According to the IMF, most advanced economies will emerge from the coronavirus crisis with little lasting damage, thanks to the relatively rapid roll-out of vaccines and their willingness to significantly increase government spending and borrowing.
The likely success in controlling the pandemic’s economic impact will not be repeated in emerging economies, highlighting the divergence in economic fortunes, the fund said.
Even with several fortunes, the global economic outlook had improved significantly from the fund’s earlier forecast at the start of this year, it said Tuesday, pushing up its expectations for nearly all countries.
The global economy will experience two years of rapid growth of 6 percent and 4.4 percent in 2021 and 2022, the IMF predicts. It has also revised down the estimated size of the contraction in global production following the arrival of the pandemic last year.
The fund’s projections suggest that the pandemic’s economic legacy will be nothing like the financial crisis of 2008-2009, which left countries hungover from sluggish growth for a decade afterward.
By 2024, advanced economies will produce about 1 percent less output than their pre-pandemic growth path, according to the IMF’s forecasts. In contrast, they suffered a gap of more than 10 percent after the 2008-2009 recession.
Overall, the economic impact of the pandemic is “much smaller than the [2008-09] global financial crisis, ” said Gita Gopinath, the fund’s chief economist, adding that advanced economies [economic] scars and [in] The United States. [there is] effectively no scars ”.
The IMF has revised its forecast for US growth in 2021 upwards by 1.3 percentage points from its earlier projections in January. Canada’s projection was up 1.4 percentage points, Italy by 1.2 percentage points and the UK by 0.8 percentage points.
The fund was particularly optimistic about the prospects for a rapid US recovery without inflationary pressures. Gopinath said, “The US is really the only major economy of which [economic output] for 2022 is expected to be higher than what it would have been without this pandemic. “
However, the IMF noted that the economic and social pain of the crisis had hit certain countries and groups of people within countries much harder than others. Parts of Europe dealing with another wave of coronavirus will likely take longer to recover, but the IMF was optimistic that the EU would overtake other advanced economies such as the US in a few years.
By 2024, the IMF expects that even many of these lagging European economies will have almost returned to their pre-pandemic growth path.
This is largely because advanced countries and their companies are much more resilient to lockdowns than the fund previously expected.
The IMF, on the other hand, expects the crisis to be a continued drag on emerging economies, where, with the exception of China, economic output is projected to be nearly 8 percent in 2024 below what the IMF expected before the pandemic.
Countries most at risk of a slow recovery are emerging economies with little access to Covid-19 vaccines, countries with weak public finances and heavily dependent on tourism, the IMF said.
The blow to emerging economies in the short term will be exacerbated by the disruption of education during the pandemic, which has taken what the fund described as a “heavy toll” on education in poorer countries because they have limited capacity to operate online. to teach.
Gopinath said there was little cause for immediate concern about the unprecedented levels of fiscal stimulus on both sides of the Atlantic causing a rise in inflation, as global forces are likely to keep price increases in check and there is no sign yet that central banks or governments would lose control.
But it highlighted the risk that the US would have to lead the world in tightening monetary policy quickly if inflationary pressures soar. This could hit emerging markets particularly hard by stimulating capital flight to developed economies.
However, there is no sign so far that US President Joe Biden’s $ 1.9 billion stimulus has destabilized international markets, Gopinath said, calling that an encouraging sign.