IMF revises global growth forecast by 0.5%

Global Gross Domestic Product will grow faster than expected in 2021, the International Monetary Fund said on Tuesday, revising its January projection up by 0.5 per cent points to 6 per cent.

The IMF made the projection in its ‘World Economic Outlook’ update released on Tuesday.

It projected Nigerian economy to grow to 2.5 per cent from 1.5 per cent announced in January, which is 1.0 per cent higher than its 2021 forecast in January.

The multilateral institution also projected sub-Saharan Africa’s growth to strengthen to 3.4 per cent in 2021, up by 0.2 per cent.

According to the IMF, the world’s two biggest economies, the United States and China, are likely to grow by 6.4 per cent and 8.4 per cent, respectively, in 2021.

“In our latest World Economic Outlook, we are now projecting a stronger recovery for the global economy compared with our January forecast, with growth projected to be 6 percent in 2021 (0.5 percentage point upgrade) and 4.4 percent in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3 percent in 2020,” the IMF said in a report on its official website.

The fund, however, warned that the future presents daunting challenges.

“The pandemic is yet to be defeated and virus cases are accelerating in many countries,” it stressed.

The IMF explained that the upgrades in global growth for 2021 and 2022 were mainly due to upgrades for advanced economies.

“This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic,” it said.

Other advanced economies, including the euro area, will also rebound this year but at a slower pace, according to the IMF.

While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023, IMF said.

But while “a way out of this health and economic crisis is increasingly visible,” according to IMF’s Gita Gopinath, “divergent recovery paths” will likely result in increased poverty in so-called emerging markets and low-income countries, which could struggle to recover.

Gopimath, who is the fund’s economic counsellor, estimated that while per-capita gross GDP in wealthier countries could fall by over 2 per cent by 2024, relative to pre-pandemic forecasts, the decline could top 5 per cent in poorer counterparts.

The IMF said the pandemic and related restrictions meant 95 million people could “have entered the ranks of the extreme poor in 2020,” after global GDP shrank by an estimated 3.3 per cent and left what the United Nations Conference on Trade and Development in March described as a $10trn hole in the global economy.

However, services trade “remains subdued,” the IMF said, with international travel at a near standstill since March 2020, causing particularly large losses in tourism-dependent countries.