International Monetary Fund upgrades global growth outlook to 6% as Covid clouds clear

Darnell Taylor
April 6, 2021

The IMF said most emerging markets have large financing needs this year and are exposed to rollover risk, especially if domestic inflation rises or global long-term interest rates continue to rise.

In 2020 the current account deficit was 3.5%, up by 0.3 percentage points from the autumn report, while in 2022 it is projected to drop to 1.6%.

"Extraordinary policy measures have eased financial conditions and supported the economy, helping to contain financial stability risks", the International Monetary Fund (IMF) said in its Global Financial Stability report released ahead of the Spring meeting of the global lender and the World Bank.

The new growth projection is 1.0 per cent higher than the multilateral institution's 2021 forecast in January.

The government announced last week that the country's exports expanded for a sixth straight month in March, increasing 16.6 percent from a year earlier to $53.8 billion.

"The euro area is not expected to reach a pre-crisis level of output until the first half of 2022", she said, with 4.4 percent growth expected this year following the 6.6 percent contraction in 2020.

The global recovery is expected to be asynchronous and divergent between advanced and emerging market economies, the International Monetary Fund said on Tuesday, noting that policymakers should take early action and tighten selected macroprudential policy tools while avoiding a broad tightening of financial conditions.

The upward revision, Gopinath said, reflects improved external environment, with stronger global growth and US COVID-19 relief package, which have increased the demand for China's products.

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Since the pandemic began, the province has logged 367,602 COVID-19 infections, including 333,576 recoveries and 7,458 deaths. The government has abstained from introducing such an order due to its "tremendous ill effect on both children and adults".

Among emerging markets and developing economies, China was projected to grow this year at 8.4 per cent, she said. But according to Gopinath, the improved global outlook is mainly thanks to upgrades for advanced economies.

The IMF said that uneven recoveries are also occurring within countries as young and lower-skilled workers remain more heavily affected. The American economy is now forecast to grow 6.4% in 2021, compared to the 5.1% projection in January.

Gopinath told reporters that policymakers need to take a "tailored" approach in providing support, with policies well-calibrated to the stage of the pandemic, the strength of the economic recovery, and the structural characteristics of individual countries.

IMF Chief Economist Gita Gopinath said that the fund has been calling for worldwide cooperation on tax policy "for a long time", adding that different corporate tax rates around the world have fueled tax shifting and avoidance.

The report also said that the recovery in emerging markets is expected to be slower than in advanced economies - with significant divergence across countries - driven by the less supportive stance of central banks over the past few months, in response to higher commodity prices; higher domestic inflation; the improved economic outlook and higher U.S. rates.

The IMF said that the United Kingdom economy would outgrow the eurozone after its slump in 2020 but is unlikely to regain its pre-pandemic size until some time in 2022.

In 2021, consumer prices are expected to increase by 0.7%, compared to 0.8% projected in October.

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