IMF lowers U.S. economic growth forecast for 2021 from 7% to 6%

The International Monetary Fund is slightly lowering its outlook for a global recovery from the pandemic recession, reflecting continued supply chain disruptions in industrialized countries and deadly disparities in immunization rates between rich and poor countries.

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  • International Monetary Fund slightly lowers outlook for global recovery after pandemic recession
  • In its latest World Economic Outlook, the IMF forecasts global growth this year of 5.9%, compared to its July projection of 6%
  • For the United States, the IMF forecasts 6% growth for 2021, below its July forecast of 7%
  • The downward revision reflects a slowdown in economic activity resulting from an increase in COVID-19 cases and a production delay caused by supply shortages and resulting acceleration in inflation

In its latest World Economic Outlook published Tuesday, the IMF forecasts global growth this year of 5.9%, against its projection in July of 6%.

For the United States, the world’s largest economy, the IMF forecasts growth of 6% for 2021, below its July forecast of 7%. The downward revision reflects a slowdown in economic activity resulting from an increase in COVID-19 cases and a production delay caused by supply shortages and the resulting acceleration in inflation.

The IMF predicts that for all of the world’s advanced economies, growth will rise to 5.2% this year, against a meager expected gain of 3% for low-income developing countries.

“The dangerous divergence in economic prospects between countries,” the IMF said, “remains a major concern.”

The MMF expects total output in advanced economies to recoup losses suffered during the pandemic by 2022 and exceed their pre-pandemic growth path by 2024.

But in emerging and developing countries outside of China, the IMF warns, output will remain estimated 5.5% below the output growth path the IMF predicted before the pandemic hit in March. from last year. This deterioration poses a serious threat to the standard of living in these countries, said the monetary fund.

The IMF attributed this economic discrepancy to large disparities in access to vaccines between rich and low-income countries. He said the outlook for the poorest countries had “darkened considerably”, reflecting the increase in cases of the delta variant which has raised the death toll from COVID worldwide to nearly 5 million.

While nearly 60 percent of the population in advanced economies are fully immunized, only about 4% of the population in the poorest countries are.

Along with lagging immunization levels, poorer countries face headwinds linked to spike in inflation, with food prices rising the most in low-income countries, the IMF said.

The 5.9% increase in world production forecast in the IMF’s outlook would represent a huge gain after a 3.1% drop in production due to last year’s pandemic. For 2022, the IMF forecasts an expansion of 4.9%, unchanged from its forecast for July.

The 6% gain in US growth this year follows a sharp 3.4% contraction in 2020. The IMF expects solid US growth of 5.2% in 2022. For the 19 countries that use the euro, the IMF forecasts an expansion of 5% this year and 4.3% in 2022.

China, the world’s second-largest economy, is expected to grow 8% this year, down slightly from the IMF forecast of 8.1% in July, with growth of 5.6% in 2022.

The new World Economic Outlook has been prepared for this week’s fall meetings of the IMF, made up of 190 countries, and its sister lending organization, the World Bank, as well as finance ministers and presidents of central banks of the Group of 20 major industrial countries. It was released hours after the IMF expressed confidence in its managing director, Kristalina Georgieva, in response to allegations that while she was a senior World Bank official, she and others lobbied on staff to change the ranking of companies in an attempt to appease China.

The IMF’s 24-member board said in a statement that a review it conducted “did not conclusively show” that Georgieva played an inappropriate role in the situation.

“Having considered all the evidence presented, the Board of Directors reaffirms its full confidence in the leadership of the Chief Executive Officer and his ability to continue to perform his duties effectively,” he said.

Among the items on the agenda for this week’s meetings will be efforts to persuade rich countries to keep their promises to increase the level of vaccines for poor countries as well as a discussion among the countries of the G -20 on a global deal just announced for a 15% minimum tax on corporate profits. Once the deal has been reviewed by G-20 finance officials, it is expected to be approved at a summit of G-20 leaders in Rome.

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