The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.

The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.

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What the IMF is saying

“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) that is expected to grow at 6.4 percent 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.

China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”

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On divergent recoveries 

The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.

“The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.

“Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.“

For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.

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In case you missed it 

The International Monetary Fund (IMF)  identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.

The International Monetary Fund (IMF) has identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic.

This is as many of the poorest countries in the world are facing the threat of weak recovery and setbacks in their development path.

This disclosure is contained in a report issued by the IMF on Sunday, April 5, 2021, and can be seen on its website.

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Some of the factors include access to vaccines. The poorer or low-income countries, face uneven access to vaccines as most of these countries rely almost entirely on the multilateral COVAX facility. This is a WHO-backed global initiative, in collaboration with a consortium of international organizations, aimed at equitable access to vaccines. The initiative is currently set to procure vaccines for just 20% of the population in low-income countries.

Secondly, low-income countries have had limited policy space to respond to the crisis, most especially, they have lacked the means for extra spending.

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Thirdly, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries continue to act as a drag on growth.

The IMF in its presentation estimates that low-income countries will require about $200 billion until 2025 to step up their response to the pandemic, and a further $250 billion to catch up with advanced economies. An additional $100 billion will be needed if risks identified in the baseline scenario materialize. Meeting these needs will require a coordinated, multifaceted, strong response.

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Bottom line

With the devastating impact of the coronavirus pandemic still very visible, the low-income countries and even the developed economies are still trying to create a path to economic recovery.

The high debt level of low-income countries even before the pandemic means that only a small portion of its Covid-19 expenditure could be financed through borrowing.