IMF lifts world growth outlook as vaccines offset uncertainty
Japan and China outlooked revised downwards
Mexico City —The International Monetary Fund (IMF) raised its forecast for global growth 2021, betting the rollout of coronavirus vaccines and more fiscal stimulus will offset the immediate challenge posed by the resurgent pandemic.
Global GDP will rise 5.5% in 2021, faster than the 5.2% projected in October, the fund said on Tuesday. It credited improvement in the US for much of the upgrade, which was offset by cuts to its predictions for the eurozone and UK.
Such an expansion would match 2007 as the best in four decades of data and follow an upwardly revised 3.5% contraction 2020, which would still be the worst peacetime decline since the Great Depression. The IMF projected a 4.2% global expansion for 2022.
“Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” IMF chief economist Gita Gopinath wrote in a blog post accompanying the World Economic Outlook.
The fund sees major central banks holding their policy-rate settings through 2022, with financial conditions remaining at current levels for advanced economies and improving for emerging-market and developing nations.
The US saw one of the biggest upgrades after approving a $900bn relief plan. President Joe Biden is also seeking $1.9-trillion in additional aid. The IMF forecasts the world’s largest economy may grow 5.1% in 2021, vs 3.1% in October.
Japan, which has announced its own stimulus of more than $700bn, also saw a significant upward revision. The fund now projects 2021 economic growth at 3.1% compared with 2.3% previously.
Those upbeat outlooks contrast with Europe, where a deluge of cases has spurred new restrictions. The eurozone growth forecast was cut by a full percentage point, to 4.2%, on the expectation that the cooling at the end of 2020 will continue. The UK was cut by almost a point and a half to 4.5%.
Overall, advanced economies will see output losses compared with pre-pandemic projections that are relatively smaller than elsewhere thanks to fiscal and monetary policy support and earlier, widespread access to vaccines.
The projections assume broad vaccine availability in advanced economies and some emerging markets in 2021 and across most countries by the second half of next year. They also incorporate potential new lockdowns before inoculation is widespread, and that social distancing continues until the pandemic is tamed.
Still, forecasters face many unknowns. They include how restrictions to curb infection affect the economy before widespread inoculation, how vaccine rollout expectations and policy support influence activity, and changes in financial conditions and commodity prices.
For global trade, the IMF sees import and export volumes rising by 8.1% in 2021, slightly less than the 8.3% increase seen in October, after an estimated 9.6% decline in 2020.
The IMF will follow the release of the economic forecasts this week with an updated Global Financial Stability Report on Wednesday and an update to its Fiscal Monitor on Thursday.
- China's growth estimate for 2021 eased to 8.1% from 8.2%, while India’s lifted to 11.5% from 8.8%.
- Canada’s projection for this year was cut to 3.6% from 5.2%.
- The US and Japan will regain their end-2019 activity levels in the second half of 2021, while the eurozone and UK will remain below those levels into 2022.
- Global economy seen losing $22-trillion in output from 2020/2025 relative to pre-pandemic projected levels.
- More than 150 economies are expected to have per-capita income levels in 2021 that are below 2019, and about 110 economies in 2022.
- Nearly 90-million people are likely to fall into extreme poverty by year-end.
- Social unrest amid higher inequality or unequal vaccine access could further complicate the recovery.
- World leaders should work together closely to speed vaccination in nations with low health-care capacity and provide debt relief for low-income and developing countries with unsustainable burdens.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.