IMF lowers global growth outlook as supply bottlenecks hobble pandemic recovery


WASHINGTON: Persistent supply chain disruptions and inflationary pressures are limiting the global economy’s recovery from the Covid-19 pandemic, the International Monetary Fund (IMF) said on Tuesday as it slashed growth prospects for the United States and others. major industrial powers.
In its World Economic Outlook, the IMF cut its 2021 global growth forecast at 5.9% from 6.0% forecast in July. It left a global growth forecast for 2022 unchanged at 4.9%.
“This modest headline revision, however, masks big downgrades for some countries,” the IMF said in the report, adding that worsening pandemic dynamics have clouded prospects for low-income developing economies, while rich countries struggle with supply disruptions.
The IMF said it expects high inflation to decline to pre-pandemic levels in 2022.
But IMF chief economist Gita Gopinath noted that the global lender is increasingly concerned about persistent inflation, saying: “Central banks must be prepared to act quickly if the risks of rising inflation expectations are become more important in this unexplored recovery. ”
Gopinath, speaking at a virtual press conference, said lawmakers should be “particularly vigilant” for signs that wage inflation is spreading more widely from certain sectors and whether rising house prices are helping to unpin. inflation expectations.
But he cautioned against comparisons to 1970s-style “stagflation,” noting that underlying demand was strong and problems were primarily on the supply side.
Global manufacturing activity has been affected by mismatches between supply and demand and a shortage of key components such as semiconductors, clogged ports and a lack of cargo containers, and a labor shortage, as global supply chains optimized for efficiency remain in disarray after pandemic-induced shutdowns last year. .
US growth slowdown
The United States is suffering the brunt of these effects, and the IMF cut its forecast for US growth for 2021 by a full percentage point, to 6.0%, from 7.0% in July, a level that was considered the strongest pace since 1984. .
US growth could contract further, the IMF said, because its forecasts assume that a deeply divided US Congress will approve President Joe Biden’s proposed infrastructure and $ 4 trillion worth of social spending over a decade.
Lawmakers are now trying to reach consensus on a smaller package, and the IMF said a significant reduction would reduce growth prospects for the United States and its trading partners.
The report, which was released at the beginning of the fall meetings of the IMF and the World Bank, also cut growth forecasts for other industrial economies. German growth fell by half a percentage point from the July forecast to 3.1%, while Japan’s growth fell 0.4 points to 2.4%.
The IMF’s forecast for UK growth this year fell just 0.2 points to 6.8%, giving it the fastest growth forecast among the G7 economies.
China’s growth forecast for 2021 was cut 0.1 point to 8.0% as the IMF cited a faster-than-expected reduction in public investment spending. India’s forecast was unchanged at 9.5%, but the outlook in other emerging Asian countries has diminished due to the worsening pandemic.
The IMF cut its forecast by 1.4 points for the “ASEAN-5” group of Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Some commodity-exporting countries, such as Nigeria and Saudi Arabia, experienced modest improvements in growth due to rising oil and commodity prices.
Vaccine Division
The report also warned of a dangerous divergence in economic outlook driven by “the large vaccine gap”, with low-income countries, where 96% of the population remains unvaccinated, facing slower growth for longer periods, more poverty and the prospect of anchored inflation expectations.
“An additional 65 million to 75 million people are estimated to be in extreme poverty in 2021 compared to pre-pandemic projections,” the report said, adding that low-income countries in much of Africa needed about 250 billion. dollars in additional expenses to fight Covid. 19 and regain its pre-pandemic growth path.
These countries are currently forecast to have cumulative production next year that will be 6.7% below pre-pandemic levels. Meanwhile, advanced economies will have 2022 output nearly 1% above pre-pandemic levels, the IMF said.

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