The International Monetary Fund is now expecting a stronger economic recovery in 2021 as Covid-19 vaccine rollouts get underway, but it warns of “daunting challenges,” given the different rates of administering shots across the globe.
On Tuesday, the group said it expects the world economy to grow by 6 percent in 2021, up from its 5.5 percent forecast in January.
Looking further ahead, global GDP (gross domestic product) for 2022 is seen increasing by 4.4 percent, higher than an earlier estimate of 4.2 percent.
Unemployment in the United States is expected to fall to 5.8 percent this year and to 4.1 percent in 2022, the IMF projected.
“Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible,” Gita Gopinath, the IMF’s chief economist, said in the latest World Economic Outlook report.
The latest round of fiscal stimulus in the U.S., along with the vaccine rollouts across the world, have made the fund more confident about the global economy this year.
“Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis,” Gopinath said.
The IMF estimated a 5.1 percent GDP rate for advanced economies this year, with the United States growing at a pace of 6.4 percent in 2021.
Meanwhile, the forecast for emerging and developing economies is 6.7 percent in 2021, with India expected to grow as much as 12.5 percent.
“Within-country income inequality will likely increase because young workers and those with relatively lower skills remain more heavily affected in not only advanced but also emerging markets and developing economies,” Gopinath warned, while also adding that lower levels of female employment is exacerbating disparities too.
As a result, the IMF said that governments should continue to focus on “escaping the crisis” by providing fiscal support, including to their health care systems. In a second phase, “policymakers will need to limit long-term economic scarring” from the crisis and boost public investment, for instance.
“Without additional efforts to give all people a fair shot, cross-country gaps in living standards could widen significantly, and decades-long trends of global poverty reduction could reverse,” Gopinath warned.
The latest forecasts suggest the United States is well placed to experience a solid economic recovery in 2021, in contrast to what’s expected for most of the world, where many economies are likely to take longer to return to their pre-crisis levels.
The positive assessment for the U.S. is highly driven by President Joe Biden’s $1.9 trillion coronavirus rescue package, which entered into force last month.
As such, unemployment in the United States is expected to fall from 8.1 percent in 2020 to 5.8 percent this year and then again to 4.1 percent in 2022, according to the latest IMF projections.
In February, Treasury Secretary Janet Yellen said the U.S. could return to full employment in 2022. “There’s absolutely no reason why we should suffer through a long slow recovery,” she told CNN at the time.
The IMF’s latest forecasts confirm that the U.S. is on track to not only return but surpass its pre-Covid levels this year.
“Among advanced economies, the United States is expected to surpass its pre-Covid GDP level this year, while many others in the group will return to their pre-COVID levels only in 2022,” Gopinath said.