William Malcolm

IMF Upgrades Global Economic Forecast

The International Monetary Fund (IMF) has upgraded the outlook for global economic growth next year to 4.9 percent, while expecting growth to be half a percentage point lower so far. He stated this in an update of his spring outlook. However, the fund warned that the economy is recovering unevenly, which he said is a result of poor vaccination practices against covid-19 in some countries. The monetary fund’s outlook for this year has remained unchanged and continues to count on 6% growth, which largely only erases last year’s record slump caused by the pandemic.

“Access to vaccines has emerged as a major turning point along which the recovery of the global economy is divided into two parts: countries that can look forward to further normalization of activities later this year, and those that will continue to face recurrent cases of infection, and However, recovery is uncertain even in countries where the incidence of the infection is now very low if the virus persists elsewhere, “the monetary fund said.

According to the fund, almost all developed economies belong to the first group of countries. On the contrary, the outlook for a large part of developing and young market economies is worse than in April.

The outlook for the Czech Republic is not updated. In the spring forecast, the Monetary Fund stated that the Czech economy will show growth in gross domestic product (GDP) by 4.2 percent this year and by 4.3 percent next year. At the beginning of July, the European Commission (EC) predicted growth for the Czech economy by 3.9 percent this year and by 4.5 percent next year. The Czech Ministry of Finance estimates this year’s economic growth at three percent, the Czech National Bank (CNB) at 1.2 percent.

According to the Monetary Fund, higher inflation in recent months, which has occurred mainly in the United States and some other developed countries, is largely a reaction to the easing of anti-epidemic measures. It should return to pre-pandemic levels next year. According to the fund, higher inflation will continue next year in some developing countries, where the pressure on food prices is rising and also the efforts of importers to reflect higher oil prices in costs.

The Monetary Fund warned that if inflation remained high for an extended period of time, the US Federal Reserve (Fed) and with it the central banks of other developed countries could reconsider its monetary policy. A preventive tightening of their monetary policy would then adversely affect the growth of young market economies, twice – once due to capital outflows and the second time due to tighter financial conditions.

IMF chief economist Gita Gopinath told a news conference after the outlook was announced that high inflation is primarily a matter for the United States. In some sectors, high inflation is increasing the pressure on wage growth, but this is not the case in general.

“Long-standing problems in supply chains and soaring housing prices are among the factors that can lead to persistently higher inflation,” Gopinath said.

The reduction in the amount of funding that the United States expects for infrastructure and social spending also poses a significant risk. Republicans and Democrats in Congress are still arguing over the shape of this program. The IMF estimates that the proposed expenditures will increase the growth of the US economy by 0.3 percentage points this year and by 1.1 percentage points next year.

Most recommendations were left unchanged by the IMF. He said governments should prioritize spending on health care, especially vaccination, support for poorer households and more vulnerable businesses, and invest more in education, training and productivity-enhancing projects. According to the fund, the transition to a low-carbon economy should also accelerate.

The United States in particular will perform significantly better than the spring outlook, with the fund improving its GDP growth outlook for this year to seven percent from the original estimate of 6.4 percent. The fund has a more favorable outlook for Mexico, for example, while India and China will grow more slowly than the spring outlook, but their growth rates will still be above average compared to other countries.

GDP growth in selected countries and regions of the world:

COUNTRY / AREA201920202021 *2022 *
World2.8-3.26.0 (6.0)4.9 (4.4)
Developed countries1.6-4.65.6 (5.1)4.4 (3.6)
USA2.2-3.57.0 (6.4)4.9 (3.5)
Eurozone1.3-6.54.6 (4.4)4.3 (3.8)
Germany0.6-4.83.6 (3.6)4.1 (3.4)
France1.8-8.05.8 (5.8)4.2 (4.2)
Italy0.3-8.94.9 (4.2)4.2 (3.6)
Spain2.0-10.86.2 (6.4)5.8 (4.7)
Japan0.0-4.72.8 (3.3)3.0 (2.5)
Great Britain1.4-9.87.0 (5.3)4.8 (5.1)
Canada1.9-5.36.3 (5.0)4.5 (4.7)
Young markets and developing countries3.7-2.16.3 (6.7)5.2 (5.0)
China6.02.38.1 (8.4)5.7 (5.6)
India4.0-7.39.5 (12.5)8.5 (6.9)
Young markets in Europe2.5-2.04.9 (4.4)3.6 (3.9)
Russia2.0-3.04.4 (3.8)3.1 (3.8)
Latin America and the Caribbean0.1-7.05.8 (4.6)3.2 (3.1)
Brazil1.4-4.15.3 (3.7)1.9 (2.6)
Mexico-0.2-8.36.3 (5.0)4.2 (3.0)
Middle East and Central Asia1.4-2.64.0 (3.7)3.7 (3.8)
Saudi Arabia0.3-4.12.4 (2.9)4.8 (4.0)
Sub-Saharan Africa3.2-1.83.4 (3.4)4.1 (4.0)