Emerging markets and developing economies will continue to be hardest hit by the economic effects of the COVID-19 pandemic, the International Monetary Fund says.
The medium-term prediction sees international economic output about 3% lower in 2024 than before the pandemic, the fund said in its updated World Economic Outlook.
The economic damage will have a bigger effect on the labor market over the medium- and long-term since high-contact sectors such as restaurants and retail will likely shrink permanently.
The fund said the prospects of emerging markets and developing countries will be scarred by the economic crisis. Recovery by these countries will be challenging.
"Unlike what happened during the global financial crisis, emerging market and developing economies are expected to have deeper scars than advanced economies, with losses expected to be the largest among low-income countries," the fund said in its report.
The fund said economies more reliant on tourism, or with big high-contact sectors, are projected to suffer much more over the medium term. This includes Caribbean and Pacific island countries. The fund said gross domestic product for Pacific island countries might be 10% lower in 2024 than pre-pandemic projections.
"Systemic financial stress is largely avoided in the COVID crisis but the recovery is still challenging for some countries," the fund said.
The updated report paints a rosier estimate of the world economy this year as the pace of vaccinations increases worldwide.
In February, fund managing director Kristalina Georgieva told the Group of 20 finance ministers and central bank heads the pandemic might cut 0.1 percentage points off international growth.
Georgieva said the fund now projected growth improving to 3.3% in 2020 from 2.9% in 2019.