over a controversial dam project have ended without progress. Egypt and Sudan said they had suggested expanding the number of mediators of the talks beyond the African Union to include the United States, the European Union, and the United Nations but Ethiopia rejected the plan. Egypt had previously said the talks were a last chance to jumpstart negotiations before Ethiopia begins filling the reservoir behind the dam, a practice Egypt and Sudan consider a threat to their water supplies.
Austin to Israel. U.S. Defense Secretary Lloyd Austin will head to Israel next week, Axios reports, the first visit to the country by a Biden cabinet official. Austin is expected to meet with Prime Minister Benjamin Netanyahu, Defense Minister Benny Gantz and Foreign Minister Gabi Ashkenazi, with a focus on Iran as well as Syria and Lebanon.
Odds and Ends
If toilet paper was the scarce commodity at the beginning of the coronavirus pandemic, ketchup packets are poised to be the must-have item for the post-vaccine world. The United States is currently experiencing a shortage of the single serving condiments as delivery orders and hygiene concerns are making the communal bottle obsolete.
Heinz Kraft, the makers of the most widely sold ketchup, told AFP that they have changed up their production processes because “demand was greater than supply,” and has developed a touch-free dispenser for use in restaurants. The Wall Street Journal reported a 13 percent increase in the price of ketchup sachets since January 2020.
That’s it for today.