Uneven distribution of Covid-19 vaccines poses risks for global recovery, financial stability - IMF

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The rollout of vaccines has bolstered market sentiment, says the IMF (Photo: Reuters)
The rollout of vaccines has bolstered market sentiment, says the IMF (Photo: Reuters)
Reuters
  • Until vaccines are widely available, monetary and fiscal support is needed to sustain the global economic recovery, says the International Monetary Fund.
  • The uneven distribution of vaccines would negatively impact capital flows to emerging markets, it warns in its latest global financial stability update.
  • Risks to global economic recovery will also threaten financial stability, the IMF says.


The uneven distribution of vaccines will negatively impact capital flows to emerging market economies, the International Monetary Fund (IMF) has said.

The IMF on Wednesday released its latest Global Financial Stability Update. So far, the roll out of Covid-19 vaccines has bolstered market sentiment. But in order to sustain the global economic recovery, continued monetary and fiscal policy support is needed, the IMF highlighted.

"Until vaccines are widely available, the market rally and the economic recovery remain predicated on continued monetary and fiscal policy support. Inequitable distribution of vaccines risks exacerbating financial vulnerabilities, especially for frontier market economies," the report read.

On Tuesday the IMF published its revised growth outlook for 2021. It expects the global economy to bounce back from a contraction of -3.5% with growth of 5.5% - reliant on the distribution of Covid-19 vaccines and policy support in large economies.

"The speed of the recovery will depend crucially on production, distribution networks, and access to vaccines… continued monetary and fiscal support remain vital to lessen lingering uncertainties, build a bridge to the recovery, and ensure financial stability," the IMF emphasised.

The IMF noted that countries like Canada, the UK and US had pre-purchased vaccines and had a large per capita coverage. Emerging and developing economies, however are still lagging in their procurement  via the World Health Organisation's COVAX facility or in negotiations with manufacturers.

In his address to the World Economic Forum on Tuesday, President Cyril Ramaphosa spoke out against the hoarding of vaccines by richer countries, and pleaded with them to release excess doses to support  equitable distribution, Fin24 previously reported.

The IMF warned that delayed access to "comprehensive healthcare" solutions could result in an "incomplete global recovery" that endangers the global financial system. Delays to tackling the pandemic in emerging market economies – which accounted for 65% of global growth between 2017 and 2019 – could negatively impact the global economy, the report indicated.

"Supply chain disruptions could affect corporate profitability even in regions where the pandemic is under control. And because growth is a crucial ingredient for financial stability, an uneven and partial recovery risks jeopardising the health of the financial system." 

The IMF expects emerging and frontier market economies to continue to face large fiscal deficits into 2021. If advanced economies normalise their policies – potentially introducing higher rates - this would also present challenges to emerging markets, the report read.

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