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IMF lifts outlook for global and U.S. growth

MarketWatch logo MarketWatch 4 days ago Greg Robb
a group of people sitting at a table © Justin Sullivan/Getty Images

The International Monetary Fund on Tuesday raised its global economic outlook, citing a much brighter picture for the U.S. economy.

The IMF raised its U.S. outlook sharply in 2021 to 6.4% this year from 5.1%. The U.S. should see solid 4.4% growth in 2022.

The Fed sees the U.S. economy growing at a 6.5% pace this year but with a steeper slowdown to a 3.3% growth rate in 2022.

The IMF raised its estimate for global growth to 6% this year and 4.4% next year. This represents an upgrade of 0.5% for 2021 and 0.2% for 2022 from what it forecast in January.

Gita Gopinath, the IMF’s economic counsellor, said “a way out of this health and economic crisis is increasingly visible.”

Losses over the medium term from the pandemic are likely to be smaller than in the aftermath of the financial crisis. But this time, low-income countries and emerging markets will suffer more compared with the fallout from the Great Recession.

Area 2020 Growth 2021 projection Prior 2021 estimate 2022 projection
World output -3.3% 6% 5.5% 4.4%
U.S. -3.5% 6.4% 5.1% 3.5%
Eurozone -6.6% 4.4% 4.2% 3.8%
Japan -4.8% 3.3% 3.1% 2.5%
U.K. -9.9% 5.3% 4.5% 5.1%
Canada -5.4% 5% 3.6% 4.7%
China 2.3% 8.4% 8.1% 5.6%
India -8% 12.5% 11.5% 6.9%
Brazil -4.1% 3.7% 3.6% 2.6%
Russia -3.1% 3.8% 3% 3.8%

The only region to see a downgrade in growth this year were the “ASEAN-5” —Indonesia, Malaysia, Philippines, Thailand and Vietnam. Projected growth for these five nations combined in 2021 was cut to 4.9% from a previous forecast of 5.2%.

Gopinath cautioned the forecast is highly uncertain and much still depends on the race between the COVID-19 virus and vaccines.

Rising long-term interest rates in the U.S. won’t pose difficulties for other countries unless markets get a sense that Federal Reserve policy needs to tighten abruptly.

Prominent central banks will need to provide clear communication as they begin to tighten monetary policy, the IMF said.

The IMF said inflation pressure would remain contained in most countries.

Commodity prices, such as oil are expected to firm up further in months ahead. Headline inflation could turn volatile in coming months. But this volatility should be short-lived.


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