The global economy has recovered only fragile from the depths of the coronavirus pandemic, and many emerging markets are still experiencing severe difficulties, according to the latest Brookings FT Tracking Index.
Growth in the world's largest economies has been uneven, according to the index. This underscores the precarious prospects that will form the backdrop for the annual IMF and World Bank meetings this week.
With a second wave of coronavirus undermining efforts to normalize, with business, household and investor confidence shattered, and with little room for additional monetary stimulus, most countries still have a long way to go before production reaches pre-war levels Pandemic reached.
"A broad and robust recovery is not on the horizon," said Professor Eswar Prasad of the Brookings Institution, adding that the risk of significant and long-lasting scar effects on economies is increasing.
Meetings will be held virtually from Washington this week. Kristalina Georgieva, chief executive of the IMF, said last week the recovery from the Covid-19 crisis was "long, uneven and uncertain. And prone to setbacks. "
Economic data from around the world is weaker than the worst point in a previous downturn since the Brookings FT Tracking Index for Global Economic Recovery (Tiger) began in 2012.
The index compares indicators of real activity, financial markets and confidence with their historical averages for the world economy and for individual countries, and measures the extent to which the data is normal in the current period.
It became clear that the recovery in the industrialized countries is far from over after a historic decline in the spring and that the situation in the emerging countries is deteriorating considerably, as the indicators are still far from normal.
Private sector confidence has been weakened, which is not good for business investment and job creation
Although manufacturing has rebounded strongly and global trade has boosted, and household spending has generally remained strong as governments in developed countries replaced lost profits with wage subsidies, the outlook for businesses is worrying and business, household confidence is worrying and investors low and threatening to undermine the strength of a rebound.
Prof. Prasad said, "Private sector confidence has been weakened, which is not good for business investment and job creation."
However, financial markets were stable after the initial shock and made sure they did not exacerbate the health emergency.
Although the recovery was lukewarm, the world was able to evade far greater damage due to the tremendous use of fiscal policy, said Prof. Prasad. Central banks did what they could, too, but monetary policy was shown to be running out of ammunition and the limits of its remaining room for maneuver were becoming "increasingly apparent".
"Central banks are at risk of becoming increasingly entangled in their economies by buying corporate and government bonds and financing corporations directly, which could leave them vulnerable to political pressure and threats to their independence in the future," he said.
The US has outperformed many European countries, and unemployment fell over the summer. However, the recovery has slowed in recent months as the country lost control of coronavirus outbreaks and politicians fought to regain support for unemployed households.
In addition to many of the same risks, the Eurozone faces the risk of deflation. The annual inflation rate recently turned negative. Recovery has been patchy and tied to success in fighting the virus. Germany did better than Italy, Spain and France. In all countries the service sectors have been hit.
In Asia, China is recovering the most after recovering most of its economic activity when Covid-19 first struck in January and February. Even so, its performance will be worse than any other this year as it opened its economy to trade in the early 1980s.
Its success in getting rid of the virus through a tough lockdown and then reopening is in contrast to India, which has suffered many more cases and deaths and prevented the economy from functioning.