IMF boosts world growth outlook as Covid-19 vaccines outweigh uncertainty

The International Monetary Fund raised its forecast for global growth this year, betting the rollout of coronavirus vaccines and more fiscal stimulus will offset the immediate challenge posed by the resurgent pandemic.
 
Global gross domestic product will soar 5.5 per cent this year, faster than the 5.2 per cent projected in October, the fund said Tuesday. It credited improvement in the US for much of the upgrade, which was offset by cuts to its predictions for the euro area and the UK.
 
Such an expansion would match 2007 as the best in four decades of data and follow an upwardly revised 3.5 per cent contraction last year, which would still be the worst peacetime decline since the Great Depression. The IMF projected a 4.2 per cent global expansion for 2022. “Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” IMF Chief Economist Gita Gopinath wrote in a blog post accompanying the World Economic Outlook.

 

The pandemic is exacerbating inequality, with close to 90 million people likely to fall into extreme poverty in 2020 and 2021, the fund said. It sees the global economy losing $22 trillion in output from 2020-2025.
 
The fund sees major central banks holding their policy-rate settings through 2022, with financial conditions remaining at current levels for advanced economies and improving for emerging-market and developing nations.
 
The US saw one of the biggest upgrades after approving a $900 billion relief plan. The IMF forecasts the world’s largest economy may grow 5.1 per cent this year, versus 3.1 per cent in October. The projection doesn’t incorporate President Joe Biden’s proposal for $1.9 trillion more in aid, which the IMF estimates would add another 1.25 per cent to output this year.         Bloomberg