IMF: more growth in the world with Biden. And in Italy? It depends on the vaccinations

by time news

The International Monetary Fund is preparing to raise its forecasts of growth of the global economy in 2021 and 2022, thanks to the recent fiscal stimulus in the United States and the increase in vaccinations against Covid-19. This was stated by the director of the IMF, Kristalina Georgieva. The Fund predicted in January that global economic output would grow by 5,5% in 2021, after a estimated contraction of 3.5% last year due to the coronavirus pandemic. In the meantime, however, the US Congress has approved further $ 1.9 trillion of fiscal stimulus and administration Biden ha raised the target vaccination of the population against Covid-19.

“This allows for an upward revision of our global forecasts for this year and 2022,” Georgieva pointed out. The new estimates will be published next week in the IMF’s periodic update on the world economy. Despite the improvement in the global outlook, Georgieva however stressed that there is one growing divergence between rich countries that are rapidly vaccinating their populations against Covid-19 and poorer ones who don’t have the resources to do it.

“They already have one more limited fiscal firepower to fight the crisis “, Georgieva pointed out, “and many are highly exposed to hard-hit sectors, such as tourism.” Georgieva then urged policymakers to closely monitor financial sector risks, “including overvaluation of assets”. In addition, for the IMF director general, faster US growth “could cause interest rates to rise rapidly”, which in turn could limit the flow of money and credit through the economy and attract capital from poorer nations. “This would entail major challenges especially for middle-income countries with large external financing needs and high debt levels. Many of these countries will need more support. ”

By restricting the focus on our country, for the Fund, “Italy’s political response to the pandemic has generally been effective in mitigating the impact of the health crisis on the population and the economy “but now it must aselect the vaccination campaign. “The pace of vaccinations should be accelerated and support measures should be phased out gradually as the health crisis recedes and economic recovery”. In Italy, the economic stimulus to support activities in difficulty, “will be necessary even after the end of the health crisis to limit the scars of the labor market, social capital and to build a greener, smarter and fairer economy”, warns the Fund.

As for the economic trend, iItaly’s GDP could grow by around 4.25% in 2021, with a weak start followed by an acceleration in the last part of the year. However – the IMF specifies – the prospects for the Italian economy they depend on the progress of the pandemic and support policies. The growing number of licensed vaccines and ongoing immunization will allow for an exit from the pandemic, although emerging mutations could cause setbacks.

The timing and form of the economic recovery therefore remain uncertain. Despite the very strong rebound in the third quarter of 2020 and production returned to close to pre-Covid levels, GDP fell by almost 9% in 2020, with the hospitality, tourism and transport sectors among the most affected. Italy needs to come up with a credible plan for a significant debt decline. “The spending needed to tackle the pandemic shock and ensure recovery should be accompanied by a credible plan to anchor a significant, albeit gradual, reduction in debt once the recovery is in place”.

As regards the banking sector, the Fund warns Italy that the authorities should plan “timely and targeted actions to address individual banks in difficulty. The quality of bank loans should weaken once temporary political support expires” , but “maintaining the flow of credit to businesses with good prospects is essential to sustain recovery”. According to the Fund, “after the expiry of the current European restrictions, the supervisory decisions on a case-by-case basis on the authorization of the payment of dividends would avoid penalizing the banks with greater capital and generation of profits, preserving the capital in the weaker banks”.

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