Global economy is projected to grow reaching 5.5 percent in 2021 and 4.2 percent in 2022 following an estimated 3.5 percent contraction in 2020 due to the COVID-19 pandemic, according to the International Monetary Fund (IMF).
This came within the 2021 World Economic Outlook Update Report that the IMF released on Tuesday.
The estimate for 2020 is 0.9 percent higher than projected in the IMF’s October forecasts, which reflects the stronger than expected recovery on average across regions in the second half of 2021, according to the report.
For 2021, the IMF raised its forecast for global growth by 0.3 percent thanks to the additional policy support in a few large economies and the expectations of vaccine-powered strengthening of activity later in 2021.
IMF said that the upgrade is particularly vast for the advanced economy countries reflecting additional fiscal support, mostly in the United States and Japan along with expectations of earlier widespread vaccine availability compared to the emerging market and developing economy countries.
The IMF also projected global trade to grow up to 8 percent in 2021, expecting it to moderate to 6 percent in 2022.
Services trade is expected to recover more slowly than merchandise volumes, which is consistent with subdued cross-border tourism and business travel until transmission declines everywhere, according to the report.
On global inflation, the IMF expected it to remain sluggish during 2021–2022 despite the anticipated recovery in the same years driven by the output gaps that are not expected close until after 2022.
Also according to the report, addressing the emerging markets and developing economies' economic outlook, the report noted that they are projected to experience diverging recovery paths. In emerging markets and developing economies inflation is projected just over 4 percent, which is lower than the historical average of the group.
Global activity is also expected to remain well below the pre-COVID levels, specially that the strength of the projected recovery varies across countries, depending on the severity of the health crisis, the extent of domestic disruptions to activity, the exposure to cross-border spillovers, and the effectiveness of policy support to limit persistent damage caused by the pandemic.
Oil exporters and tourism-based economies within the this category face particularly difficult prospects considering the expected slow normalization of cross-border travel and the subdued outlook for oil prices, according to the report.
Moreover, the report expected oil prices to rise in 2021 just over 20 percent from the low base of 2020, but will still remain well below their average for 2019.
In addition, non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021, according to the report.
On the other hand, the report also estimated that 90 million people are likely to fall below the extreme poverty threshold during 2020–2021 due to the pandemic, stressing that vulnerabilities, economic structure, and pre-crisis growth trends, as well as the severity of the pandemic and the size of the policy response to combat will shape recovery profiles among regions.
Dealing with the ongoing challenges, the report said that policy actions should ensure effective support until recovery is firmly underway, with a focus on advancing key imperatives of increasing potential output, ensuring participatory growth that benefits all countries, and accelerating the transition to lower carbon dependence.
It also stressed that robust multilateral cooperation is required to control the pandemic globally.
In this regard, the report underscored the necessity of supporting funding for the COVAX facility to accelerate access to vaccines for all countries, ensuring universal distribution of vaccines, and facilitating access to therapeutics at affordable prices for all.
“Many countries, particularly low-income developing economies, entered the crisis with high debt that is set to rise further during the pandemic. The global community will need to continue working closely to ensure adequate access to international liquidity for these countries. Where sovereign debt is unsustainable, eligible countries should work with creditors to restructure their debt under the Common Framework agreed by the G20," said the report.
The report also expected the local transmission of COVID-19 to be brought to low levels globally by the end of 2021 due to the growing vaccine availability, improved therapies, testing, and tracing, while some regions will get to low local transmission sooner than others depending on country's specific conditions.