IMF World Economic Outlook: Recovery During a Pandemic

The Institute for International Economic Policy was pleased to host a discussion of the International Monetary Fund’s October 2021 World Economic Outlook titled "IMF World Economic Outlook: Recovery During a Pandemic - Health Concerns, Supply Disruptions, and Price Pressures" on Friday, October 29th, 2021. This event featured John Bluedorn (IMF), Christoffer Koch (IMF), Tara Sinclair (GWU), Jean-Marc Natal (IMF), and Benjamin Jones (Northwestern University). This event was moderated by IIEP Director Jay Shambaugh.

The global economic recovery is continuing, even as the pandemic resurges. The fault lines opened up by COVID-19 are looking more persistent—near-term divergences are expected to leave lasting imprints on medium-term performance. Vaccine access and early policy support are the principal drivers of the gaps.

The IMF World Economic Outlook -- the flagship publication of the IMF -- details the state of the global economy and its prospects going forward. It also includes two analytical chapters considering key policy issues facing the world economy. Chapter 2 considers the appropriate policy mix as many countries face elevated or rising inflation. Chapter 3 examines how countries could use science and innovation policy to boost long run economic growth. This event presented an opportunity for policymakers and academics to consider these crucial issues.

Chapter 1: Global Prospects and Policies
Presenter: John Bluedorn, International Monetary Fund

The global economic recovery continues amid a resurging pandemic that poses unique policy challenges. Gaps in expected recoveries across economy groups have widened since the July forecast, for instance between advanced economies and low-income developing countries. Meanwhile, inflation has increased markedly in the United States and some emerging market economies. As restrictions are relaxed, demand has accelerated, but supply has been slower to respond. Although price pressures are expected to subside in most countries in 2022, inflation prospects are highly uncertain. These increases in inflation are occurring even as employment is below pre-pandemic levels in many economies, forcing difficult choices on policymakers. Strong policy effort at the multilateral level is needed on vaccine deployment, climate change, and international liquidity to strengthen global economic prospects. National policies to complement the multilateral effort will require much more tailoring to country-specific conditions and better targeting, as policy space constraints become more binding the longer the pandemic lasts.

Chapter 2: Inflation Scares
Presenter: Christoffer Koch, International Monetary Fund
Discussant: Tara Sinclair, George Washington University

Despite recent increases in headline inflation in both advanced and emerging market economies, long-term inflation expectations remain anchored. Looking ahead, headline inflation is projected to peak in the final months of 2021 but is expected to return to pre-pandemic levels by mid-2022 for most economies. But given the recovery’s uncharted nature, considerable uncertainty remains, and inflation could exceed forecasts for a variety of reasons. Clear communication, combined with appropriate monetary and fiscal policies, can help prevent “inflation scares” from unhinging inflation expectations.

Chapter 3: Research and Innovation: Fighting the Pandemic and Boosting Long-Term Growth
Presenter: Jean-Marc Natal, International Monetary Fund
Discussant: Benjamin Jones, Northwestern University

How can policymakers boost long-term growth in the post–COVID-19 global economy? This chapter looks at the role of basic research—undirected, theoretical, or experimental work. Using rich new data that draw on connections from individual innovations and scientific articles, this chapter shows that basic research is an essential input into innovation, with wide-ranging international spillovers and long-lasting economic impacts.