Recovery from the economic impacts of the COVID-19 crisis has been divergent across jurisdictions, partly due to different cyclical and structural factors including health measures and partly due to different duration of health policy related restrictions. Limited ability to provide additional policy support, in particular in the form of fiscal stimulus, has been a factor behind a relatively weaker recovery in many Emerging Market and Developing Economies (EMDEs) than in Advanced Economies (AEs).

Russia’s invasion of Ukraine has added substantially to these pre-existing challenges, by causing a setback to global growth, triggering higher inflation, and adding to economic uncertainty.

Vulnerabilities from the COVID-19 crisis may now materialise at a time when policy space is limited and firms and households have reduced financial buffers. Moreover, a more uneven global recovery increases the risk of negative spillovers. Taken together, these setbacks may imply that the scarring effects from the pandemic have a greater potential to damage future growth.

This report considers exit strategies through the lens of financial stability and the capacity of the financial system to finance strong and equitable growth. It primarily reflects experiences through to the first quarter of 2022. Since then, the economic and financial market situation has evolved considerably. And the situation will evolve further in the months between this interim report and the final report in November, which will be delivered to the G20 in November 2022.

The final report will consider relevant new economic developments and input from stakeholders with a view to presenting conclusions regarding the financial stability issues related to scarring effects from COVID-19, and how the FSB will address these issues going forward.

The FSB invites feedback from stakeholders on the report, both in writing and in the form of a dedicated (virtual) outreach event. Details on both will follow shortly.