MNI INTERVIEW:Eurozone Has Fiscal, Monetary Space-IMF's Brooks

Hitches in vaccine distribution have the potential to dent an expected global economic rebound this year, a senior International Monetary Fund official told MNI, adding that eurozone countries have additional fiscal and monetary policy space to respond should downside risks materialise.

Access to vaccines will be key to country and regional outcomes, Petya Koeva Brooks, Deputy Director in the IMF's Strategy, Policy, and Review Department, said in an interview.

"We are assuming that in advanced economies and some large emerging markets there is going to be availability of vaccines by the middle of the of this year," she said, "But for many other countries, especially low income countries, we're not talking about until 2022 and beyond. And that's really a problem."

Were fast, universal access to vaccines available, the additional gain for the global economy could be in the order of USD9 trillion, with USD4 trillion attributed to advanced economies, making it "in everybody's interest to have the vaccine be available across the board," she said.

DIFFERENCES WITHIN EUROZONE

Variations across countries in the speed of recovery will be a major challenge for the European Central Bank, together with the not-yet fully-known extent of economic scarring caused by the pandemic, Brooks said. While ECB support has helped provide a platform for recovery, the ability of individual economies to reallocate resources as needed will be key from now on she said, adding that more detailed IMF work in this area due to be published alongside April's World Economic Outlook.

"Euro area countries do have market access, and they can borrow at relatively low flow rates," she explained. "In a way the timing of it is probably not as important as it would have been if these were economies that were constrained by their market access.

"We've been supportive of using the escape clauses of the EU Stability and Growth Pact, and we think that that should continue until the recovery is firmly entrenched," Brooks said, and there would be a case in the event of an additional downturn for "even further measures by the ECB to support the economy."

The global economy has a very large amount of slack, she said, adding that inflation expectations are either well anchored, or below central bank targets in large economies.

"Even if we were to see an increase in inflation, some of that we would expect to be transitory," she said. Core inflation is also subdued, "with some exceptions, principally in some emerging and developing economies."

A persistent rise in inflation "is not something that we are concerned about at this stage," Brooks said.

Positive surprises, especially in the third quarter of last year, allowed the IMF to revise its latest global growth forecast for this year up 0.3 percentage point to 5.5% in October, Brooks said,

In the euro area, growth is expected to be closer to 4%, after a 7.2% contraction in 2020.