The logo of the International Monetary Fund at the headquarters in Washington, DC
Thomas Trutschel | Photothek | Getty images
LONDON – The International Monetary Fund expects a stronger economic recovery in 2021 as the rollout of the Covid-19 vaccine gets underway, but it warns of “daunting challenges” given the varying rates of firing around the world.
On Tuesday, the organization said it expects the global economy to grow 6% by 2021, compared to the 5.5% forecast in January. Looking further ahead, global GDP (gross domestic product) will increase by 4.4% for 2022, higher than a previous estimate of 4.2%.
“Even with great uncertainty about the path of the pandemic, a way out of this health and economic crisis is becoming increasingly visible,” Gita Gopinath, the IMF’s chief economist, said in the latest World Economic Outlook report.
The latest round of fiscal stimulus in the US, along with the introduction of vaccines around the world, has given the group more confidence in the global economy this year.
Income inequality within a country is likely to increase as young workers and those with relatively lower skills are more affected, not only in advanced but also in emerging markets and emerging economies.
Gita Gopinath
Chief Economist of the IMF
Nonetheless, the outlook presents daunting challenges related to differences in the speed of recovery both between and within countries and the potential for continued economic damage from the crisis, Gopinath added.
The IMF estimated 5.1% growth for advanced economies this year, while the United States grew 6.4%.
Meanwhile, the group’s forecast for emerging and emerging economies growth is 6.7% for 2021, while India is projected to grow at a whopping 12.5%.
“Income inequality within a country is likely to increase as young workers and those with relatively lower skills are more severely affected, not only in advanced but emerging markets and emerging economies as well,” Gopinath warned, adding that a lower level of female employment also affects the inequalities worsened.
As a result, the IMF said governments should continue to focus on “escaping the crisis” by providing fiscal support, including their health care systems. In a second phase, “policymakers will have to limit the long-term economic scars” caused by the crisis and boost public investment, it added.
“Without additional efforts to give all people a fair chance, differences in living standards across countries could widen significantly and reverse decades-long trends in global poverty alleviation,” said Gopinath.
Recovery in the US.
The latest projections suggest the United States is in a good position to experience a solid economic recovery in 2021, unlike much of the world, where it will likely take longer for pre-crisis levels to return.
The positive assessment for the US is strongly driven by President Joe Biden’s $ 1.9 trillion coronavirus rescue package, which went into effect last month.
As such, unemployment in the United States is projected to decline from 8.1% in 2020 to 5.8% this year and to 4.1% in 2022, according to the latest IMF projections.
In February, Treasury Secretary Janet Yellen said the US could be fully operational again by 2022. “There is absolutely no reason why we should have a long, slow recovery,” she told CNN at the time.
The latest IMF forecasts confirm that the US is on track not only to return, but to surpass pre-Covid levels this year.
“Developed economies are expected to surpass pre-Covid GDP levels in the United States this year, while many others in the group will not return to pre-COVID levels until 2022,” Gopinath added.