Daily Management Review

IMF expects global economy to recover unevenly


The global economy will grow by 6% this year and 4.9% next year, according to an updated International Monetary Fund (IMF) forecast.

The trajectories of global economic recovery have become even more divergent, says the IMF's updated global macro forecast. Vaccination rates remain a key criterion - almost all developed countries (around 40% of their populations are vaccinated, around 20% in developing countries and less than 2% in low-income countries) can expect to see a business recovery by year-end, while the rest will depend on outbreaks of the disease, although no one has complete protection against pandemic risks.

The global economy could grow by 6% in 2021 and by 4.9% next year. Although the overall estimate for this year is unchanged, for developing countries the forecast is reduced by 0.4 percentage points to 6.3%.

By contrast, the forecast for developed countries has been improved (plus 0.5 percentage points to 5.6%). By contrast, the increase of 0.5 p. p. in the prognosis for 2022 is mainly due to the US outlook and the new fiscal stimulus (plus 0.3% this year to 7%, next year plus 1.4% to 4.9%). In the euro area the increase will be less pronounced at 4.6% and 4.3%.

The IMF attributes the global spike in inflation primarily to supply shortages due to covid constraints (for example, delivery times have increased due to a lack of containers on the main routes - this has led to higher freight costs). Consumer patterns are also changing - in particular, there has been an increase in demand for housing (amid low mortgage rates and growth in remote employment). Commodity prices are another source of inflation: oil could rise by 60% this year from a low base in 2020, other commodities, especially metals and food, by 30%. Global trade as a whole could rise by 9.7% this year and by 7% in 2022.

The fund expects price growth to return to previous rates in 2022 - the IMF recommends that central banks treat these spikes as "temporary" and "avoid policy tightening until inflation trends become clearer".

source: imf.org