The IMF’s latest World Economic Outlook was released Tuesday. It projects global growth of 5.9% this year, as opposed to its July projection of 6%.
Gita Gopinath, IMF Chief Economist, stated that “the global recovery continues, but the momentum is hampered by the pandemic,” she told reporters at a briefing.
The IMF forecasts that the United States, the largest economy in the world, will experience a 6% growth rate by 2021. This is below the July forecast of 7.7%. This downward revision is due to a slowerdown in economic activity as a result of a rise in COVID-19 and delayed production, and an acceleration in inflation.
According to the IMF, global advanced economies will experience 5.2% growth this year. This compares with a modest 3% gain for low-income countries.
The IMF stated that “the dangerous divergence of economic prospects across countries” remains a concern.
The monetary fund anticipates that the global output of advanced economies will recover the losses suffered during the pandemic by 2022, and exceed their pre-pandemic growth rate by 2024.
The IMF warns that output in developing and emerging countries other than China will be 5.5% lower than the path of growth it had forecasted before the March pandemic. According to the monetary fund, this downgrade is a serious threat for living standards in these countries.
According to the IMF, this economic divergence was due to large differences in vaccine access between high- and low-income countries. The IMF stated that the outlook for poorer nations had “darkened significantly” due to the rise in cases of the Delta variant, which has risen the global COVID death rate to almost 5 million.
Nearly 60% of people in advanced countries are fully vaccinated. Only 4% are in poorer countries.
Gopinath stated that it should be a priority to reach the goal of vaccinations in all countries at least 40% by the end this year, and 70% by the middle next year.
She stated that to reach these levels, rich countries like the United States would need to honor their commitments to provide vaccines to less fortunate nations.
Gopinath stated that recent developments have shown us that we are all in the same boat and the pandemic will not end anywhere until it ends everywhere. According to the IMF, if COVID continues to have an extended impact, it would result in a global reduction of $5.3 trillion over five years. This is a decrease from the current forecast.
Poorer countries face challenges from an increase in inflation. Food prices are rising most in low-income nations, according to the IMF.
After a 3.1% drop in output due to the pandemic, the 5.9% increase in global output forecast by the IMF outlook would be a significant gain. The IMF forecasts a 4.9% increase in global output for 2022, which is unchanged from its July forecast.
This year’s 6% increase in U.S. GDP follows a 3.4% decline in 2020. The IMF predicts strong U.S. growth at 5.2% in 2022. The IMF projects a 5% increase in the number of countries that use the euro currency this year, and 4.3% in 2022.
China, second largest economy in the world, is expected to grow by 8% this year. This is slightly less than the IMF’s July forecast of 8.1%, and 5.6% in 2022.
For the fall meetings of the IMF (190 members) and the World Bank (sister lending organization), as well as the finance ministers and central banks presidents of the Group 20 industrial countries, the new World Economic Outlook was prepared. The IMF released it hours after Kristalina Georgieva was praised for her work as managing director. This was in response to claims that Georgieva and other senior World Bank officials had pressured staffers to move up in business rankings to please China.
In a statement, the IMF’s 24-member executive board stated that it did not conclude that Georgieva had played an inappropriate role in the situation.
It stated that it had reviewed all evidence and reaffirmed its confidence in the management director’s leadership abilities and ability to carry out her duties effectively.
When Gopinath was asked about the data controversy, she said that it had been a World Bank report rather than an IMF publication. She stated that the IMF board had expressed its confidence in the “impartiality and excellence of the IMF’s analytical work.”
This week’s agenda will include efforts to convince rich countries to honor their promises to increase the amount of vaccines going into poor countries. There will also be a discussion between the G-20 over an unannounced global agreement to impose a 15% minimum corporate income tax. After the agreement has been reviewed by G-20 finance officials it will likely be approved at a G-20 leaders’ summit in Rome.
