After plunging 3.5% in 2020, the worst year since World War II, the global economy will grow 5.5% this year, the International Monetary Fund (IMF) said in its latest forecast released Tuesday.
The new projection for 2021 is an upgrade from the 5.2% expansion the Fund forecast in October and represents an upbeat stance compared to the subdued outlook held by the World Bank. Global trade is also expected to rebound this year, recording 8.1% growth after falling 9.6% last year.
In an update to its flagship World Economic Outlook, the IMF said the modest upgrade in global growth reflected an increase in government spending to offset the worst effects of the pandemic and the spread of Covid-19 vaccines, which it expects to power a stronger global economic recovery.
Vaccines should contain the spread of the virus, allow governments around the world to ease lockdowns, and encourage a return to normal economic activity, it said but there are risks to the outlook, particularly from new coronavirus variants that could derail global health and economic growth.
“Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook,” the IMF said.
The lender also warned that the strength of the recovery is projected to vary significantly across countries, calling for governmental support to help economies globally offset the damage from the crisis.
“Much depends on the outcome of this race between a mutating virus and vaccines and the ability of policies to provide effective support until the pandemic ends,” IMF chief economist Gita Gopinath said at a press briefing Tuesday. “There remains tremendous uncertainty.’’
Government stimulus programs late last year, especially in the United States and Japan, have boosted the world economy, the IMF said. The Joe Biden administration is also poised to pump an extra $1.9 trillion into the U.S. economy.
“The upgrade is particularly large for the advanced economy group, reflecting additional [government] support – mostly in the United States and Japan – together with expectations of earlier widespread vaccine availability compared to the emerging market and developing economy group,” the report said.
IMF Global growth forecasts
The IMF expects the U.S. economy to expand 5.1% this year after collapsing 3.4% in 2020. China is expected to record 8.1% growth after seeing a 2.3% increase in 2020. The United Kingdom will expand 4.5% this year following an estimated contraction of 10%.
The Eurozone – 19 European countries that have the euro as their national currency – will collectively register 4.2% growth this year after seeing output fall 7.2% in 2020, the IMF says. The Japanese economy is forecast to grow 3.1%, reversing a 5.1% decline in 2020.
Thanks to a faster-than-expected recovery at its factories and farms, India got a significant upgrade. Its economy is forecast to expand 11.5% in 2021, the fastest among major economies, and a rebound from 2020’s decline of 8%.
The sub-Saharan Africa region is forecast to 3.2% this year, after contracting -2.6% in 2020. Its biggest economy, Nigeria, is expected to grow 1.5% in 2021, after falling 3.2% last year.
Oil prices expected to rise this year – just over 20 percent – from the low base for 2020, which would greatly boost Abuja. Meanwhile, South Africa will expand 2.8% in 2021 after a -7.5% growth last year.