(Bloomberg) – Economic growth from controlling the global pandemic in all countries through vaccination will generate more than $ 1 trillion in additional tax revenue in advanced economies by 2025, underscoring the benefit of investing in vaccines , according to the International Monetary Fund.
Nations should continue to invest to support healthcare systems and households until the global pandemic is brought under control and the economic recovery strengthens, the IMF noted in its Fiscal Monitor report released Wednesday.
Vaccination “will more than pay for itself and provide an excellent return on public money invested in increasing global vaccine production and distribution,” the IMF said.
Driven by spending to fight the virus and dampen economies, global average public debt hit a record 97% of gross domestic product in 2020, 13 percentage points higher than anticipated before the pandemic. The debt-to-GDP ratio is projected to stabilize around 99% this year, the IMF noted. In the medium term, these relationships in most countries are expected to stagnate or decline as growth picks up.
Countries have announced US $ 16 trillion tax measures in the past year, the fund noted. The average fiscal deficit in advanced economies increased four times, from 2.9% of GDP in 2019 to 11.7% in 2020. In emerging markets, it doubled from 4.7% of GDP to 9.8%. Low-income developing countries saw their deficits grow from an average 3.9% of GDP to 5.5%.
Policymakers will need to balance the risks of large and growing public and private debt with a premature withdrawal of fiscal support in a way that slows recovery. To help meet financing needs from the pandemic, the IMF suggested that policymakers consider temporary taxes on high incomes or wealth.
While average interest payments in advanced markets and many emerging markets have been lower, low-income countries face financial challenges due to limited market access and little room to increase revenue, the IMF said. These countries need help through grants, concessional financing and, in some cases, debt restructuring.
Uncertainty about the fiscal outlook is unusually high, with faster-than-expected vaccinations that have the potential to hasten the end of the pandemic, boost revenue collection, and reduce the need for fiscal support. On the other hand, a deeper economic recession or an abrupt tightening of financial conditions could slow down the recovery.
Last week, the IMF warned that the pandemic could leave deep scars, and predicted that in 2024, world output could be about 3% below the level forecast before the pandemic.
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