The International Monetary Fund on Tuesday maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for developing countries struggling with surging COVID-19 infections.
The divergence is based largely on better access to COVID-19 vaccines and continued fiscal support in advanced economies, while emerging markets face difficulties on both fronts, the IMF said in an update to its World Economic Outlook.
“Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries,” Gita Gopinath, the IMF’s chief economist, said during a news conference.
“Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades,” she said.
The IMF significantly raised its forecasts for the United States, which it now expects to grow at 7.0% in 2021 and 4.9% in 2022 – up 0.6 and 1.4 percentage points, respectively, from the forecasts in April.
The projections assume the U.S. Congress will approve President Joe Biden’s roughly $4 trillion in proposed infrastructure, education and family support spending largely as envisioned by the White House.
Positive spillovers from the U.S. spending plans, along with expected progress in COVID-19 vaccination rates, are boosting the IMF’s 2022 global growth forecast to 4.9%, up 0.5 percentage point from April.
The Fund gave its biggest upgrade to Britain, lifting its 2021 growth by 1.7 percentage points to 7.0%, reflecting better adaptation to COVID-19 restrictions than previously anticipated.
The euro zone saw a smaller 0.2 percentage point upgrade for 2021, while Japan saw a 0.5 percentage point cut, reflecting higher infections and tighter restrictions in the first half of the year.
India, which has struggled with a massive wave of coronavirus infections this year, saw the biggest cut in its growth forecast – three percentage points – to 9.5% for 2021. The IMF also reduced its 2021 forecast for China by 0.3 percentage point, citing a scaling back of public investment and overall fiscal support.
The IMF also forecast lower prospects for Indonesia, Malaysia, the Philippines, Thailand and Vietnam where recent waves of COVID-19 infections are weighing on activity. The Fund forecast that emerging Asia would grow 7.5% this year, down 1.1 percentage points from the April forecast.
Low-income countries saw a downgrade of 0.4 percentage point in their 2021 growth, with the Fund citing the slow rollout of vaccines as the main factor impeding their recovery.