The Speed of Economic Recovery Hinges on Vaccines (Comprehensive)

IMF World Economic Outlook on the 6th (local time)
Global growth forecast at 6% but concerns over country disparities
Emerging markets' growth increase < advanced economies
"Countries with slow vaccination and limited policy support may see widening living standards gap"

[Asia Economy Reporter Kim Eun-byeol, Sejong=Reporter Son Seon-hee] Vaccine inoculation is determining the economic growth of countries worldwide. Countries with high vaccination rates are returning to normal life faster, positively impacting growth rates, while countries with relatively low vaccination rates are experiencing slower economic recovery. Although South Korea's exports are recovering, it is pointed out that domestic demand recovery is delayed due to low vaccination rates.

According to the World Economic Outlook (WEO) released by the International Monetary Fund (IMF) on the 6th (local time), the growth forecast for major advanced countries, including the Group of Seven (G7), was revised upward by 0.8 percentage points from the January forecast to 5.1%. The growth rate for developing countries such as China and India is 6.7%, higher than that of advanced countries, but the increase in forecast is only 0.4 percentage points. The growth forecast for next year also shows advanced countries at 3.6%, 0.5 percentage points higher than in January, while developing countries remain at about 5.0%, the same as in January.

This difference is partly due to the base effect compared to last year and monetary easing, but vaccine distribution also played a significant role. The IMF raised the growth rate of the United States, with a high vaccination rate of 32.15%, by 1.3 percentage points to 6.4%, and forecasted 5.3% growth for the United Kingdom, where the vaccination rate reaches 46.52%.

Other Gopinath, Chief Economist at the International Monetary Fund (IMF) [Image source=Reuters Yonhap News]

On the other hand, growth rates in emerging European countries (4.4%), Latin America and the Caribbean (4.6%), and the Middle East and Central Asia (3.7%) fall short of these figures. Gopinath, IMF Chief Economist, said at a press conference that the reason for raising the growth forecast was "reflecting the fact that the United States is expected to grow by 6.4% this year," and expressed concern that "countries with slow vaccination and limited policy support may experience a significant gap in living standards." She added, "The average annual per capita GDP loss for advanced countries from 2020 to 2024 is expected to decrease by 2.3% compared to pre-COVID-19 projections, whereas low-income countries will see a 5.7% reduction."

The Economist Intelligence Unit (EIU), under the British weekly magazine The Economist, predicted that some countries will not achieve full vaccination by 2023, and as the base effect from last year disappears, disparities between countries will widen further. Fortunately, although South Korea's vaccine distribution rate is low, its growth rate is expected to hold up well. The IMF forecasts South Korea's growth rate this year at 3.6%, an increase of 0.5 percentage points from January. According to the Bank of Korea on the same day, the current account surplus in February recorded $8.03 billion, marking a surplus for ten consecutive months. With increased freight transport income, the service balance (a surplus of $130 million) posted a surplus for the first time in 75 months since November 2014 (a surplus of $90 million).

This content was produced with the assistance of AI translation services.