Coronavirus, with its universal threat of illness and death, may have demonstrated exactly what the whole world has in common. The economic recovery is doing the opposite. As a World Bank report made clear this month, the legacy of the pandemic is a widening gap between those living in the rich world and those elsewhere. Tighter monetary policy from the Federal Reserve, to combat higher inflation within its own borders, is likely to deepen this divide.
As China’s president Xi Jinping told the World Economic Forum last week, if the rich world “slams on the brakes” on monetary stimulus, it risks spilling over to vulnerable middle- and lower-income countries and eventually causing a crisis that, in turn, affects the rich world. Many of these countries have already suffered permanent scarring from the pandemic, as governments struggled to deploy the same fiscal firepower as advanced economies to keep workers employed and businesses open through lockdowns.
The result has been a “two-track” global recovery: output in advanced economies is predicted to return to 2019 levels by 2023, while in emerging economies it remains well below pre-pandemic trends. Progress towards a more equitable recovery, both from the pandemic and the recession it induced, will need global co-operation.
