Widening inequality and a divergence between advanced and lesser-developed economies are still a major concern although the global economy has been forecast to grow amid challenges posed by the ongoing Covid-19 pandemic.
The global economy will expand 6% this year, up from the 5.5% pace estimated in January, the International Monetary Fund (IMF) said in its recent World Economic Outlook.
That upgrade largely reflects a rapidly brightening outlook for the US economy, which the IMF now sees growing by 6.4% in 2021, the fastest since the early 1980s. That’s up 1.3 percentage points from the IMF’s 5.1% projection in January and nearly double the rate it estimated last year.
The IMF sees advanced economies less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more — a contrast to 2009, when rich nations were hit harder.
With US gross domestic product next year forecast to be even bigger than projected before Covid-19, the IMF’s projections show little residual scarring from the pandemic for the world’s largest economy.
The IMF forecast, if realised, would mark the fastest pace of global growth since 1976 but also comes off the steepest annual downturn of the post-war era last year as the pandemic brought commerce around the world to a near stand-still at times, Reuters said in a dispatch. The fund said the world economy contracted 3.3% in 2020, a modest upgrade from an estimated contraction of 3.5% in its January update.
The latest World Economic Outlook — released at the start of the IMF’s and World Bank’s spring meetings — reflects a dramatic divergence between the outlook for the United States and much of the rest of the world courtesy of another $1.9tn in pandemic relief spending recently enacted in Washington.
Meanwhile, the IMF reiterated its call for wealthy nations to help poorer ones combat Covid-19, and underlined the need to prioritise health-care spending more broadly to defeat the pandemic.
President Joe Biden’s $1.9tn stimulus package passed last month will help boost US GDP to above its pre-pandemic level this year and will have sizeable positive spillovers for trading partners. It will next year make the US the only large economy to surpass the level of output it would have had in the absence of the pandemic, IMF Chief Economist Gita Gopinath said.
For 2022, the fund saw global growth at 4.4%, higher than the 4.2% previously projected.
Still, many advanced economies will not return to their pre-pandemic output levels until 2022, the IMF said, and emerging-market and developing economies may take until 2023 to recover those levels. Citing IMF, Bloomberg said the world economy in 2024 will be about 3% smaller than anticipated before the Covid-19 outbreak.
“The outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis,” Gopinath said.
The IMF emphasised the high degree of uncertainty surrounding the outlook, and that improvements could easily be tripped up by any of several factors, with success against the pandemic topping the list.
