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IMF: Global 2021 GDP growth may reach 5.5% thanks to COVID vaccine

Valerie Mai Valerie Mai

January 28, 2021 | 16:50

The International Monetary Fund (IMF) improved its forecast for world gross domestic product (GDP) growth this year by 0.3 percentage points compared to its October estimates, according to the IMF's January report.

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In 2022, the IMF expects 4.2 percent growth. Last year, according to the fund's analysts, the world economy declined by 3.5 percent. (Photo: Zing News)

The International Monetary Fund has become more upbeat about the global economy, as coronavirus vaccinations are administered across the world. It is, however, worried about the risk new Covid variants pose to the post-pandemic recovery.

According to its latest World Economic Outlook, published Tuesday, the institution now expects the global economy to grow 5.5% this year - a 0.3 percentage point increase from October’s forecasts. It sees global GDP (gross domestic product) expanding by 4.2% in 2022, CNBC cited.

In 2022, the IMF expects 4.2 percent growth. Last year, according to the fund's analysts, the world economy declined by 3.5 percent, while in the fall, experts expected that by the end of 2020, global GDP would fall by 4.4 percent. At the same time, the fund noted that crude oil prices will grow by more than 20 percent this year, against the lower base level of 2020 but still be much lower than the 2019-year level. Prices for other commodities are also expected to increase, with the strongest growth anticipated in 2021 for metals prices, PNA quoted IMF experts.

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The United States is set to grow more than expected this year, according to the IMF. Meanwhile, China is set to grow above 8% this year (Photo: Zing News)

“Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” the IMF’s Chief Economist Gita Gopinath said in a blog post. There remains tremendous uncertainty and prospects vary greatly across countries.”

The world has seen surging numbers of Covid-19 infections and deaths over the past few months, as new variants of the coronavirus have spread rapidly. These have been described as more infectious and are potentially deadlier than the original strain. As a result, many countries have stepped up their social restrictions, which has inflicted further economic pain.

On the other hand, the United States is set to grow more than expected this year, according to the IMF. The Fund revised its GDP forecast upward by 2 percentage points on the back of strong momentum in the second part of 2020 and additional fiscal support. GDP is now seen at 5.1% this year.

Looking at emerging markets, China is set to grow above 8% this year, the IMF said. “China returned to its pre-pandemic projected level in the fourth quarter of 2020, ahead of all large economies. The United States is projected to surpass its pre-Covid levels this year, well ahead of the euro area,” Gopinath said on Tuesday. The IMF reiterated that governments will need to keep supporting their economies via fiscal stimulus in order to bolster economic recovery.

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Valerie Mai