The International Monetary Fund (IMF) has expressed optimism about the global economy but warns that the new COVID 19 variant could affect the global economic growth, according to its latest World Economic Outlook.
According to the report, “the institution now expects the global economy to grow 5.5% this year — a 0.3 percentage point increase from October’s forecasts. It sees global GDP (gross domestic product) expanding by 4.2% in 2022”.
According to its Chief Economist, Gita Gopinath:
- “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.
- “There remains tremendous uncertainty and prospects vary greatly across countries.
- “China returned to its pre-pandemic projected level in the fourth quarter of 2020, ahead of all large economies. The United States is projected to surpass its pre-Covid levels this year, well ahead of the euro area.
- “Policy actions should ensure effective support until the recovery is firmly underway, with an emphasis on advancing key imperatives of raising potential output, ensuring participatory growth that benefits all, and accelerating the transition to lower carbon dependence.”
What you should know
- There has been a surge in the number of reported cases of the new variant Covid-19 infections and deaths over the past few months.
- The new variant has been described as being more infectious and potentially deadlier than the original strain.
- The IMF had cut its GDP forecasts for the euro zone this year by 1%.
- It is being projected that the 19-member region, which has been severely hit by the pandemic, would grow by 4.2% this year.
- Germany, France, Italy and Spain — the four largest economies in the euro zone — also saw their growth expectations cut for 2021.
- Economic activity in the region slowed in the final quarter of 2020 and this is expected to continue into the first part of 2021. The IMF does not expect the euro area economy to return to end-of-2019 levels before the end of 2022.
- IMF revised its GDP forecast upward by 2% points on the back of a strong momentum in the second part of 2020 and additional fiscal support, with GDP expected to grow to 5.1% this year.