- The IMF will lift its forecast for global economic growth in a report set for release next week.
- Vaccination and new US stimulus were grounds for the upgrade, the IMF’s managing director said.
- Still, developing economies are recovering far slower than advanced countries, she added.
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The International Monetary Fund will lift its projections for global economic growth in the wake of encouraging vaccination trends and major new stimulus in the US, Managing Director Kristalina Georgieva said Tuesday.
The IMF will roll out an upgraded set of forecasts for this year and for 2022 next week when it publishes its World Economic Outlook report, she said. The organization’s January estimates saw global output growing 5.5% in 2021 after a forecasted tumble of 3.5% the previous year. The months since have seen COVID-19 cases fall from their peaks, vaccine rollouts begin, and $1.9 trillion in new fiscal support from the Biden administration.
The developments all stand to boost global economic recoveries through the summer, Georgieva said in prepared remarks.
“This allows for an upward revision to our global forecast for this year and for 2022,” she said.
Without “extraordinary effort” from essential workers and scientists, the global recession seen through most of 2020 would have been “at least three times worse,” the managing director added.
The news isn’t all good. Georgieva highlighted that, despite the broadly improved outlook, the global recovery remains uneven and gaps between countries could widen in the coming months. The US and China are likely to reach pre-pandemic levels of gross domestic product by the end of the year, but “they are the exception, not the rule,” she said.
New virus strains in Europe and Latin America are fueling high uncertainty about the region’s prospects. Emerging and developing countries also endured a 20% drop in per-capita income, roughly twice that seen in advanced economies. The plunge leaves emerging countries with a much harder climb back to pre-crisis health.
“They already have more limited fiscal firepower to fight the crisis. And many are highly exposed to hard-hit sectors, such as tourism,” Georgieva said
One upgrade among many
The IMF joins a handful of other institutions turning more bullish toward the US and global rebounds. Fitch lifted its own forecast for global expansion on March 18 to 6.1% from 5.3%, similarly citing stimulus and progress toward reopening. The estimate implies the strongest year of global growth since at least 1980.
US growth will outperform slightly at 6.2%, Fitch said. That’s up from the previous estimate of 4.5%.
“It still looks reasonable to assume that the health crisis will ease by midyear, allowing social contact to start to recover. But immunization delays or problems remain the key risk,” the firm said.
Wall Street giants have also boosted their estimates in recent weeks. Morgan Stanley is among the most bullish, lifting its US growth estimate to 8.1% in 2021 from 7.6% in an early March note. The forecast also calls for US GDP to reach pre-pandemic levels by the end of the first quarter.
Bank of America raised its 2021 US growth estimate to 7% from 6.5% on Thursday, marking its fourth upgrade this year alone. The revision was entirely linked to Democrats’ new stimulus measure and the “exceptional consumer spending” seen among those receiving relief checks, the team led by Michelle Meyer wrote.