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April 6, 2021
IMF announces World Economic Outlook April 2021 Forecast
Photo: Chief Economist Gita Gopinath poses before giving the World Economic Outlook during the 2021 Spring Meetings of the International Monetary Fund. April 6, 2021. Washington, DC, United States. IMF Photo/Joshua Roberts.
Washington, DC, April 6, 2021 — The IMF announced an upgrade to global growth in its World Economic Outlook on Tuesday (April 6) in Washington, DC.
IMF has projected that the global economy would grow at 6 percent in 2021, moderating to 4.4 percent in 2022. A significant turnaround from an estimated contraction of -3.3 percent in 2020 when a pandemic hit the world.
“So relative to our January forecast, we are upgrading growth to 6% for 2021 and 4.4% for 2022. It reflects the additional financial support provided in the United States and the vaccination efforts that will strengthen recovery in the second half of this year. It also reflects the continued resilience of economic activity to the pandemic in many parts of the world,” said IMF chief economist Gita Gopinath.
Gopinath stressed that a high degree of uncertainty surrounds the IMF’s projections as the pandemic is yet to be defeated and virus cases are accelerating in many countries.
That’s leading to diverging recoveries both across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliant on tourism do less well.
“The biggest risk right now is still the pandemic. If there are new virus variants that evade the vaccine, it could lead to a sharp downgrade. But if, on the other hand, there’s the faster rollout of vaccinations, then that could uplift the outlook,” said Gopinath.
She also added that multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways. It could cause inflated asset valuations to unwind in a disorderly manner, economic conditions to tighten sharply, and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies.
“The second big risk is to financial conditions. We see multispeed recoveries, and we have seen interest rates go up. If interest rates go up even further in a more disorderly fashion than that could have negative implications for several countries, especially for some highly vulnerable emerging and developing economies,” said Gopinath.
Policymakers will need to continue supporting their economies while dealing with more limited policy space and higher debt levels than before the pandemic, Gopinath added. It requires better-targeted measures to leave room for prolonged support if needed.
“Given that we are not out of the woods, it is crucial for policy support to be continued in this crisis. Of course, countries are dealing with high debt levels, so they’ll have to make sure this support is better targeted and well-tailored to countries’ specific economic conditions, the stage of the recovery they are in, and the structural characteristics of the economy,” she added.
She also urged central banks to keep access to money open in the current environment.
“Monetary policy should also remain accommodative while proactively addressing financial risks of using macroprudential tools,” Gopinath remarked.
Source: IMF
|GlobalGiants.Com|
Edited & Posted by the Editor | 11:25 AM | Link to this Post
