IMF lowers global economic growth forecast for 2021

At the autumn meeting of the International Monetary Fund (IMF) and the World Bank (WB) on October 12, the IMF released the World Economic Outlook (WEO) report stating that the breaks in the supply chains The response and price pressure are restraining the recovery of the world economy after the COVID-19 pandemic.

Workers at a textile factory in Nantong, Jiangsu province, China. Photo: JIO
Workers at a textile factory in Nantong, Jiangsu province, China. Photo: JIO

In the above report, the IMF reduced its global growth forecast for 2021 to 5.9% from 6% in July forecast, and kept its forecast for 2022 at 4.9%.

The IMF statement said that while the overall forecast reduction was only 0.1%, for some specific countries, the growth forecast decreased more sharply. In particular, the current impact of the COVID-19 pandemic and the failure to distribute vaccines around the world is increasing economic disparities and creating a bleak outlook in developing countries. develop.

Global manufacturing has stalled due to supply chain problems, shortages of critical components such as semiconductors, closures of seaports, lack of trucks, and labor shortages. because of blockade measures to combat the epidemic. The supply-demand imbalance caused prices to rise and pushed up inflation. The IMF forecasts inflation will return to pre-epidemic levels by 2022, but warned that a prolonged supply disruption could alter inflation forecasts.

In the WEO, the US economic growth forecast is revised down the most, from 7% to 6% in 2021. The IMF thinks that US growth is likely to fall even more sharply because this forecast assumes this time. that the US Congress will approve President Joe Biden's $4 trillion infrastructure and social spending proposal. US lawmakers are trying to agree on a smaller spending package, but the IMF said a reduction in that number would lead to a reduction in growth forecasts for both the US and its trading partners.

The report also cut growth in many other industrialized economies. German growth fell half a percentage point to 3.1% while Japan's growth dropped 0.4 points to 2.4%. The IMF forecasts that growth in the UK this year will decrease by 0.2 points to 6.8%, and this is the fastest growth forecast in the Group of advanced industrial economies (G7).

China's 2021 growth is forecast to slow 0.1 point to 8%, according to the IMF, thanks to a faster-than-expected recovery in public investment. The forecast for India is unchanged, now at 9.5%. Growth of the "ASEAN-5" group (including Indonesia, Malaysia, the Philippines, Thailand and Singapore) is expected to be around 2.9%, up from the 3.4% decline recorded in 2020 but down. 1.4 points compared to the forecast in July. In 2022, this region is forecasted to achieve 5.8% growth.

Particularly in some commodity exporting countries such as Nigeria and Saudi Arabia, the IMF slightly raised its growth forecast thanks to higher oil and commodity prices.

The IMF also warned of a dangerous disparity in economic prospects due to "massive vaccine imbalances", as 96% of the population in low-income countries remains unvaccinated, leading to lower growth in the global economy. In the long run, poverty increases and inflation risks skyrocket. The report states: "About 65-75 million more people will fall into extreme poverty in 2021, compared with pre-epidemic projections." The IMF also said that low-income countries need an additional $250 billion to fight the epidemic and regain economic growth before the outbreak.

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