The global economy is recovering from the coronavirus pandemic faster than previously expected, largely thanks to the strength of the United States. However, the International Monetary Fund warned Tuesday that major challenges remain as uneven vaccine adoption threatens to leave developing countries behind.
The IMF said it improved its global growth forecast for the year thanks to vaccinations for hundreds of millions of people. These efforts should contribute to a strong recovery in economic activity. The international panel now expects the global economy to grow 6 percent this year, compared to its previous forecast of 5.5 percent after a 3.3 percent decline in 2020.
“Even with great uncertainty about the course of the pandemic, a way out of this health and economic crisis is becoming increasingly visible,” said Gita Gopinath, chief economist at the IMF, in a statement on the Fund’s World Economic Outlook report.
Emerging from the crisis is being led by the richest countries, particularly the United States, where the economy is expected to grow 6.4 percent this year. The euro area is expected to grow 4.4 percent, and Japan is expected to grow 3.3 percent, according to the IMF
Of the emerging and developing countries, China and India are expected to lead. China’s economy is expected to grow 8.4 percent and India’s 12.5 percent.
Ms. Gopinath recognized the robust fiscal support that major economies have provided to the improved outlook and noted the relief efforts being made by the United States. The IMF estimates that the economic impact of the pandemic would have been three times worse had it not been for $ 16 trillion in global financial assistance.
Despite the brighter outlook, Ms. Gopinath said the global economy was still facing “huge” challenges.
Low-income countries face greater losses in economic output than advanced economies, reversing the gains in poverty reduction. In advanced economies, the low skilled are hardest hit and those who have lost their jobs may have difficulty replacing them.
“As the crisis has accelerated the transformative forces of digitization and automation, many of the jobs lost are unlikely to return, requiring cross-sectoral redistribution of workers – often with significant income penalties,” said Gopinath.
The IMF warned that its forecasts depend on the use of vaccines and the spread of variants of the virus that could pose a threat to both public health and the economy. The fund is also closely monitoring US interest rates, which remain at their lowest levels but could pose financial risk if the Federal Reserve unexpectedly increases them.