By Adedapo Adesanya
The International Monetary Fund (IMF) has reviewed its World Economic Outlook (WEO) to 6.0 per cent this year after the contraction of 3.3 per cent in 2020 amid the COVID-19 pandemic.
According to the Bretton Wood Institution on Tuesday, accelerated vaccinations and a flood of government spending, especially in the United States, have boosted the outlook for the global economy, but more must be done to prevent permanent scars.
The IMF said governments had spent $16 trillion in their attempts to mitigate the economic damage caused by the virus and that without the unprecedented policy response the global economy would have contracted by 10 per cent last year.
The WEO warned that the recovery would be uneven, with faster progress in rich countries further advanced with their vaccine programmes and with the financial firepower to pay for stimulus packages. Inequality would increase both between and within countries, it stated.
The IMF warned against withdrawing government support too soon and urged policymakers to safeguard the recovery through policies to support firms, including ensuring the adequate supply of credit and workers with wage support and retraining.
Of the advanced countries, the United States has recorded the biggest improvement in its prospects, with the IMF raising its growth forecasts by 1.3 points to 6.4 per cent in 2021 and 1.0 points to 3.5 per cent in 2022.
The United Kingdom is expected to grow by 5.3 per cent in 2021 and by 5.1 per cent in 2022 – an upward revision of 0.8 and 0.1 percentage points respectively since January.
Meanwhile, China’s economy, one of few that grew last year, will expand 8.4 per cent in 2021, the IMF said.
The Euro Area too will see GDP expand 4.4 per cent, slightly better than the prior forecast.
Speaking on the report, Ms Gita Gopinath, the IMF’s economic counsellor, said in a blog: “It is one year into the COVID-19 pandemic and the global community still confronts extreme social and economic strain as the human toll rises and millions remain unemployed.
“Yet, even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible. Thanks to the ingenuity of the scientific community hundreds of millions of people are being vaccinated and this is expected to power recoveries in many countries later this year.”
Ms Gopinath said swift action had prevented a repeat of the financial meltdown of 2008 and as a result, medium-term losses – output that will never be recovered – would be smaller at about 3 per cent of global GDP.
Unlike after the 2008 crisis, it would be emerging markets and low-income countries that could be expected to suffer greater scarring given their limited ability to stimulate their economies.
Despite becoming more optimistic about growth prospects, she said the future presented daunting challenges.
“The pandemic is yet to be defeated and virus cases are accelerating in many countries. Recoveries are also diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliant on tourism do less well.”
The IMF calculates that an additional 95 million people expected to have entered the ranks of the extreme poor in 2020, and there are 80 million more undernourished than before.
The lender noted that cooperation to ensure widespread vaccinations across the world to address the “deeply iniquitous” vaccine access where rich countries are scooping up the bulk of the supply.
IMF also called for resources to help children who have fallen behind in their education during the pandemic.
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