The global economy, ravaged by the Covid-19 pandemic, is projected to grow at 5.5 per cent in 2021 and 4.2 per cent in 2022, the IMF said on Tuesday, reflecting the expectations of a vaccine-powered strengthening of business activities later in the year and additional policy support in a few large economies.
“In our latest World Economic Outlook forecast, we project global growth for 2021 at 5.5 per cent, 0.3 percentage point higher than our October forecast, moderating to 4.2 per cent in 2022,” said Gita Gopinath, Chief Economist of the IMF.
The global economy contracted by an estimated 3.5 per cent in 2020 amidst the unprecedented health crisis.
The 2021 forecast is revised up by 0.3 percentage point relative to the previous forecast (5.2 per cent) in October last year, reflecting expectations of a vaccine-powered strengthening of business activities later in the year and additional policy support in a few large economies, the IMF said.
According to Gopinath, the upgrade for 2021 reflects the positive effects of the onset of vaccinations in some countries, additional policy support at the end of 2020 in economies such as the United States and Japan and an expected increase in contact intensive activities as the health crisis wanes. However, the positive effects are partially offset by a somewhat worse outlook for the ‘very near-term’ as measures to contain the spread of the virus dampen activity, she said.
Noting that there is a great deal of uncertainty around this forecast, Gopinath said that greater success with vaccinations and therapeutics and additional policy support could improve outcomes, while slow vaccine rollout, virus mutations, and premature withdrawal of policy support could worsen the outcomes.