Developing economies will struggle to rebound solidly
Wednesday, April 14, 2021
Significance
Although the Fund upgraded its forecast for global growth this year to 6%, the recovery is becoming more uneven. Decisions were taken on global corporate tax, extended debt relief for developing states and a large disbursement of Special Drawing Rights (SDRs). Whether these measures are wide or deep enough to support lower-income countries is debatable.
Impacts
- Led by the United States, support for corporate tax reform is rising, but benefits will not come soon enough for fiscally distressed states.
- The firm global recovery relies on China’s GDP gaining more than 8% and India’s more than 10%; India faces greater immediate downside risks.
- The economic outlook is brighter for developing nations with robust public finances and limited tourism reliance where COVID-19 is in check.
- COVAX delivery timings may be optimistic, and the WTO is unlikely to waive intellectual property rights to production capability transfers.