The economics of the pandemic – IMF F&D



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Widespread economic recovery requires end of pandemic

Last May, the IMF released a detailed and comprehensive roadmap to end the COVID-19 pandemic, save lives, and get the world back on track to large-scale economic recovery (“A Proposal to Put end to the COVID-19 pandemic ”, Agarwal and Gopinath, 2021). The road map has been endorsed by multilateral institutions and key stakeholders. It was based on a simple but powerful premise: Ending the pandemic is a necessary precondition for restoring jobs, livelihoods and economic well-being. One cannot be achieved without the other.

How has the world behaved since the roadmap was released? The global recovery continued, but momentum weakened. In six months, the officially recorded COVID-19 death toll worldwide has increased by around 50% and now exceeds 5 million, and the actual death toll is estimated to be several times higher. Of particular concern is the growing divergence in economic prospects between rich and poor nations. In the October 2021 World Economic Outlook, the IMF forecast that aggregate output in advanced economies would return to its pre-pandemic path in 2022 and exceed it by 0.9% in 2024. In contrast, output in emerging and developing countries, excluding China, is expected to remain 5.5% below pre-pandemic forecast in 2024.

If COVID-19 were to have a prolonged impact, we could see global GDP losses reach $ 5.3 trillion over five years from our current projection, with several million more lives lost.

This divergence in economic outlook is a consequence of large disparities in immunization rates (which we call “the great vaccine divide”) and political support. By the end of October, among advanced economies, around 65% of the population was fully immunized, and booster shots were available in many of them. In contrast, the vaccination rate was less than 2 percent in low-income countries. It is not just a problem for particular countries or regions, it is a global problem. As public health officials have repeatedly pointed out, the pandemic is not over anywhere until it is over everywhere. Further uncontrolled transmission makes the emergence of new variants, some resistant to existing vaccines, more likely, possibly putting the world back on the starting line in the race against the virus. If COVID-19 were to have a prolonged impact, we could see global GDP losses reach $ 5.3 trillion over five years from our current projection, with several million more lives lost.

Action plan

Our roadmap has identified three main objectives and actions necessary to achieve these objectives, as well as the funding needs for each action. The targets: immunize at least 40 percent of the population in all countries by the end of 2021 and 70 percent by the first half of 2022; monitoring and insuring against downside risks (due to the emergence of new variants or supply chain problems); and save lives by ensuring widespread access to tests, treatments, personal protective equipment and other essential health tools.

Progress towards the key actions needed to achieve these goals has been mixed, and we are still lagging behind. At the end of October, some 75 to 80 countries, mostly in Africa, were not on track to meet the 40% immunization target by the end of 2021. Fifty-five of those countries are likely to have problems. mainly supply, while 24 will have both supply and absorptive capacity problems.

Our plan recommends the following short-term actions to end the pandemic and support a large-scale economic recovery.

Immediately close the gap of 550 million doses to achieve 40% coverage by accelerating existing dose donations to the COVID-19 Global Vaccine Access Facility (COVAX), an initiative aimed at equitable vaccine distribution , and by promising new donations; exchange doses with COVAX and the African Union (i.e. postpone the delivery of doses intended for the Group of Twenty [G20] countries to allow developing economies to jump in the queue); and eliminate restrictions on exports of vaccines and essential inputs.

Commit to funding the new ACT-Accelerator budget of approximately $ 23 billion to ensure that all countries can access the necessary volume of vaccines, tests, treatments and personal protective equipment. (The ACT-Accelerator is a partnership of international global health organizations to fight COVID-19.)

Maintain collective responsibility for progress against goals through frequent engagement between the advanced economies of the Group of Seven, the wider G20 and other key stakeholders.

Beyond the short term, it will be important to expand regional vaccine manufacturing capacity in developing economies and monitor risks.

Better management

After nearly two years of the deadliest and most economically devastating pandemic in a century, what are the first lessons we’ve learned?

First, the COVID-19 crisis has made it clear that pandemic policy is economic policy, that there is no lasting end to the economic crisis without an end to the health crisis. Ending the pandemic is therefore essential for global macroeconomic and financial stability, which makes it of fundamental importance to the IMF and other economic institutions. Indeed, the IMF’s projections and policy recommendations for the global economy hinge crucially on the relative success of the race against the virus. Systemic risks posed by future pandemics and global health challenges should be more explicitly considered in economic analysis and surveillance.

Second, the world needs better management of global public goods, including preparation for dealing with future pandemics. This will require much more coordination and collective action than we have managed to mobilize so far. The report of the G20 High Level Independent Expert Panel on Pandemic Preparedness suggests several concrete steps in this regard (see “Rethinking multilateralism for an era of pandemic”, this issue).

We are all in this fight together, and collectively we can and must do better to tackle the problems facing the planet.

RUCHIR AGARWAL is a senior economist in the IMF’s Research Department.


GITA GOPINATH is the chief economist of the IMF.

The opinions expressed in articles and other materials are those of the authors; they do not necessarily represent the views of the IMF and its Executive Board, or the policy of the IMF.



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