The International Monetary Fund now expects a stronger economic recovery in 2021 as the introduction of Covid-19 vaccines begins. He warns, however, of “formidable challenges” given the different rates of shot administration around the world.
On Tuesday, the group announced that it expects the global economy to grow 6 percent in 2021, compared to 5.5 percent in January.
Looking to the future, global GDP (gross domestic product) will rise by 4.4 percent for 2022, which is above an earlier estimate of 4.2 percent.
Unemployment in the United States is projected to fall to 5.8 percent this year and 4.1 percent in 2022, the IMF forecast.
“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 the latest report in the World Economic Outlook.
The recent round of fiscal stimulus in the US, as well as the global launch of vaccines, have made the fund more confident about the global economy this year.
“Still, the prospect presents formidable challenges related to varying rates of recovery between and within countries and the potential for continued economic damage from the crisis,” said Gopinath.
The IMF estimated the GDP rate for advanced economies this year at 5.1 percent, with the United States growing at a pace of 6.4 percent in 2021.
The forecast for emerging and developing countries is 6.7 percent in 2021, with India expected to grow by up to 12.5 percent.
“Income inequality within the country is likely to increase as young workers and people with relatively low skills are more affected not only in advanced but also in emerging markets and developing countries,” warned Gopinath, adding that lower levels of female employment reduce the differences tightened too.
As a result, the IMF urged governments to continue to focus on escaping the crisis by providing fiscal support, including for their health systems. In a second phase, “policymakers have to limit the long-term economic scars” from the crisis and, for example, boost public investment.
“Without additional efforts to give everyone a fair shot, the differences in living standards between countries could widen significantly and decades of global poverty alleviation trends could be reversed,” warned Gopinath.
Recent projections suggest the United States is well positioned to see a solid economic recovery in 2021, contrary to expectations for most of the world, where many economies are likely to take longer to reach pre-crisis levels to return.
The positive rating for the US is largely due to President Joe Biden’s $ 1.9 trillion coronavirus rescue package that went into effect last month.
As a result, unemployment in the United States is expected to fall from 8.1 percent in 2020 to 5.8 percent this year, and then back to 4.1 percent in 2022, according to the latest IMF projections.
In February Treasury Secretary Janet Yellen said the US could return to full employment in 2022. “There’s absolutely no reason why we should have a long, slow recovery,” she told CNN at the time.
The latest IMF projections confirm that the US is on the right track not only to return this year, but to surpass its pre-Covid levels.
“The advanced economies are expected to outperform their pre-COVID GDP this year while many others in the group will not return to pre-COVID levels until 2022,” Gopinath said.