The I.M.F. maintained its forecast for global growth of 6% for 2021 in its latest World Economic Outlook report, largely due to advanced economies, including the United States, which expect slightly higher growth faster than previously planned by the world body. Economic growth in developing countries is expected to be slower, and the world body has said the spread of more contagious variants of the virus poses a threat to the recovery. He called on nations to work together to accelerate the protection of their citizens.
The International Monetary Fund warned on Tuesday that the gap between rich and poor countries was widening amid the pandemic, with low vaccination rates in emerging economies leading to an unbalanced global recovery.
“Multilateral action is needed to ensure rapid and global access to vaccines, diagnostics and therapies,” Gita Gopinath, IMF chief economist, wrote in the report. “It would save countless lives, prevent the emergence of new variants and add billions of dollars to global economic growth.”
The I.M.F. forecast that the US economy will grow by 7% in 2021. The Eurozone is expected to grow by 4.6% and that of Japan by 2.8%. Rapid expansion was expected for China, at 8.1%, and India, at 9.5%, but both prospects have been revised downwards since April. The outlook in China has been lowered due to a reduction in public investment, while India has been downgraded due to a severe second wave of viruses slowing the recovery.
Global expansion in 2022 is expected to be stronger than expected, growing 4.9%. This too will be led by the advanced economies, the I.M.F. predicted.
More than a year after the outbreak of the coronavirus, economic fortunes are closely linked to the success of governments in providing fiscal support and in acquiring and deploying vaccines. The I.M.F. said that about 40 percent of the population in advanced economies has been fully immunized, while that figure is only 11 percent or less in emerging markets and low-income developing economies. The varying levels of financial support from governments also amplify the divergence in economic fortunes.
Concerns about price increases have made headlines in the United States and elsewhere, but the I.M.F. said he continued to believe the recent surge in inflation was “transient”. The organization noted that unemployment rates remain below their pre-pandemic levels and that long-term inflation expectations remain “well anchored”. Ms Gopinath said that forecasting the path of inflation is subject to a lot of uncertainty due to the unique nature of the economic shock the world has faced.
“More persistent disruptions in supply and a sharp increase in house prices are some of the factors that could lead to continued high inflation,” Ms. Gopinath said.
As the Federal Reserve prepares to meet on Tuesday and Wednesday, it has advised central banks to be nimble in setting monetary policy and urged them not to raise interest rates too soon.
“Central banks should avoid prematurely tightening their policies when faced with transient inflationary pressures, but should be prepared to act quickly if inflation expectations show signs of letting go,” Gopinath added.