IMF Ups Global GDP Outlook But Warns of Uneven Growth
Joining the chorus of forecasters raising predictions for economic growth, the International Monetary Fund on Tuesday boosted its global outlook but warned gains will be uneven, resulting in wider gaps between developed countries and the rest of the world.
The IMF, an international policy organization with 190 member countries, said it now expects global gross domestic product (GDP) to grow 6% in 2021, up from the 5.5% it forecast in January, and 4.4% in 2022, up from 4.2%. The group cited unprecedented government support, faster vaccine rollouts and a generally better-than-expected adaptation to the COVID-19 pandemic.
Major economies like the U.S. and China are seen leading the gains, while emerging markets, particularly in Africa and the Middle East, will continue to lag. The “multispeed recoveries” are due to differences in the pace of vaccine rollouts, economic policy support, and the types of industries like tourism emerging countries rely on for economic growth.
“The divergent recovery paths are likely to create significantly wider gaps in living standards between developing countries and others, compared to pre-pandemic expectations,” the IMF said in issuing its latest World Economic Outlook report.
The U.S. government has passed three major stimulus bills since the pandemic began in 2020. The latest $1.9 trillion American Rescue Plan, passed last month, should “deliver a strong boost to growth in the U.S. in 2021 and provide sizable positive spillovers to trading partners,” the IMF said.
After contracting 3.5% last year, U.S. GDP this year is expected to surpass pre-pandemic levels, growing at two to three times the pace in the years before the pandemic began. The IMF now sees U.S. GDP growing 6.4% this year, rather than 5.1%, and 3.5% in 2022, rather than 2.5%.
Meanwhile, China, which had already recovered to pre-COVID-19 levels last year, is expected to grow 8.4% this year, up from 8.1%, and 5.6% in 2022, the same as previously predicted.
This growth contrasts with the IMF’s new GDP forecasts for other areas:
- Sub-Saharan Africa, 3.4% growth this year, up from 3.2%.
- Latin America and the Caribbean, 4.6% growth this year, up from 4.1%.
- Middle East and Central Asia, 3.7% growth this year, up from 3%.
To prevent further widening of the gap between developed and emerging economies, the IMF said central banks from wealthier countries like the U.S. should aim to keep monetary policy and interest rates “orderly.” Failing to do so could “set those economies back even further relative to advanced economies,” the IMF said.