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Jeddah – Yasmine El Tohamy – LONDON: Vaccines and fresh economic stimulus promised by US President-elect Joe Biden will give the global economy a chance to put the coronavirus pandemic behind it in 2021, policymakers and industry leaders told the Reuters Next conference.
Their optimism came despite a resurgence in COVID-19 cases that has prompted the World Bank to downgrade its growth forecast for this year and warn that delays in vaccination programs could pinch recovery even further.
The head of German engineering giant Siemens AG said China is currently driving the world economy but was optimistic about recovery in the US, where Biden has promised a faster
rollout of vaccines and more economic stimulus.
“In the US, they are holding all the cards and if they put the money to work in a wise way, there is going to be a very, very, strong second half of 2021 and especially 2022,” Siemens Chief Executive Joe Kaeser said.
Europe and the US both now need to “get their act together and put the billions and trillions of dollars and euros which have been promised to work,” he told the digital forum.
The World Bank last week cut its 2021 global growth forecast to 4 percent from 4.2 percent and said the rise in output could be
as little as 1.6 percent if there were vaccine delays.
European Central Bank President Christine Lagarde nevertheless stuck to the ECB’s existing forecasts for the eurozone, provided lockdown measures are lifted by the end of March and vaccines adequately distributed.
She cited as positives the fact that, after elections in the state of Georgia, Biden could count on US Senate support for his economic program and that Britain and the EU had managed to avert a no-deal Brexit on Dec. 31.
“Some of the uncertainties we had on the horizon that made us look at the future with a dark cloud over our heads, some of that has been cleared,” Lagarde told
“From that perspective we start on a more positive basis than what some would like to look at,” she added, vowing that the ECB had the capacity to add emergency stimulus if needed.
The ECB sees growth of 3.9 percent this year across the 19 countries that use the euro currency, more optimistic than many private sector economists.
Asked about the risk that developing nations could be left behind in the economic recovery as their people struggle to pay for COVID-19 vaccines, Lagarde said it would “backfire” on the rich world if they did not show solidarity.
“It is in the self-interest of developed countries to make sure that low-income, developing, fragile states have access to vaccination as it is needed,” the ECB chief said.
World Bank Chief Economist Carmen Reinhart said increasing debt distress in many of those countries meant that China, now the world’s largest official creditor, would need to start restructuring the debt it is owed.
“What I think China will need to do to confront this is what previous other creditors in the past had done, which is you have to restructure,” Reinhart told a panel on economic inequality.
“And restructure big time, meaning either lower interest rates, longer maturities, write-off in principal or some combination of that.”
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