The global economy is projected to grow 5.9% in 2021 and 4.9% in 2022, the International Monetary Fund (IMF) has forecast in its latest World Economic Outlook (WEO).
This is a 0.1 percentage point lower for 2021 than in the July 2021 World Economic Outlook (WEO) update.
The downward revision for 2021 reflects a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics.
The report said this is partially offset by stronger near-term prospects among some commodity-exporting emerging markets and developing economies. Employment is generally expected to continue lagging behind the recovery in output.
“Beyond 2022 global growth is projected to moderate to about 3.3% over the medium term. Advanced economy output is forecast to exceed pre-pandemic medium-term projections—largely reflecting sizable anticipated further policy support in the United States that includes measures to increase potential.
“By contrast, persistent output losses are anticipated for the emerging market and developing economy group due to slower vaccine rollouts and generally less policy support compared to advanced economies.”
According to the report, headline inflation rates have increased rapidly in the United States and in some emerging markets and developing economies.
“In most cases, rising inflation reflects pandemic-related supply-demand mismatches and higher commodity prices compared to their low base from a year ago.
“For the most part, price pressures are expected to subside in 2022. In some emerging market and developing economies, price pressures are expected to persist because of elevated food prices, lagged effects of higher oil prices, and exchange rate depreciation lifting the prices of imported goods.”
“However, great uncertainty surrounds inflation prospects—primarily stemming from the path of the pandemic, the duration of supply disruptions, and how inflation expectations may evolve in this environment,” the report added.
Overall, the balance of risks for growth is tilted to the downside. The major source of concern is that more aggressive SARS-CoV-2 variants could emerge before widespread vaccination is reached.
The report said, inflation risks are skewed to the upside and could materialize if pandemic-induced supply-demand mismatches continue longer than expected, leading to more sustained price pressures and rising inflation expectations that prompt a faster than-anticipated monetary normalization in advanced economies.