IMF report to shed light on what's interfering with the global economic recovery
A MARTINEZ, HOST:
There's a new warning today over the financial impact of a pandemic on some parts of the world. The International Monetary Fund, the IMF, says it sees a, quote, "dangerous divergence in economic prospects between wealthier and less affluent nations." And that's in part because of a big disparity in access to vaccines. And it says some countries are pulling back too soon on economic policies designed to help them get through that pandemic. Joining us now is Kristin Myers, editor in chief of personal finance website The Balance. Kristin, the language in this outlook - pretty stark. What's driving those concerns?
KRISTIN MYERS: Well, the main one is, really, the pandemic and the uneven distribution of the vaccine in response to the pandemic. So while here in the United States, Americans are going back to work, enjoying the ability to go out and travel again - but that's really not the case in a lot of other countries, like India for example. And, you know, the report really also does highlight concerns over supply chains and inflation, which is obviously constraining global growth, but it has definitely had an impact here in the United States. So, you know, they say in this report that the global economy is, however, projected to grow 5.9% in 2021. So the global growth will continue. However, that is a downward revision. So we are seeing this economic recovery, this global growth, slowing over time.
MARTINEZ: That impact that you mentioned here in the United States. What kind of impact are we seeing that's derived from what's happening in less developed countries?
MYERS: You know, that's a really great question. I think people forget so many times that our economies don't really exist in isolation. And, you know, the United States really does rely on a lot of other nations as trading partners, relies on other countries to manufacture goods, for example, to participate in supply chains - not to, you know, mention what happens in foreign stock markets, for example. So when other countries really can't produce goods or even buy goods from us or have labor shortages, that really does impact what happens here in the United States and our economic growth here in the United States. You know, just one example very quickly - if you went to buy a car pretty recently, you might have noticed that you had to pay a lot more for it or, frankly, the car you wanted wasn't available. Well, that's because of chip shortages that are produced out of Asia. So you really do start to see how we are all - at least our economies are definitely all interconnected.
MARTINEZ: There is a word I keep hearing and seeing - stagflation. Explain stagflation. And what's the risk of that?
MYERS: So stagflation is this really interesting environment where you have both a combination of inflation and stagnant economic growth and high unemployment. Now, typically, we think of inflation as associated with higher economic growth, but of course, with stagflation you both see higher pricing as well as that constrained economic growth. And that's the environment that we're in right now. Now, stagflation is, honestly, an environment of confusion. It's difficult to navigate. It's difficult to navigate, for example, if you're an investor. You - you know, which is more attractive to you? Bonds or stocks? But it's also incredibly difficult to navigate if you are a part of the central banks. How do you thread that line? How do you rein in inflation while continuing to help economic growth? And that's something that the Federal Reserve and the central banks around the world are dealing with now.
MARTINEZ: Kristin Myers, editor in chief of The Balance. Kristin, thanks a lot.
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