World Economic Outlook

IMF April World Economic Outlook, IMF and World Bank Spring Meetings and U.S. efforts on global access to vaccines

The IMF released today its April 2021 World Economic Outlook, increasing projected global growth in 2021 and 2022 from its earlier projections. See IMF, World Economic Outlook, Managing Divergent Recoveries, April 2021, https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april-2021. Global contraction was less severe than previously thought in 2020 and the rebound is larger though there remains significant uncertainty.

“Global prospects remain highly uncertain one year into the pandemic. New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment. Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support. The outlook depends not just on the outcome of the battle between the virus and vaccines—it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis.

“Global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO. The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility. High uncertainty surrounds this outlook, related to the path of the pandemic, the effectiveness of policy support to provide a bridge to vaccine-powered normalization, and the evolution of financial conditions.”

The following tables from the IMF webpage taken from the new report show first the global, advanced economies and developing economy outlook for 2020, 2021, 2022 and then for various major countries and regions for the same periods.

Much has been written about the need for debt relief and greater access to vaccines for many low-income countries to help them get through the pandemic and back on track for economic expansion. The IMFBlog from April 5, 2021 provides an overview of the serious challenges faced by low income countries and the potential sources of financial support available through the IMF if supported by member countries. See IMFBlog, Funding the Recovery of Low-income Countries After COVID, April 5, 2021, https://blogs.imf.org/2021/04/05/funding-the-recovery-of-low-income-countries-after-covid/.

“Several factors hamper the economic recovery of low-income countries. First, they face uneven access to vaccines. Most of these countries rely almost entirely on the multilateral COVAX facility—a global initiative aimed at equitable access to vaccines led by a consortium of international organizations. COVAX is currently set to procure vaccines for just 20 percent of the population in low-income countries. Second, low-income countries have had limited policy space to respond to the crisis—in particular, they have lacked the means for extra spending * * *.

“Third, pre-existing vulnerabilities, including high levels of public debt in many low-income countries, and weak, sometimes negative, total factor productivity performance in some low-income countries continue to act as a drag on growth.”

The blog post reviews estimated financial needs over the next five years. The estimated needs are $200 billion to respond to the COVID-19 pandemic (including adequate vaccinations), an additional $250 billion to speed convergence with advanced economies, and an additional $100 billion if various risks materialized. Potentially $550 billion — obviously a huge number.

The blog identifies various potential sources of funds to address these needs that can be available through the IMF.

“- Expanding access to concessional resources under the Poverty Reduction and Growth Trust, including extending access to emergency financing. From March 2020 to March 2021, about $13 billion has been approved to more than 50 low-income countries. The IMF is also currently reviewing its lending framework to low-income countries, beyond the temporary increase in access limits.

“- Proposal for a new allocation of Special Drawing Rights . Support is building among the IMF’s membership for a possible SDR allocation of $650 billion. This would help address the long-term global need for reserve assets, and would provide a substantial liquidity boost to all members.

“- Debt service relief through the Catastrophe Containment and Relief Trust to 29 eligible countries. The recently-approved third tranche covering the period April-October 2021 brings total debt service relief up to $740 million since April 2020. Such relief provides space for poor countries to scale up spending on priority areas during the pandemic.

“- Supporting a further extension of the G-20 Debt Service Suspension Initiative (DSSI) until end-December 2021. The DSSI delivered US$5.7 billion in debt service relief for 43 countries in 2020 and is expected to deliver up to US$7.3 billion of additional debt service suspension through June 2021 for 45 countries.

“The needs of the poorest countries over the next five years are acute. But they are not out of reach. A strong, coordinated, comprehensive package is needed. This will secure a rapid recovery and transition to a green, digital, and inclusive growth that will accelerate convergence of low-income countries to their advanced economy counterparts.”

The IMF Spring meeting this week is taking up various issues designed to ensure assistance to the world’s low income countries. See, e.g., IMF, PRESS RELEASE NO. 21/99, IMF Executive Board Extends Debt Service Relief for 28 Eligible Low-Income Countries through October 15, 2021, April 5, 2021, https://www.imf.org/en/News/Articles/2021/04/05/pr2199-imf-executive-board-extends-debt-service-relief-28-eligible-lics-october-15-2021.

The Rockefeller Foundation released a paper recently arguing that funding from the Special Drawing Rights could be used to help procure vaccines for low- and middle-income countries to enable 70% vaccination rates by the end of 2022. See PR Newswire, The Rockefeller Foundation Releases New Financing Roadmap to End Pandemic by End of 2022, April 6, 2021, https://www.prnewswire.com/news-releases/the-rockefeller-foundation-releases-new-financing-roadmap-to-end-pandemic-by-end-of-2022-301262501.html; Rockefeller Foundation, One for All: An Action Plan for Financing Global Vaccination and Sustainable Growth, https://www.rockefellerfoundation.org/wp-content/uploads/2021/04/One-for-All-An-Action-Plan-for-Financing-Global-Vaccination-and-Sustainable-Growth-Final.pdf.

Other multilateral organizations such as the World Bank have been actively involved helping developing countries including using billions for vaccine procurement. See World Bank Group, WBG Vaccine Announcement – Key Facts, March 30, 2021, https://www.worldbank.org/en/news/factsheet/2020/10/15/world-bank-group-vaccine-announcement—key-facts

“COVID-19 vaccines, alongside widespread testing, improved treatment and strong health systems are critical to save lives and strengthen the global economic recovery. To provide relief for vulnerable populations, low- and middle-income countries need fair, broad, and fast access to effective and safe vaccines.

“That’s why the World Bank (WB) is building on its initial COVID-19 response with $12 billion to help poor countries purchase and distribute vaccines, tests, and treatments. The first WB-financed operation to support vaccine rollout was approved in January 2021

“By March 31, 2021, the WB had already committed $1.6 billion in vaccine financing in 10 countries including Afghanistan, Cabo Verde, Bangladesh, Lebanon, Mongolia, Nepal, Philippines, Tajikistan, and Tunisia. More than 40 additional projects are in the pipeline and will be approved in the coming weeks and months.”

The World Banks’s Spring meeting is also occurring this week and addressing the COVID-19 pandemic remains a critical part of the World Bank’s agenda.

U.S. announced larger role in global vaccine rollout

President Biden has had as his first priority to tackle the COVID-19 pandemic in the United States while committing to greater involvement in multilateral organizations. He has rejoined the World Health Organization, contributed $2 billion to the COVAX facility to obtain vaccines for low- and middle-income countries, with an additional $2 billion to be contributed as other countries fulfill their pledges, agreed to a fund raising event for COVAX later in April, loaned four million vaccine doses to Canada (1.5 million) and Mexico (2.5 million) and agreed with Japan, India and Australia to produce one billion doses of a vaccine (2021-2022) in India with funding from the US and Japan and distribution by Australia to countries in the Indo-Pacific region.

On April 5, 2021, U.S. Secretary of State Antony Blinken announced the Biden Administration’s intention to be more actively involved internationally as it gets the U.S. population vaccinated. See U.S. Department of State, Secretary Antony J. Blinken Remarks to the Press on the COVID Response, April 5, 2021, https://www.state.gov/secretary-antony-j-blinken-remarks-to-the-press-on-the-covid-response/. The portion of Secretary Blinken’s remarks dealing with greater international engagement and the appointment of the U.S. coordinator for global COVID response and health security is copied below.

“There’s another major element to stopping COVID, and that’s what we’re here to talk about today.

“This pandemic won’t end at home until it ends worldwide.

“And I want to spend a minute on this, because it’s critical to understand.  Even if we vaccinate all 332 million people in the United States tomorrow, we would still not be fully safe from the virus, not while it’s still replicating around the world and turning into new variants that could easily come here and spread across our communities again.  And not if we want to fully reopen our economy or start traveling again.  Plus, if other countries’ economies aren’t rebounding because they’re still afflicted with COVID, that’ll hurt our recovery too.

“The world has to come together to bring the COVID pandemic to an end everywhere.  And for that to happen, the United States must act and we must lead.

“There is no country on Earth that can do what we can do, both in terms of developing breakthrough vaccines and bringing governments, businesses, and international institutions together to organize the massive, sustained public health effort it’ll take to fully end the pandemic.  This will be an unprecedented global operation, involving logistics, financing, supply chain management, manufacturing, and coordinating with community health workers who handle the vital last mile of health care delivery.  All of that will take intensive diplomacy.

“The world has never done anything quite like this before.  This is a moment that calls for American leadership.

“Now, the Biden-Harris administration’s main focus to date has been to vaccinate Americans – to slow and ultimately stop COVID here at home.  We at the State Department have been focused on vaccinating our workforce in the United States and in embassies and consulates around the world.  That’s been the right call.  We serve the American people first and foremost.  Plus, we can’t forget that the United States has had the highest number of COVID cases of any country in the world by a significant margin.  So stopping the spread here has been urgently needed for our people and for the world.  We have a duty to other countries to get the virus under control here in the United States.

“But soon, the United States will need to step up our work and rise to the occasion worldwide, because again, only by stopping COVID globally will Americans be safe for the long term.

“Moreover, we want to rise to the occasion for the world.  By helping bring to a close one of the deadliest pandemics in human history, we can show the world once again what American leadership and American ingenuity can do.  Let’s make that the story of the end of COVID-19.

“We’ve already taken some important steps.

“On day one of the administration, we rejoined the World Health Organization.  By being at the table, we can push for reforms so that we can prevent, detect, and rapidly respond to the next biological threat.

“Congress recently provided more than $11 billion for America’s global COVID response, which we’ll use in several ways, including to save lives by supporting broad and equitable vaccine access; providing aid to mitigate secondary impacts of COVID, like hunger; and helping countries boost their pandemic preparedness.

“I’d note that this builds on a long tradition of American leadership.  The United States is the world’s largest donor to global health by far, including through international efforts like the Global Fund and the World Health Organization – and through our own outstanding global health programs, like PEPFAR, which has helped bring the world to the cusp of the first AIDS-free generation.

“We’ve also made a $2 billion donation to the COVAX program, which will supply COVID vaccines to low-income and middle-income countries.  We’ve pledged another $2 billion that we’ll provide as other countries fulfill their own pledges.

“We’ve already loaned vaccines to our closest neighbors, Mexico and Canada.

“And we’ll work with global partners on manufacturing and supplies to ensure there will be enough vaccine for everyone, everywhere.

“As we get more confident in our vaccine supply here at home, we are exploring options to share more with other countries going forward.

“We believe that we’ll be in a position to do much more on this front.

“I know that many countries are asking for the United States to do more, some with growing desperation because of the scope and scale of their COVID emergencies.  We hear you.  And I promise, we’re moving as fast as possible.

“We’ll be guided every step by core values.

“We won’t trade shots in arms for political favors.  This is about saving lives.

“We’ll treat our partner countries with respect; we won’t overpromise and underdeliver.

“We’ll maintain high standards for the vaccines that we help to bring to others, only distributing those proven to be safe and effective.

“We’ll insist on an approach built on equity.  COVID has already come down hard on vulnerable and marginalized people.  We cannot allow our COVID response to end up making racial and gender inequality worse.

“We’ll embrace partnership, sharing the burden and combining strengths.  The collaboration we formed a few weeks ago with the Quad countries – India, Japan, Australia – is a good example.  Together, we’re increasing the world’s manufacturing capacity so we can get more shots out the door and into people’s arms as fast as possible.

“And by the way, one of the reasons we work through multilateral collaborations where possible is because they often share and defend these same values.  For example, the COVAX initiative is designed explicitly to ensure that low- and middle-income countries can also get vaccines, because it’s only through broad and equitable vaccination that we’ll end the pandemic.

“Finally, we’ll address the current emergency while also taking the long view.  We can’t just end this pandemic.  We must also leave our country and the world better prepared for the next one.

“To do that, we’ll work with partners to reform and strengthen the institutions and systems that safeguard global health security.  That will require countries to commit to transparency, information sharing, access for international experts in real time.  We’ll need a sustainable approach to financing, surge capacity, and accountability, so all countries can act quickly to stem the next outbreak.  And we’ll keep pushing for a complete and transparent investigation into the origins of this epidemic, to learn what happened – so it doesn’t happen again.

“All told, this work is a key piece of President Biden’s ‘Build Back Better’ agenda.  We’ve got to make sure that we can better detect, prevent, prepare for, and respond to future pandemics and other biological threats.  Otherwise, we’ll be badly letting ourselves and future generations down.

“This is a pivotal moment – a time for us to think big and act boldly.  And the United States will rise to the challenge.

“I’m here today with a remarkable leader who will help us do just that.

“Gayle Smith was the administrator of USAID for President Obama, and served on the National Security Council for both President Obama and President Clinton, where we first got to know each other and worked together.  She has deep experience in responding to public health threats, having helped lead the U.S. response to the Ebola crisis in 2014, having worked for years on the global fights against malaria, tuberculosis, HIV/AIDS.  She is joining us from her most recent role as president and CEO of the ONE Campaign, which fights extreme poverty and preventable disease, primarily in Africa.

“She’s tested.  She’s highly respected.  She will hit the ground running.  And I can say from having worked with Gayle and admired her for years that no one will work harder, faster, or more effectively to get us to the finish line.

I”’m grateful she’s agreed to serve as the coordinator for global COVID response and health security.  Gayle Smith, the floor is yours.  Thank you for doing this.

MS SMITH:  Thank you, Mr. Secretary.  It’s a pleasure to be able to work with you again, and to call you Mr. Secretary.

“I’d also like to thank my friends at the ONE Campaign for making this possible.  And I look forward to working with the men and women of the department and across the federal government, including because I know what you can do.

“I want to thank in particular some really smart scientists, President Biden, and the staff and volunteers at Howard University, where tomorrow I will get my second dose of the COVID vaccine.

“That vaccine is good for the body, but it’s also good for the mind and the soul, because it inspires hope in the future.  And our job is to shape that future.

“I fought some viruses in the past, and I’ve learned two lessons.  The first is that if the virus is moving faster than we are, it’s winning.  The second is that with unity of purpose, science, vigilance, and leadership, we can outpace any virus.

“America’s done it before.  Eighteen years ago, a Republican president launched a bold initiative to take on the HIV/AIDS epidemic.  A Democratic president went on to expand that mission in scope.  In 2014, the Obama-Biden administration, with the strong and generous support of Congress, defeated the world’s first Ebola epidemic.

“Our challenges now are two: first, to shorten the lifespan of a borderless pandemic that is destroying lives and livelihoods all over the world, and the second is to ensure that we can prevent, detect, and respond to those future global health threats we know are coming.

“American leadership is desperately needed, and I’m extremely confident we can rise to the occasion.  I’m honored to be here, and thank you very, very much.”

Conclusion

This is an important week with both the IMF and World Bank Spring meetings and important agenda items on the continued global response to the pandemic and helping countries build back better. The IMF April World Economic Outlook has good news about the direction of global activity although the pace of recoveries will vary significantly among countries and regions. While global production and distribution of COVID-19 vaccines has ramped up enormously in the few months that vaccines have been approved and while there are many additional potential vaccines under development or in trials, the early months have seen some production challenges and distribution skewed to a handful of countries. Many of those countries with the most vaccine doses (U.S., UK, EU, India) have been countries or regions with many of the largest number of infections and deaths. Even so, the effort at equitable and affordable access to all needs additional work.

An article in the New York Times reviews an exciting potential development of a low-cost, easy to produce vaccine that could dramatically expand the ability of developing countries to produce their own vaccines. See New York Times, Researchers Are Hatching a Low-Cost Coronavirus Vaccine , April 5, 2021, https://www.nytimes.com/2021/04/05/health/hexapro-mclellan-vaccine.html (“A new vaccine for Covid-19 that is entering clinical trials in Brazil, Mexico, Thailand and Vietnam could change how the world fights the pandemic. The vaccine, called NVD-HXP-S, is the first in clinical trials to use a new molecular design that is widely expected to create more potent antibodies than the current generation of vaccines. And the new vaccine could be far easier to make.
Existing vaccines from companies like Pfizer and Johnson & Johnson must be produced in specialized factories using hard-to-acquire ingredients. In contrast, the new vaccine can be mass-produced in chicken eggs — the same eggs that produce billions of influenza vaccines every year in factories around the world.”).

Production is ramping up for the various vaccines that have been approved in various countries. Producers continue to explore adding capacity or licensing production to other producers. Governments – like the United States, Japan, India and Australia – are finding creative ways for nations to work together to build up additional capacity to reach countries with needs. COVAX has proven to be an important vehicle for distributing vaccines to low- and middle-income countries. As capacities expand and additional funding is available, COVAX will continue to be a critical part of the solution.

The IMF and World Bank have the ability to address many of the challenges facing developing countries with the support of its member governments. Hopefully, this week’s meetings will make a difference. And individual countries can and are doing more. Secretary Blinken’s remarks show the U.S. will be increasing its role and working with others to ensure global success. For a world fatigued from the pandemic, a path to resolution is needed now. Hopefully, we are close.