(ATF) More stimulus is needed to propel the global economy through the coronavirus pandemic, even as vaccines are being rolled out, according to the International Monetary Fund’s top economist.
Gita Gopinath said in an interview on Wednesday that the world faces a “pretty dark winter” as a new strain of the coronavirus forces new lockdowns, although she expects a partial economic recovery in the second half of 2021.
“It’s important for countries not to prematurely withdraw that [stimulus],” Gopinath told Yahoo Finance. She cited recent Covid-19 relief packages passed by legislators in the US and Japan as good examples.
In its last world economic outlook, published in October 2020, the IMF’s projected global gross domestic product growth of 5.2%. Gopinath said measures of activity since that report have pointed to better-than-expected growth for the third quarter of 2021.
Gopinath said the US and Japanese rebounds may prompt an IMF upgrade of economic forecasts, adding the global economy is starting 2021 in a stronger position than anticipated last year due to a stronger-than-forecast performance in the third and fourth quarters.
She warned that low-income countries may have to wait well into 2022 to reach widespread vaccination, underscoring the uneven nature of the economic recovery and was concerned that the Covax Facility, a global initiative to ensure 2 bilion doses of coronavirus vaccine access to low-income countries, was “underfunded.”
Gopinath also called on central banks to maintain loose policies through the recovery. “Central banks should take a pretty cautious approach to withdrawing any kind of support measures,” she said, adding that accommodative monetary policy is not a major risk for inflation.
The economist has been outspoken about the need for reform in the wake of the pandemic. Gopinath has called on governments to do more to help workers reskill and move into growing sectors, to avoid the global public health crisis leaving a long-lasting legacy in the form of entrenched inequality.
"Employment remains well below pre-pandemic levels and the labour market has become more polarised with low-income workers, youth, and women being harder hit," she wrote in October 2020.
"The poor are getting poorer with close to 90 million people expected to fall into extreme deprivation this year," Gopinath added. "The ascent out of this calamity is likely to be long, uneven, and highly uncertain. It is essential that fiscal and monetary policy support are not prematurely withdrawn, as best possible."