While coronavirus vaccine candidates point to improved prospects for the global economy next year, they won’t help countries much in the immediate future. And roadblocks to securing additional financial support could damage the already fragile recovery.
“Countries now face a long ascent that will be difficult, uneven, uncertain and prone to setbacks,” said IMF Managing Director Kristalina Georgieva.
The European Union, meanwhile, is facing an internal revolt that could delay the final approval of its €800 billion ($950 billion) coronavirus recovery fund, which took months to negotiate and is due to kick in on January 1.
Withdrawing fiscal support prematurely is “the biggest risk” facing economies in the short term, according to Neal Shearing, group chief economist at Capital Economics.
“This would be a self-defeating mistake,” he said in a research note on Tuesday.
That’s because an extended period of weak demand, which large scale fiscal stimulus has mitigated, poses the greatest threat to economic growth, he added.
— James Frater contributed reporting.