The International Monetary Fund – IMF – has said it expects the world’s economic recovery will be stronger than it first projected after revising its forecasts for 2021 and 2022.
The IMF made the move to update its global forecasts after noting a sizable increase over its January expectations.
After noting a 3.3% contraction in the global economy throughout 2020, the IMF is forecasting a stronger recovery than first estimated, with growth figures of 6% for the world’s economy this year.
The IMF notes that the COVID-19 pandemic’s impact on 2020’s figures represented the largest economic dip during peacetime that the world has experienced since the Great Depression.
The IMF’s Chief Economist, Gita Gopinath said that government stimulus packages valued at more than $16 trillion prevented damages that could have been “at least three times as large.”
In the U.S., where just under $2 trillion of public funds have been spent on stimulus measures, the country is expected to post growth of 6.4%, more than 1.3% more than first anticipated.
For China, one of a select number of countries that were able to post growth figures throughout 2020, projections have risen to 8.4% growth in 2021.
The European Union is also set to expand at a rate of around 4.4% in 2021, beating the IMF’s original forecasts.
The UK is expected to rebound at around 5.3% this year, with 5.1% projected for 2021. Even with these gains, the UK is expected to reach pre-pandemic economic activity by late 2022.
“Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible,” the IMF’s Chief Economist, Gita Gopinath said.
“The outlook presents daunting challenges… and the potential for persistent economic damage from the crisis,” Gopinath warned, reiterating the importance of stimulus measures.
IMF Says Global Recovery is Stronger Than First Projected
The flipside of these projections being revised, however, is that the IMF is forecasting a further separation of the poverty barrier. Analysts say that the gains made in recent years to close the poverty gap are set to be reversed in the coming years.
Young people, as well as women in the workforce are particularly vulnerable, says the IMF, as they often work in areas of the economy that have been smashed by the pandemic like the hospitality and tourism industries.
In total, the IMF says that more than 95 million people have been added to the poverty line in 2020, and an additional 80 million are more ‘undernourished’ than before the pandemic.
The IMF’s Chief said that it’s imperative governments maintain support measures for the vulnerable.
“Without additional efforts to give all people a fair shot, cross-country gaps in living standards could widen significantly, and decades-long trends of global poverty reduction could reverse.”
Tackling the most serious aspects of inequality remains dependent on a quick rollout of the COVID-19 vaccine, adds the IMF’s Chief.
“Averting divergent outcomes will require, above all, resolving the health crisis everywhere,” Gopinath concluded.