Anyone looking for evidence that the performance of the global economy has improved since the announcement in November last year of a breakthrough in the race to develop a vaccine against Covid-19 can easily find it. The publication on April 1 of a gauge of global manufacturing output showed that activity continued to expand last month, rising to its highest level in a decade. On Tuesday, the International Monetary Fund provided further confirmation that the prospects for the world economy have brightened since the end of last year. In its latest World Economic Outlook , the IMF anticipated growth of 6 per cent this year, an increase of 0.5 percentage points compared with its previous estimate, and a dramatic turnaround following a contraction of 3.3 per cent in 2020. Yet, the recovery is a dangerously uneven one. The widespread optimism following the vaccine breakthrough – which was excessive to begin with given the huge logistical challenges of mass vaccination programmes and the resurgence of the virus in many developed and emerging markets – has been punctured by sharp differences in both the pace of immunisation and the degree of policy support. While financial markets, especially stock markets, no longer attach any importance to countries’ ability to contain the virus, the handling of the pandemic remains a crucial determinant of economic performance, and one that has major political consequences. One of the most conspicuous divergences is between the United States and Europe. Survey data published on Monday showed that the services industry – which is more directly affected by the pandemic – in the US grew at its fastest pace on record last month. In the euro zone, by contrast, services sector output has contracted for seven straight months. As I argued previously , not only is the European Union paying a heavy price for having botched its immunisation campaign, it has not been forceful enough in providing fiscal stimulus. Non-US central banks must protect countries from rates cycle The US, on the other hand, is “ acting big ”, so much so that some investors worry about the risk of overheating. A gauge of interest rate expectations indicates that the Federal Reserve will begin raising rates as soon as the end of next year, in a sign of how confident markets are in the strength of the US’ recovery. An even sharper divergence has arisen between advanced economies and emerging markets, with the obvious exception of mainland China , whose successful handling of the virus allowed it to return to pre-pandemic levels of output last year. While Europe’s immunisation campaign has been sluggish, developing nations are trailing far behind their developed peers on vaccinations. Not only is this amplifying long-standing concerns about policymakers’ ability to respond to global health emergencies in a timely and equitable manner, it makes it more likely that new variants will emerge in unprotected populations. The IMF has sounded the alarm, warning that developing economies are likely to suffer more severe scarring from the virus due to poor access to vaccines and limited capacity to deploy fiscal stimulus measures. In a report published on Wednesday, JPMorgan noted that the growth differential between normally faster-growing emerging markets and advanced economies will turn negative this quarter. The plight of developing countries is most apparent in Brazil. By spending more money fighting the pandemic than almost all other emerging markets, Latin America’s largest economy has ended up spooking investors, forcing the country’s central bank to hike interest rates aggressively last month. What is more, the additional spending has failed to contain the virus, with Brazil reporting record high numbers of new cases and deaths. The divergences and inequalities that characterise the post-pandemic recovery pose significant risks. First, America’s outperformance is pushing up the country’s bond yields and the dollar. This has already put emerging market asset prices under strain , and is increasing the risk of a virus-induced debt crisis in the poorest, and most vulnerable, countries. The last thing the world needs right now is a major financial crisis in low-income nations. Second, as the IMF has pointed out, there are significant inequalities within advanced economies themselves, notably America’s. Younger and lower-skilled workers, particularly in the services sectors that have been hit hardest by the pandemic, are suffering the most. Their jobs are most at risk in the post-Covid-19 world due to the rapid acceleration of digitisation and automation. This suggests that one of Covid-19’s legacies is an increase in the populist and nationalist politics that were already gaining ground in advanced economies before the pandemic. While the response to the virus – in particular the imposition of nationwide lockdowns – has made the US even more polarised, it has also further undermined confidence in European integration. Marine Le Pen , the leader of France’s far-right party who hopes to win next year’s presidential election, has benefited hugely from the crisis. The breakthrough in the search for an effective vaccine against Covid-19 was a critical turning point in the pandemic. Yet, it is being compromised by a dangerously uneven recovery. Nicholas Spiro is a partner at Lauressa Advisory