The International Monetary Fund on Tuesday raised its forecast for global economic growth in 2021 but warned that there was still “extraordinary uncertainty” about the outlook.
In its latest World Economic Outlook forecast, the IMF projects global growth at 5.5%, which is higher than their previous forecast in October. Global growth will moderate to 4.2% growth in 2022, the IMF said.
The upgrade for this year reflects the positive effects from the start to vaccinations in some countries, additional fiscal support in the U.S. and Japan, and at least a partial return to business and consumer normality as the health crisis wanes.
“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,” said IMF chief economist Gita Gopinath, in a blog post accompanying the updated forecast.
The global economy contracted by 3.5% in 2020, the worst peacetime contraction since the Great Depression of the 1930s, the agency said.
Close to 90 million people are expected to enter extreme poverty in 2020 and 2021, reversing the trends of the past two decades, the IMF said.
Altogether, the COVID-19 pandemic will cost the global economy $22 trillion over 2020-2025 relative to pre-pandemic projected levels.
The IMF raised its U.S. growth estimate for 2021 to 5.1% from the prior estimate of 3.1%. It cut its euro-area forecast by 1% to 4.2%. and its forecast for the UK by 1.4% to 4.5%.
The IMF cut its growth estimate in 2021 for China by one-tenth to 8.1%.
During a press conference, Gopinath said she didn’t expect “runaway inflation.” Rising metal prices are a sign of increasing demand, as are some supply bottlenecks.
“That shows up in headline inflation and not as much in core inflation. And some of this should be transitory,” Gopinath said.
She called on the international community to make sure the COVID vaccinations are available globally.
“The new virus strains have made abundantly clear that the pandemic is not over until it’s over everywhere,” Gopinath said.