The Pandexit is near, and we are ready to go spending our way into new highs in material wellbeing. This is the story of our Advanced Economies Outlook. It strongly reminds me of Sandman, who puts children to sleep and gives them pleasant dreams, making sure they’re not lying awake worrying. During the pandemic, we had the luxury of having two Sandmen: central banks and fiscal authorities. They kept us sound asleep for over a year, but now it’s time to get up and start to think about the serious problems we’re facing.

Because there are also other, less optimistic stories. One of these is about emerging markets, as told in our Emerging Markets Outlook. Although their situation improves – partly driven by the recovery in developed markets – they generally remain fragile. Where vaccine rollouts have been the slowest, the pickup in economic activity has been poor. The IMF estimates that since the pandemic, the public and private sectors together will on average have to spend some 15 percentage points of their own 2030 GDP to meet the SDGs in low-income countries.

Also requiring our attention is the fact that the recovery is unequal and hardly sustainable. The recently published IEA-report ‘Net zero by 2050 shows’ that all current pledges fall short of reaching the goal of net-zero emissions in 2050 and limiting global warming to 1.5 °C. Another report showed that the world economy would lose about 10% of economic value if it stays on the current trajectory. But this might even be too optimistic. A leaked draft IPCC report, prepared for the coming climate summit in the fall of this year, posits that even with current temperature rises (1.1% above preindustrial level) tipping points are already in reach or reached.

That means that rain forest could turn into savanna, and ice caps and permafrost could melt with irreversible consequences for climate and biodiversity. On top of all this, a recently published World bank report, concludes that without action the world, especially in low-income countries, risks the collapse of the services provided by nature. By a conservative estimate a collapse in select services, such as wild pollination, provision of food from marine fisheries and timber from native forests, could result in a significant loss of 2.3% in economic activity for the world. The impact would relatively be strongest in low-income and lower-middle-income countries, where a drop in 2030 GDP may be more than 10%.

These are not the nice bedtime stories we are supposed to get from Sandman. Sandman let us sleep so long and deep, that we risk missing our chance to reset the economy. Waking up from the corona crisis, in the pandexit twilight zone, we have to face these challenges.

In terms of monetary and fiscal policies, it is time to depart the emergency stances and concentrate on creating an economy that is more resilient and fit for the future challenges. Both Sandmen have to come up with new, future-proof bedtime stories. In terms of investing this means that we must put our money where our mouth is: investing in emerging markets to reach the sustainable development goals. It also means making bold choices for the entire industry. It is quite clear that fossil fuels are increasingly becoming a risk for investors. Divesting from them is not a matter of choice but a matter of time. The best bedtime story from Sandman that we leave our children is a livable, equitable future planet.