MILANO – The International Monetary Fund raises the level of caution on economic recovery, whose march is severely tested by the possible consequences of new variants of Covid – particularly in parts of the world where vaccination campaigns are languishing – and by the bottlenecks that they frustrate industrial production and threaten to make the price race stronger. In updating its forecasts on global trends, the Washington institution – which has just confirmed its confidence in director Georgieva, suspected of having favored China when she was at the helm of the World Bank – slightly downgrades its 2021 GDP estimate and sounds some alarm bells. An overall picture in which, at least in numbers, Italy stands out positively, boasting one of the best revisions compared to the estimates of last July.
Growth drops below 6%, but for Italy a leap forward
“The global recovery continues but the thrust has weakened, crippled by the pandemic,” says the Fund’s chief economist, Gita Gopinath on her blog. Compared to the July estimates, the world GDP forecast for 2021 drops to 5.9% and that for next year remains stable at 4.9%. But behind these overall numbers there are large shifts, which draw a gap between geographical and economic areas that is getting wider and wider.
On the one hand, the advanced economies, where vaccination campaigns have reached important numbers and the biggest bugbear is rather the problems in supplies, the prices of energy and raw materials in general. On the other, those under development or poor. In the latter case, for example, 96% of the population is not yet vaccinated, while in rich countries 60% or more have completed their cycle: a picture of “great vaccine divide”, in which the availability of serum is acting as a dividing line for the economic prospects. Not surprisingly, while the output of advanced economies is expected to resume the pre-pandemic growth path as early as 2022, in emerging and developing markets it will remain 5.5 percentage points below the predicted pre-Covid trajectory still in 2024.
In this scenario, Italy stands out because it records one of the best performances compared to the last document of the Fund. Italian growth is now indicated at 5.8% for 2021, in line with the major international forecasters: it means an improvement of 0.9 points on July. The Eurozone average is + 5% and according to the Fund, only France, among the major economies, will do better. In particular, the cut of half a point given to Germany stands out, now expected at + 3.1%. A cut which, however, is returned next year, when Berlin will grow by 4.6% (+0.5 on July). For Italy, on the other hand, the forecast for 2022 remains anchored at + 4.2%. Outside the Old Continent, US growth is revised down from 7 to 6% for this year and slightly up to 5.2% the next.
The document also updates the other large numbers of the Italian economy. Public debt is expected to decline in 2021 to 154.8% of GDP compared to 155.8% in 2020. And it will continue to decline to 150.4% in 2022, reaching 146.5% in 2026. The deficit is seen to increase from 9.5% in 2020 to 10.2% this year and 4.7% in 2022 (to 2.4% in 2026). Again, these are steps forward compared to July when Washington experts predicted a debt of 157.8% and a deficit of 11.1%.
The bugbear of inflation and financial risk-support balancing
Inflation then conquers the first pages of the report, where it is noted that price growth has been stronger than expected in important economies such as the US, Germany and some emerging ones. Although the Fund believes that the inflationary push could return to bay in 2022, it concedes that the outlook remains uncertain and overall notes that the risks to the recovery are hanging to the downside. “Our forecasts are for annual inflation in advanced economies to peak at 3.6% on average in the final months of this year, before regressing to 2% in the first half of 2022, in line with central bank targets. . Emerging markets will see faster rises and inflation will hit 6.8% on average, then drop to 4%, “the report details.
In this macroeconomic context, the risk of an acceleration in prices could call the central banks to take an early action on rates. The policymakers – note the Fund’s experts – are faced with a difficult balancing act: to continue to ensure short-term support for the global recovery, but at the same time to avoid creating dangerous financial risks. A long period of extremely favorable financing conditions, although necessary to support the recovery, has caused asset valuations (on the markets) to become high, the Washington documents read. If this super-evaluation were to continue, financial vulnerability would increase.
Gopinath recalls in conclusion that “the most recent developments have made it abundantly clear that the pandemic will not be defeated anywhere until it is over in every part of the world.” And if Covid still has a medium-term impact, the risk is to reduce the accumulated GDP by $ 5.3 trillion over the next five years, compared to current forecasts. “It must not go like this. The international community must increase its commitment to guaranteeing access to vaccines for every country, to overcome the reluctance towards vaccines where there are sufficient stocks and to ensure better economic prospects for all”.