Global economic recovery momentum is weakening, IMF warns
Dubai: global economic recovery continues but momentum has weakened and hampered by pandemic, latest report Global Economic Outlook Report issued by the IMF.
Compared to the July forecast, global growth for 2021 has been revised to 5.9% from 6% and is unchanged for 2022 at 4.9%. This modest revision of securities, however, masks sharp downgrades in ratings for certain countries.
“Pandemic outbreaks in critical links in global supply chains have resulted in longer-than-expected supply disruptions, further fueling inflation in many countries,” said Gita Gopinath, Economic Advisor and Director of Research from the IMF. “Overall, the risks to the economic outlook have increased and political compromises have become more complex,”
The downward revision of GDP reflects a deterioration for advanced economies – in part due to supply disruptions – and for low-income developing countries. Employment is generally expected to lag behind the recovery in production. Growth beyond 2022 is expected to slow to around 3.3% over the medium term.
Advanced savings
Output in advanced economies is expected to exceed medium-term projections before the pandemic, largely reflecting significant new political support expected in the United States. The group which includes the United States, the euro zone, the United Kingdom, Canada and Japan is expected to grow 5.2% this year and 4.5% for 2022.
While the United States is expected to grow by 6% and 5.2% respectively in 2021 and 2022, the Eurozone and the United Kingdom are expected to grow by 5% and 6.8% respectively in 2021.
Emerging economies
The IMF has kept the economic outlook for major emerging economies such as China, India and Russia unchanged. While China’s GDP is expected to grow by 8% in 2021 and moderate to 5.6% in 2022, that of India is expected to reach 9.5% and 8.5% for 2021 and 2022. Growth prospects for Russia improved slightly this year to 4.7% largely driven by higher oil prices.
IMF predicts continued production losses in emerging markets and developing economies due to slower vaccine deployment and generally less political support compared to advanced economies Rising inflation reflects mismatches between pandemic supply and demand and rising commodity prices from their low base for a year since.
Raw material exporters
The IMF has forecast better growth prospects for commodity-exporting countries, especially oil exporters. For the Middle East and North Africa region in which the world’s largest oil exporters are located, the IMF has forecast overall growth of 4.1 percent for 2021 and 2022.
Low income savings
The outlook for the group of low-income developing countries has darkened due to worsening pandemic dynamics. Speeding up vaccination remains the top political priority, while continuing to push for widespread testing and investment in therapeutics.
Policy recommendations
The IMF has said spending on health care remains the priority. As the pandemic persists and fiscal space is limited in some countries, funding lifelines will need to be increasingly targeted to those most affected and provide retraining and support for reallocation.
Regarding monetary policy, he said that while central banks can generally cope with transient inflationary pressures and avoid tightening until the underlying price dynamics are clearer, they should be ready. to act quickly if the recovery strengthens faster than expected or if the risks of rising inflation become tangible. .
“The dangerous divergence in economic prospects between countries remains a major concern,” Gopinath said. “The aggregate production of the group of advanced economies is expected to return to its pre-pandemic trend path in 2022 and exceed it by 0.9% in 2024. In contrast, the aggregate production of the group of emerging markets and developing economies ( excluding China) is expected to remain 5.5% below pre-pandemic forecasts in 2024, leading to a greater decline in their improvement in living standards ”,