Unprecedented government borrowing and spending helped cushion the global economy from the coronavirus pandemic and will need to stay in place for some time to ensure a healthy recovery, according to top economists at the IMF’s spring meetings.

Driving the news: At the opening of its spring meetings on Tuesday the IMF again revised up its forecast for global growth this year, now projecting the world will see 6% GDP growth, the highest since the 1970s.

  • The improved outlook is thanks to “additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility,” IMF economists said in their latest World Economic Outlook report.

What it means: Even with a world growing at a record pace and global debt-to-GDP reaching 356% in 2020 with total global debt rising to $281 trillion, much more is coming.

Why it matters: The approach being advocated by policymakers now is much different than what was instituted following the global financial crisis in 2008, when leaders in advanced economies reduced spending and imposed fiscal austerity measures to balance budgets.

  • Economists argue that choked off the recovery and led to the anemic growth in industrialized countries seen since then, but others also note that it likely helped contain the inflationary impulses of central banks’ extreme monetary policies.

The big picture: Big spending by governments and historically loose monetary policy by central banks moderated the economic hit of the pandemic significantly, the IMF noted in its analysis, estimating that “the contraction could have been three times as large if not for extraordinary policy support.”

What they’re saying: Treasury Secretary Janet Yellen said during an interview at the meetings that it is the responsibility of advanced economies like the U.S. to continue to provide economic support through government spending to ensure that progress is not reversed.

  • “We are going to be careful to learn the lessons of the financial crisis, which is: ‘Don’t withdraw support too quickly,'” Yellen said.
  • “And we would encourage all those developed countries that have the capacity… to continue to support a global recovery for the sake of the growth in the entire global economy.”

Yes, but: “High uncertainty surrounds the global economic outlook, primarily related to the path of the pandemic,” IMF wrote.

Geographical diversity of outcomes

“Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support,” IMF chief economist Gita Gopinath wrote in the fund’s outlook report.

  • “The outlook depends not just on the outcome of the battle between the virus and vaccines—it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis.”

What it’s saying: The chart above shows growth projections for various countries from their 2019 growth, while the IMF’s projections are versus 2020 growth.

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