The Bank for International Settlement said in its Annual Economic Report that “swift and forceful action from central banks and governments has limited the economic damage from the Covid-19 pandemic”. But in the coming year, “issues such as corporate insolvencies and capital and labour reallocation will come to the fore.”
Agustín Carstens, General Manager, said: “The whole world entered this crisis suddenly and as one, but the exit is proving to be slower and staggered. While the recovery has been faster and stronger than anyone would have imagined a year ago, we are not out of the woods yet. Policymakers need to carefully manage the risks arising from this economic and policy divergence and set a solid foundation for long-term growth.”
He added: “As we exit the pandemic, we see higher public debt, lower interest rates and larger central bank balance sheets. Normalising monetary and fiscal policy over the longer term will provide a necessary safety margin to cope with unexpected events such as the pandemic or future recessions. And securing a durable recovery will require addressing the more lasting consequences of the pandemic.”
