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IMF ups forecasts for rich nations, dims outlook for developing world

WASHINGTON • The International Monetary Fund on Tuesday maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for a number of developing countries struggling with surging COVID-19 infections.

The divergence is based largely on better access to COVID-19 vaccines and continued fiscal support in advanced economies, while emerging markets face difficulties on both fronts, the IMF said in an update to its World Economic Outlook.

“Close to 40% of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries,” Gita Gopinath, the IMF’S chief economist, said in a statement accompanying the report.

“Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades,” she said.

The IMF significantly raised its forecasts for the United States, which it now expects to grow at 7.0% in 2021 and 4.9% in 2022 — up 0.6 and 1.4 percentage points, respectively, from the forecasts in April. The projections assume the U.S. Congress will approve President Joe Biden’s roughly $4 trillion in proposed infrastructure, education and family support spending largely as envisioned by the White

House.

Positive spillovers from the U.S. spending plans, along with expected progress in COVID-19 vaccination rates, are boosting the IMF’S 2022 global growth forecast to 4.9%, up 0.5 percentage point from April.

The Fund cut its 2021 growth forecast for India, which has struggled with a massive wave of infections this year, by three percentage points to 9.5%. It also reduced its 2021 forecast for China by 0.3 percentage point, citing a scaling back of public investment and overall fiscal support.

The IMF also forecast lower prospects for Indonesia, Malaysia, the Philippines, Thailand and Vietnam where recent waves of COVID-19 infections are weighing on activity. The Fund forecast that emerging Asia would grow 7.5% this year, down 1.1 percentage points from the April forecast.

Low-income countries saw a downgrade of 0.4 percentage point in their 2021 growth, with the Fund citing the slow rollout of vaccines as the main factor impeding their recovery.

The IMF said downside risks remain significant globally, including the potential for new, highly contagious coronavirus variants to lead to new restrictions on movement and reduced economic activity.

In one scenario affecting both emerging markets and advanced countries with high vaccine hesitancy, the Fund said 0.8 percentage point could be shaved from global GDP growth this year and in 2022.

BUSINESS

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2021-07-28T07:00:00.0000000Z

2021-07-28T07:00:00.0000000Z

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