IMF World Economic Outlook Predicts 6 Percent Global Growth

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The International Monetary Fund warned Tuesday that the gap between rich and poor countries has widened during the pandemic, and low immunization rates in emerging economies are leading to an unstable global recovery.

The IMF maintained its 2021 global growth forecast of 6 percent in its latest World Economic Outlook report, largely as a result of advanced economies, including the United States, expecting slightly faster growth than the global organization had previously forecast. Economic growth is expected to be more sluggish in developing countries, and the global body said the spread of more contagious strains of the virus poses a threat to recovery. He urged countries to work together to accelerate the protection of their citizens.

“Multilateral action is needed to ensure rapid worldwide access to vaccines, diagnostics and treatments,” said Gita Gopinath, the IMF’s chief economist in the report. “This will save countless lives, prevent the emergence of new variants and add trillions of dollars to global economic growth.”

The IMF predicted that the US economy will grow by 7 percent in 2021. The eurozone was expected to grow by 4.6 percent and Japan by 2.8 percent. Rapid expansion was expected at 8.1 percent for China and 9.5 percent for India, but both have had their outlooks lowered since April. In China, the outlook was downgraded due to scaling back in public investment, while India’s rating was downgraded due to a serious second wave of viruses slowing the recovery.

Global expansion in 2022 was expected to be stronger than previously anticipated, with growth of 4.9 percent. The IMF predicts that developed economies will lead this.

More than a year after the outbreak of the coronavirus, economic wealth is closely tied to how successful governments are in securing financial support and acquiring and distributing vaccines. About 40 percent of the population in advanced economies is fully vaccinated, compared to just 11 percent or less in emerging markets and low-income developing economies, the IMF said. Different levels of financial support from governments also increase the disparity in economic wealth.

Concerns about price increases made headlines in the United States and elsewhere, but the IMF said it continued to believe the latest wave of inflation was “temporary.” The organization noted that unemployment rates remained below pre-pandemic levels and that long-term inflation expectations were “well-fixed”. Ms Gopinath said that due to the unique nature of the economic shock the world is facing, estimating the path of inflation is subject to a lot of uncertainty.

“More permanent supply disruptions and sharply rising housing prices are some of the factors that can lead to continued high inflation,” Ms Gopinath said.

As the Federal Reserve prepares to meet on Tuesday and Wednesday, it advised central banks to be agile 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 temporary inflation pressures, but should be prepared to act quickly if inflation expectations show signs of easing,” Gopinath said.

Mutations of the virus remain the most daunting challenge facing the global economy. The IMF predicted that the emergence of highly infectious variants could derail the recovery and destroy $4.5 trillion in gross domestic product by 2025.

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