NEW YORK — The International Monetary Fund is encouraging leaders around the world to implement strong policy actions to safeguard the global economic recovery after the 3.2% contraction endured in 2020.

At an event at Bocconi University, in Milano, Italy, the managing director of the multilateral lender, Kristalina Georgieva, said the world faces a global recovery “hobbled” by the effect of the COVID-19 pandemic and its impact. “We are unable to walk forward properly—it is like walking with stones in our shoes,” she added in reference to the three main challenges undermining the global outlook: a persistent economic divergence, rising inflation, and an increasing sovereign debt burden.

“The most immediate obstacle is the ‘Great Vaccination Divide’—too many countries with too little access to vaccines, leaving too many people unprotected from Covid,” the official said. Countries remain “deeply divided” in their ability to support the recovery, she added.

“Economic output in advanced economies is projected to return to pre-pandemic trends by 2022. But most emerging and developing countries will take many more years to recover, which will make it even more difficult to avoid long-term economic scarring,” she said.

In July, the multilateral lender projected a 6% global economic growth for this year and a 4.9% expansion for 2022, unchanged from April’s estimate. For Latin America and the Caribbean the GDP growth forecast stands at 5.8% since then.

“As you will see in our updated World Economic Outlook next week, we now expect growth to moderate slightly this year, ” Georgieva said.

The organization is set to announce its most recent World Economic Outlook on October 12, at 9am, Washington, in a press conference led by Gita Gopinath, economic counselor and director of the research department, Petya Koeva Brooks, deputy director of the research department and Malhar Nabar, division chief research department.

Inflation Prospects

At the same time inflation prospects remain “highly uncertain” for the multilateral lender and “a more sustained increase in inflation expectations could cause a rapid rise in interest rates, and a sharp tightening of financial conditions,” the official said.

The IMF estimate that global public debt has increased to almost 100 percent of gross domestic product and at the start of the pandemic many developing countries had with “very little fiscal firepower.” For Georgieva those nations now have “even less room in their budget and very limited ability to issue new debt at favorable terms. In short, they face tough times and are caught on the wrong side of the fiscal financing divide,” she said.

On September 21, Organization for Economic Cooperation and Development, OECD, lowered its growth forecasts for the global and U.S. economies, the first downgrade since December of last year, when new infections of COVID-19 were surging, The Wall Street Journal reported on its website. The Paris-based organization cut U.S. economy growth forecast to 6% from the 6.9% projected in May, and also slashed its global growth projection to 5.7% from 5.8%, citing a transitory disruptions on supply chains due to the vaccine against the lethal virus.