Support targeted at vulnerable populations and measures to broaden access to education, health care, digital services and infrastructure, as well as an emphasis on supportive fiscal measures, can help lower within-country inequality. A rapid global rollout of vaccination and redoubled productivity-enhancing reforms can help lower between-country inequality.
To steer the global recovery onto a more equitable development path, a comprehensive package of policies is needed. Within-country inequality remains particularly high in EMDE regions that account for about two-thirds of the global extreme poor. Over the medium and long term, rising inflation, especially food price inflation, as well as pandemic-related disruptions to education may further raise within-country inequality. Preliminary evidence suggests that the pandemic has also caused within-country income inequality to rise somewhat in EMDEs because of particularly severe job and income losses among lower-income population groups. Weak recoveries in emerging market and developing economies (EMDEs) are expected to return between-country inequality to the levels of the early 2010s. The COVID-19 pandemic has raised global income inequality, partly reversing the decline that was achieved over the previous two decades. Key risks to the regional outlook include a further resurgence of the pandemic, financial stress, less supportive external conditions than expected, and an additional rise in policy uncertainty or escalation in geopolitical tensions. The pace of growth over the forecast horizon will leave output slightly lower than its pre-pandemic trend by 2023, and the catch-up of per capita income growth with advanced economies will be slower during 2021-23 than in the decade before the pandemic. The near-term outlook is weaker than previously projected, owing to recurrent COVID-19 flareups, a faster-than-expected withdrawal of macroeconomic policy support, and sharp increases in policy uncertainty and geopolitical tensions.
Growth is forecast to slow to 3 percent in 2022, as domestic demand stabilizes, and 2.9 percent in 2023, as external demand plateaus and commodity prices soften. Output in Europe and Central Asia (ECA) is estimated to have expanded by 5.8 percent in 2021, reflecting a rebound in domestic demand and positive spillovers from firming activity in the euro area.
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