Global growth is getting an upgrade, but prospects for recovery are still highly uncertain due to the race between rolling out vaccines and mutations to COVID-19 the IMF says in its latest quarterly update to the World Economic Outlook report (January 20).
“We are living in a highly uncertain times. We are projecting the world would grow this year as opposed to a severe collapse last year, but there is uncertainty. A lot depends upon the outcome of this race between a mutating virus and vaccines, and how much policy support can hold up,” IMF Head of Research Gita Gopinath told reporters in a virtual briefing.
The IMF is forecasting a 5.5% boost in growth in 2021, after a 3.3% drop in 2020 – the most severe hit to the global economy since the Great Depression.
But not all countries and regions are growing at the same pace, the IMF says.
The global recovery looks uneven, and the Covid-19 crisis won’t be over for anyone until it is solved for everyone, Gopinath said. Countries need to cooperate and share resources to ensure an equitable and rapid distribution of the vaccine.
“The international community must act quickly to make sure that vaccinations and the logistics of delivery of the vaccine vaccinations is available globally to address what is currently a deeply inequitable distribution of access to vaccines across the world,” the IMF’s chief economist added.
“The health and economic arguments for this are just simply overwhelming. The new virus strain says, as we have made abundantly clear that the pandemic is not over until it's over everywhere. And we estimate there the benefit of more rapid progress towards ending the health crisis will add nine trillion dollars cumulatively to the global economy between 2020 and 2025, with benefits for all countries, including advanced economies of around four trillion dollars,” said Gopinath.
The IMF is recommending that countries with fiscal space to continue to use those resources to provide support to those people and companies in need of help in the crisis.
One example many are watching, the Biden Administration and Democrat’s proposed $1.9 trillion package of support could boost growth there significantly, although Gopinath said it was early days to assess its impact.
“For the U.S. economy, we have this can raise output, incomes or output in the U.S. by five percent over three years. That's what we have in terms of our estimate, including increasing growth this year by one and a quarter percent. But again, just to be very clear, this is all still preliminary,” added Gopinath.
A full copy of the report can be found at IMF.org/WEO.