Gita Gopinath, Chief Economist of the International Monetary Fund.
ANDREW CABALLERO-REYNOLDS | AFP | Getty Images
LONDON – The International Monetary Fund has become more positive about the world economy as coronavirus vaccines are administered around the world. However, it is concerned about the risk that new Covid variants pose for recovery after the pandemic.
According to its latest World Economic Outlook, published on Tuesday, the institution now expects the world economy to grow by 5.5% this year – an increase of 0.3 percentage point from October’s forecasts. It sees global GDP (gross domestic product) growing by 4.2% in 2022.
“Much now depends on the outcome of this race between a mutation virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” said IMF chief economist Gita Gopinath. said a blog post.
“There is still a great deal of uncertainty and the outlook is very different across the country.”
The past few months have seen the number of Covid-19 infections and deaths worldwide, as new variants of the coronavirus have spread rapidly. It has been described as more contagious and is possibly more deadly than the original strain.
As a result, many countries tightened their social restrictions, causing further economic pain.
The IMF has reduced its GDP forecasts for the eurozone by 1 percentage point this year. The 19-member region, which was hit hard by the pandemic, is now expected to grow by 4.2% this year.
Germany, France, Italy and Spain – the four largest economies in the eurozone – have also lowered their growth expectations for 2021.
Economic activity in the region slowed in the last quarter of 2020, and is expected to continue until the first part of 2021. The IMF does not expect the euro area economy to return before the end of 2022 to the end of 2019.
US growth adjusted
On the other hand, according to the IMF, the United States will grow more than expected this year.
The Fund revised its GDP forecast upwards by 2 percentage points due to strong momentum in the second half of 2020 and additional fiscal support. GDP is now seen at 5.1% this year.
The U.S. Congress approved nearly $ 900 billion in a stimulus package in December, and President Joe Biden suggested more aid packages could come soon.
Looking at emerging markets, China is set to grow more than 8% this year, the IMF said.
“China has returned to its pre-pandemic level in the fourth quarter of 2020, ahead of all major economies. The United States is expected to surpass its level ahead of Covid this year, well ahead of the eurozone,” Gopinath said on Tuesday.
The IMF reiterated that governments will need to support their economies through fiscal stimulus to strengthen economic recovery.
“Policy actions should ensure effective support until recovery is well under way, with an emphasis on promoting key needs to increase potential production, ensure participation that benefits everyone and accelerate the transition to lower carbon dependency,” Gopinath added. .