Charles Abuede
The International Monetary Fund (IMF) has said that the global economy will grow 6 per cent this year from the 5.5 per cent rate it forecast earlier in January. The international fund, in its latest global economic growth estimate for the second time in three months, revealed thus; while raising warning concerns of the widening inequality and divergence between advanced and least-development counties.
In the latest outlook published on Tuesday, the IMF outlined that in the coming year, the global growth will be 4.4 per cent from the 4.2 per cent initially projected as it hinged that policymakers should scale back government support “gradually,” to avoid “fiscal cliffs.” Central bankers should also give “clear forward guidance” on monetary policy to minimize the danger of disruptive capital flows.
According to the fund, many developed nations will not find their feet back to the pre-pandemic output levels until 2020, while some emerging markets and developing economies may take until 2023 to recover those levels. The IMF also revealed that the world economy will be 3 per cent smaller than expected before the pandemic by the year 2024.
Gita Gopinath, the Chief Economist, at the Fund, said: “The outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis.
“Much of the focus of this week’s meetings will be on the IMF’s proposed $650 billion issuance of reserve assets known as special drawing rights, which aims to boost global liquidity and help emerging and low-income nations deal with mounting debt and Covid-19 health-care costs.
The response to last year’s crisis by policymakers prevented a collapse that would have been at least three times worse, and the medium-term losses for the global economy is expected to be smaller than the global financial crisis a decade ago. But low-income countries and emerging markets are seen suffering more this time around — a contrast to 2009, when advanced economies were hit harder,” the IMF chief economist revealed.
On the path to recovery, the fund stated that the divergent path to recovery is likely to get the global gap in living standards widened as the estimated per-capita income losses over the 2020- 2022 period in both developing and emerging markets excluding china stand at 20 per cent of the per-capita GDP figures for 2019. This stands less and worse than the 11 per cent the international lender projects for the advanced economies.
“Globally, economies dependent on tourism face a particularly difficult recovery outlook given the slow pace of normalization of cross-border travel expected, the fund noted. But in advanced economies, pent-up demand will drive growth based on savings from 2020, as vulnerable people get vaccinated and contact-intensive industries resume,” the IMF said in its publication.
Other major highlights from the IMF publication show that in 2021;
v The developed economies will grow 5.1 per cent from the previous 4.3 per cent.
v The developing economies will grow 6.3 per cent while the emerging markets will witness a 6.7 per cent growth
v The euro area will expand 4.4 per cent, up from the 4.2 per cent previously seen
v Japan will grow 3.3 per cent, compared with 3.1 per cent
v China is seen expanding 8.4 per cent, up from 8.1 per cent while India will grow 12.5 per cent, up from 11.5 per cent
v U.S. is seen at 6.4 per cent, up from 5.1 per cent in January. The fund previously calculated the stimulus enacted in March will boost U.S. output by a cumulative 5 per cent to 6 per cent over three years
