Owing to COVID-19 pandemic impact, IMF cuts its global growth forecast

The International Monetary Fund is currently not optimistic about the 2021 global economy, but it still sees reasonable growth in the medium term.

In a global economic outlook released Tuesday, the fund said it expects global gross domestic product to rise 5.9%, 0.1 points lower than its July estimate. For the next year, the IMF maintained its global growth forecast at 4.9%.

This year’s outlook revisions are being made in the face of supply chain problems in developed countries and deteriorating health conditions in emerging countries.

“This modest headline revision masks large downgrades for some countries,” Gita Gopinath, chief economist at the IMF, said in an accompanying blogpost.

“The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions.”

The United States is one of the countries in this position. The IMF lowered its growth forecast by one point this year to 6%. Growth prospects for Spain and Germany also fell 0.5 percentage points each, and growth prospects for Canada also fell 0.6 percentage points.

However, since 2022, the IMF expects a modest global growth level of 3.3% in the medium term.

The IMF said it was particularly concerned about the various recovery figures in developed and emerging economies.

Developed countries could exceed pre-pandemic levels in 2024, according to their estimates, while developing countries, with the exception of China, could be 5.5% below pre-pandemic projections.

“These divergences are a consequence of the ‘great vaccine divide’ and large disparities in policy support,” Gopinath said.

“While over 60% of the population in advanced economies are fully vaccinated and some are now receiving booster shots, about 96% of the population in low-income countries remain unvaccinated.”

Consumer prices have risen sharply in recent months due to supply chain disruptions and rising prices for raw materials, especially gas.

In the United States, consumer prices rose 5.4% year earlier to July, the largest rise since August 2008, and fell slightly in August. Meanwhile, eurozone inflation peaked at 13 in September.

This rise in inflation is putting pressure on central banks to cut monetary stimulus faster than expected.

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