The International Monetary Fund (IMF) has maintained its forecasts for global economic growth at 6 percent in 2021 before slowing down to 4.9 percent in 2022, driven by the ongoing pressure caused by the COVID-19 pandemic and its associated implications, according to the IMF’s updated report on the global economic outlook released on Tuesday.
The report includes the IMF’s updated projections for the global economy since the launch of the previous report in April.
Forecasts for emerging, developing countries revised down
On the other hand, the IMF has downgraded its forecasts for emerging markets’ and developing economies’ economic outlook by 0.4 percent in 2021 compared to April’s projections, mainly because of growth markdowns for emerging Asian economies owing to the recent infection waves.
The report also expected inflation in this group to remain elevated into 2022 as a result of the continued food price pressures and the lagged passthrough from higher oil prices for importers.
The IMF’s 2021 forecast for sub-Saharan Africa is unchanged relative to the fund’s April projections, with an upgrade for South Africa following strong positive signs in the first quarter offset by downward revisions in other countries.
The report said that the worsening pandemic developments in sub-Saharan Africa are expected to weigh on the region’s recovery.
For low-income developing countries, the IMF revised down their outlook in 2021 by 0.4 percent owing to the slow rollout of vaccines as the main factor weighing on the recovery.
The IMF also estimated that these countries will require close to $200 billion in spending to combat the pandemic and an additional $250 billion to regain their pre-pandemic economic levels.
Global trade to grow in 2021
In terms of global trade, the report projected it to grow by 9.7 percent in 2021, but to moderate to 7 percent in 2022 despite the near-term supply disruptions.
“The merchandise trade recovery is set to broaden after being initially concentrated in pandemic-related purchases, consumer durables, and medical equipment. Services trade is expected to recover more slowly, consistent with subdued cross-border travel until virus transmission declines to low levels everywhere,” the report explained.
Global debt levels on rise
Touching upon the elevated debt levels, the report revealed that the global government debt reached an unprecedented level of close to 100 percent of global GDP in 2020, expecting it to remain around that level in 2021 and 2022.
On the other hand, the projected average global fiscal deficit has declined since April’s report by 0.5 percent to post 8.8 percent of GDP in 2021.
On the situation in emerging economies, the report projected fiscal deficit in these countries to decline to 7.1 percent of GDP –0.5 percentage point smaller than in April’s report, while expecting government debt to rise to 65.1 percent in 2021.
$16.5 tln dedicated to fight COVID-19 as of July
The report unveiled that the fiscal measures announced globally to fight the pandemic are estimated at $16.5 trillion as of early July 2021.
The report said that fiscal policies globally should continue to prioritise health spending, including on vaccine production, distribution infrastructure, personnel, and public health campaigns to boost take-up.
“In emerging markets and developing economies with more limited fiscal space, reorienting spending away from untargeted subsidies and recurrent expenditures and towards health, social, and infrastructure outlays can help create some of the needed room. But many countries, particularly low-income developing countries confronting pandemic-related and broader development spending needs with limited domestic revenue sources, will need strong international support,” the report elaborated.
The report did not include specific projections for the Egyptian economy, however, the latest IMF’s report on the completion of the country’s stand-by agreement (SBA) programme — issued during July –expected Egypt’s real GDP growth to increase by 5.2 percent in FY2021/2022 — up from 2.8 percent in FY2020/2021 — before rebounding slightly in FY2022/2023 to reach 5.6 percent, which is the same percentage recorded in FY2019/2020 prior to the outbreak of the pandemic.
In April, the IMF expected the global economy to grow by 6 percent in 2021, moderating to 4.4 percent in 2022, after an estimated contraction of –3.3 percent in 2020.