The International Monetary Fund(IMF), in its latest global outlook, expects the world economy to grow at 6% in 2021 and 4% in 2022. This is from a negative three per cent growth in 2020.
These optimistic projections in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly the USA, which is expected to grow at 6.4% in 2021.
Thus, the USA is the only big economy forecast to surpass the 2022 growth projections set in the pandemic’s absence.
Other more developed economies, including Europe, will also pick up but at a slower speed.
IMF forecast for China
China’s economy is forecast to grow at 8.4%. This economy has already recovered to the pre-pandemic GDP levels, while other emerging and developing economies will not do so until 2023.
The pandemic has accelerated the transformative forces of digitalization and automation, wiping out many jobs lost that will most likely never return.
This will require worker s to retrain and move to other sectors—which often comes with severe earnings penalties.
The IMF says swift policy action worldwide, including $16 trillion in fiscal support, prevented far worse outcomes. The 2020 severe economic collapse could have been three times worse had it not been for such support.
The Fund predicts that COVID-19 losses will hit emerging markets and low-income countries the hardest.
However, faster progress with vaccinations can uplift this projection, while a protracted pandemic with more aggressive variants of COVID-19 could lead to further downgrades.
As Central Banks withdraw amnesty on loan repayments by bank customers, more firms could face collapse resulting in job losses in many countries.
Once the pandemic ends, the IMF recommends that countries focus on rebuilding their economies by investing in green infrastructure and digitalization to boost output and reduce social inequalities.
The Fund says that one year into the COVID-19 pandemic, the global economy is still under strain with collapsing economies and lost livelihoods.
But even with uncertainty over the pandemic, a way out of this health and economic crisis is increasingly visible. Millions worldwide are getting vaccinated.
However, the virus is yet to be eliminated, with infection rates still rising in many countries.
Recoveries are also diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism, doing less well.
While some countries will get widespread vaccinations this summer, most, primarily low-income countries, will likely have to wait until the end-2022.
Speeding up vaccinations will require ramping up vaccine production and distribution, avoiding export controls, fully funding the COVAX facility on which many low-income countries rely for doses, and ensuring equitable global transfers of excess quantities.