The International Monetary Forecast on Tuesday downgraded its forecast for global economic growth citing the pandemic and supply chain disruptions.
The IMF updated its world economic outlook, lowering its forecast to 5.9%, compared to 6% from July. Its current forecast for 2022 is 4.9% growth.
According to the report, growth in advanced economies is expected to return to pre-pandemic levels, emerging markets are expected to be 5.5% below the trend in 2024.
IMF cuts its global growth forecast.https://t.co/XabV9ln6mC
— Daniel Lacalle (@dlacalle_IA) October 12, 2021
The IMF projects the U.S. economy to grow 6%, marking a downgrade from the original 7%. The IMF also downgraded projections for Canada, Spain, Japan, Germany, and the U.K.
It projects an 8% increase for China.
“The dangerous divergence in economic prospects across countries remains a major concern,” said IMF Chief Economist Gita Gopinath.
The IMF also projects consumer-price inflation to reach 2.8% in 2021 and 2.3% in 2022, up from 2.4% and 2.1% respectively, from July. Whereas in developing countries consumer prices are expected to rise 5.5% in 2021, and 4.9% in 2022. “While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery,” Gopinath said.
The pandemic has caused a variety of problems for the global economy as supply chains have been disrupted due to high demand. There have been massive shipping increases, which in turn raises consumer prices.
The IMF says the biggest threat to recovery would be the spread of other variants as they believe vaccinations should be the number one priority in order to see a healthy rebound. The report states that 60% of eligible populations in advanced countries have been vaccinated, compared to only 4% of the population in underdeveloped countries.
“The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics,” Gopinath added.
In September, President Biden announced he would donate 500 million vaccine doses to countries around the world as part of his goal to vaccinate 70% of the world’s population by September 2022. The IMF has also approved $650 billion in currency reserves to be distributed around the world to countries in need and benefit those struggling with the worst of the virus.
“We are all in this together and the pandemic is not over anywhere until it is over everywhere,” Gopinath wrote.