The latest World Economic Outlook (WEO) published by the International Monetary Fund projects a stronger recovery for the global economy compared to its January forecast, with growth projected to be 6% in 2021 (0.5 percentage point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020.
The projections for 2021 and 2022 are stronger than in the October 2020 WEO. “The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility,” according to the report. High uncertainty however surrounds this outlook, related to the path of the pandemic, the effectiveness of policy support to provide a bridge to vaccine-powered normalisation, and the evolution of financial conditions.
With the pandemic yet to be defeated and virus cases accelerating in many countries, recoveries are however diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and which are more reliant on tourism do less well.
The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) which is expected to grow at 6.4% this year. “This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic. Other advanced economies, including the euro area, will also rebound this year but at a slower pace. Among emerging markets and developing economies, China is projected to grow this year at 8.4%. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”
The IMF stresses that on the international stage, first and foremost, countries need to work together to ensure universal vaccination. While some countries will get to widespread vaccinations by this summer, most, especially low-income countries, will likely have to wait until end-2022. “Speeding up vaccinations will require ramping up vaccine production and distribution, avoiding export controls, fully funding the Covax facility on which many low-income countries rely for doses, and ensuring equitable global transfers of excess doses.
