Monthly Briefing on the World Economic Situation and Prospects

The October Monthly Briefing takes a closer look at the results of the most recent bank lending survey by the European Central Bank (ECB), which provides some insights into the shape of economic activity in the euro area.

Unconventional monetary policy measures have played a crucial part in central banks’ responses to the COVID-19 pandemic. Large-scale quantitative easing has led to an unprecedented expansion of developed country central bank balanced sheets.

The force of the US expansion is reverberating across the world through trade and financial channels. As the recovery picks up speed, concerns over rising inflation and interest rates in the US are increasing.

Many developing countries, especially in sub-Saharan Africa and Latin America and the Caribbean, are not projected to recover to pre-pandemic output levels until 2023.

Gender barriers perpetuate inequalities and hold back productivity growth, limiting the effectiveness of post-pandemic recovery policies. Post-pandemic public policy should urgently mainstream gender and address the crisis’ disproportionate impact on women.

Several contributing factors need to be reviewed to look into currently emerging inflationary pressures, including the oil market, grains market, base metal market, semiconductor chip shortage, international shipping, wages and monetary factors.

Elevated inequalities place countries in a more vulnerable position to confront the pandemic. Going forward, fighting inequality will be crucial for reducing vulnerability to health and other emergencies and for enhancing the resilience of societies.

The jump in deposits in 2020 can largely be attributed to the temporarily increased savings of the non-financial businesses and households amid limited spending and investment opportunities and to strong liquidity preferences and high risk-aversion during the crisis.

The pandemic has exposed systemic vulnerabilities of the world economy. A robust and resilient recovery will require strengthening public finances and improving debt sustainability, combating inequality and expanding social protection, and promoting climate action and environmental sustainability.