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Risks to recovery remain on fore with the spread of the new variant: Dr Ayhan Kose, Chief Economist and Director of the Prospects Group, Equitable Growth, Finance and Institutions, World Bank

Dec 18, 2021

Global community should join hands to reduce vaccine inequity

NEW DELHI, 18 December 2021: Dr Ayhan Kose, Chief Economist and Director of the Prospects Group, Equitable Growth, Finance and Institutions, World Bank yesterday said, "It is extremely crucial that the global community remains united in handling the pandemic and comes together especially towards addressing the issue of vaccine inequity. It is important that we minimize the long-term impact of the pandemic on the economy as well as the society."

Addressing the FICCI's 94th Annual General Meeting, Dr Kose said, "Significant risks remain down the road with the spread of the new variant of the virus Omicron. Recent data suggests that we are witnessing an unusually uneven recovery and global growth can moderate going ahead on account of diminished policy support."

Dr Kose further said, "Although global supply chains were resilient in the early stage of the pandemic, concerns started to emerge in the year 2021 - mostly on the back of resurgent demand for tradable goods which was not adequately matched with the supplies. Global shortage in semiconductors and container shortages further accentuated these concerns."

The demand supply mismatch has led to a significant increase in global retail inflation and prices are expected to remain elevated in the foreseeable future.  

"While on one hand high prices are forcing countries to tighten their monetary policies, on the other hand the recovery is still nascent and might require further support. Maintaining this delicate balance will be critical. In addition, there has been significant accumulation of debt. The funding conditions could tighten, and this can lead to a situation of financial stress," added Dr Kose. 

There has been broad based increase in the debt levels which has been magnified due to the extraordinary fiscal support undertaken by countries during the pandemic.  

"Achieving a successful resolution to the debt problem will be more difficult this time around given the highly fragmented creditor base, lack of transparency in debt reporting and a legacy stock of government debt. National policy makers and the global community need to act rapidly and forcefully ensure that the fourth wave does not end with a string of debt crisis in emerging market economies," he noted. 

Talking about India, Dr Kose said, "India has many advantages among the big and large market economies and has been the only country with a steady growth rate. India has the potential to maintain a high level of growth trajectory and I remain optimistic about its future. The country should continue its focus on improving infrastructure, technology and education outcomes to ensure a more inclusive growth."

Moreover, the country's government must think about a sustainable transition for successfully lowering its debt level and target its long-term objectives. 

Mr Sanjiv Mehta, President-Elect, FICCI said, "The past 20 months have been challenging for the global community. Uncertainty and threat remain on fore."

Adding on the situation in India, he said, "India has achieved an exceptional feat on the vaccination front and over 50% of India's population has been fully vaccinated." 

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