IMF projects 6% global growth, driven in part by U.S. GDP growth
The International Monetary Fund is projecting global growth of 6% in 2021, it said in an updated World Economic Outlook released Tuesday.
The projected growth is higher than the IMF last predicted — 5.5% in January. That is due, in large part, to financial stimulus from governments, said Gita Gopinath, chief economist at the IMF.
“Additional fiscal support in large economies, particularly the United States, has further improved the outlook,” Gopinath said at a press conference Tuesday. The $1.9 trillion American Rescue Plan put in place last month helped upgrade the global financial institution’s assessment of the American economy. The IMF is now projecting 6.4% growth in the U.S. in 2021 and 3.5% growth in 2022.
“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,” she said. In the last several years, annual GDP in the U.S. has been around 2%.
But the headline 6% number does not apply to all countries. Gopinath warned that “recoveries are also diverging dangerously across and within countries as economies with slower vaccine rollout, more limited policy support and [that are] more reliant on tourism do less well.”
The IMF is projecting “low-income developing countries” will grow at 4.3% in 2021.
The upgraded projection for global growth is mainly due to an upgrade in projected growth for advanced economies — particularly due to a sizable upgrade in the U.S.’s growth, Gopinath said.
While there was a historic global contraction of -3.3% in 2020, Gopinath said, the financial collapse could have been three times worse if there had not been swift policy action and financial support. Because the worst was averted, medium-term losses are expected to be smaller, though still substantial, than after the 2008 global financial crisis.
“However, unlike after the 2008 crisis, this time, it is emerging markets and low-income countries that are expected to suffer the greatest scarring, given their more limited policy space,” Gopinath said.
Divergent recoveries are likely to increase gaps in standards of living, she said. An additional 95 million people are estimated to have entered into the rank of “extreme poor” — defined as making less than $1.90 per day — in 2020, Gopinath said.
A tailored policy approach is needed as economies recover at different speeds, she said.
“Right now, the emphasis should be on escaping the health crisis by prioritizing health care spending on vaccinations, treatments [and] health care infrastructure,” Gopinath said. “Fiscal support should be well-targeted to affected households and firms. And monetary policy should remain accommodative while proactively addressing financial stability risks.”
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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