Sun | Oct 24, 2021

IMF foresees a slight drop in global growth from pandemic

Published:Wednesday | October 13, 2021 | 12:07 AM
In this March 31, 2020 photo, the ‘Grand Princess’ cruise ship carrying crew and passengers struck with the novel coronavirus is seen in San Francisco.
In this March 31, 2020 photo, the ‘Grand Princess’ cruise ship carrying crew and passengers struck with the novel coronavirus is seen in San Francisco.

The International Monetary Fund is slightly downgrading its outlook for the global recovery from the pandemic recession, reflecting the persistence of supply chain disruptions in industrialised countries and deadly disparities in vaccination rates between rich and poor nations.

In its latest World Economic Outlook released Tuesday, the IMF foresees global growth this year of 5.9 per cent, compared with its projection in July of 6.0 per cent.

For the United Sates, the world’s largest economy, the IMF predicts growth of 6.0 per cent for 2021, below its July forecast of 7.0 per cent. The downward revision reflects a slowdown in economic activity resulting from a rise in COVID-19 cases and delayed production caused by supply shortages and a resulting acceleration of inflation.

The IMF predicts that for the world’s advanced economies as a whole, growth will amount to 5.2 per cent this year, compared with a meagre predicted gain of 3.0 per cent for low-income developing countries.

“The dangerous divergence in economic prospects across countries,” the IMF said, “remains a major concern.”

The monetary fund expects the total output from advanced economies to recoup the losses they suffered during the pandemic by 2022, and to exceed their pre-pandemic growth path by 2024.

But in emerging and developing countries outside of China, the IMF warns, output will remain an estimated 5.5 per cent below the output growth path that the IMF had been forecasting before the pandemic struck in March of last year. That downgrade poses a serious threat to living standards in those countries, the monetary fund said.

The IMF attributed that economic divergence to the sizeable disparities in vaccine access between wealthy and low-income countries. It said the outlook for poorer countries had “darkened considerably,” reflecting the surge in cases of the delta variant that has elevated the COVID death toll worldwide to nearly five million.

While nearly 60 per cent of the population in advanced economies are fully vaccinated, only about 4.0 per cent of the population in the poorer countries are.

Along with lagging vaccination levels, poorer nations face headwinds from a spike in inflation, with food prices rising the most in low-income countries, the IMF said.

The 5.9 per cent rise in global output being forecast in the IMF outlook would represent a sizeable gain after a 3.1 per cent decline in output because of the pandemic last year. For 2022, the IMF foresees an expansion of 4.9 per cent, unchanged from its July forecast.

The 6.0 per cent gain in growth in the United States this year follows a deep 3.4 per cent contraction in 2020. The IMF expects solid US growth of 5.2 per cent in 2022. For the 19 nations that use the euro currency, the IMF predicts a 5.0 per cent expansion this year and 4.3 per cent in 2022.

China, the world’s second-largest economy, is expected to register growth of 8.0 per cent this year, down slightly from the IMF’s forecast of 8.1 per cent in July, with growth of 5.6 per cent in 2022.

The new World Economic Outlook was prepared for this week’s fall meetings of the 190-nation IMF and its sister lending organisation, the World Bank, as well as of finance ministers and central bank presidents of the Group of 20 major industrial countries. It was released hours after the IMF expressed confidence in its managing director, Kristalina Georgieva, in response to allegations that while serving as a senior World Bank official, she and others pressured staffers to change business rankings in an effort to placate China.

The IMF’s 24-member executive board said in a statement that a review it conducted “did not conclusively demonstrate” that Georgieva, played an improper role in the situation.

“Having looked at all the evidence presented, the executive board reaffirms its full confidence in the managing director’s leadership and ability to continue to effectively carry out her duties,” it said.

Among the agenda items for the meetings this week will be efforts to persuade rich nations to fulfil their pledges to boost the level of vaccines going to poor countries, as well as a discussion among the G-20 countries over a just-announced global agreement for a 15 per cent minimum tax on corporate profits. Once the agreement is reviewed by G-20 finance officials, it is expected to be endorsed at a leaders’ summit of G-20 countries in Rome.