The pandemic continues to slow the global economic recovery, warns the IMF

The International Monetary Fund (IMF) warned on Tuesday that the persistence of the covid-19 pandemic and the uneven distribution of vaccines continue to slow the global economic recovery and worsen the outlook for developing countries, including those in Latin America.

Global growth for 2021 is projected at 5.9%, up from 6% estimated in July, a decline "marginal", explained the IMF in its update of the quarterly report "World economy perspectives" (WEO in English).

But those figures mask big setbacks in some nations, warned IMF chief economist Gita Gopinath, noting that "the outlook for the group of low-income developing countries has darkened considerably due to worsening pandemic dynamics".

Added to the wave of infections of the delta variant of the coronavirus is a markedly lower vaccination rate in developing countries.

About 58% of the population in advanced economies is already fully immunized, compared to 36% in emerging economies and less than 5% in poor countries, underlines the IMF, which publishes its forecasts in the framework of its meetings Annuals with the World Bank this week in Washington.

Another global challenge is logistics bottlenecks that have thrown global supply chains out of sync, leading to blockages at ports, shortages of a variety of materials, and rising export costs.

Cuts for the US, Brazil and Mexico

As a result, the IMF lowered the 2021 growth forecast for the world’s largest economy to 6%, down from 7% anticipated in July. But he revised it up for 2022, to 5.2%, taking into account the pharaonic spending projects planned by Joe’s government.Biden, for several billion dollars.

On the contrary, the Fund revised up its growth forecast for 2021 for the euro zone (+0.4 points, to 5%).

But here, again, the disparities are large, with an increase in its growth estimate for France (+0.5 points to 6.3%), thanks to accelerating the vaccination of its population, and a cut for Germany, suffering from the shortage of semiconductors (-0.5 points to 3.1%).

China, the second economic power in the world and where the pandemic began at the end of 2019, will continue to drive global growth (-0.1 points to 8%) along with the United States and India (9.5%, unchanged), said the IMF.

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For Latin America and the Caribbean, a region highly affected by the pandemic, the Fund improved its growth forecast for this year (+0.5 points to 6.3%), after a severe recession registered in 2020 (-7% compared to -3.1% worldwide).

But it cut its projection for Brazil and Mexico, the two main economies in the region, estimating a GDP expansion of 5.2% and 6.2%, respectively, in both cases 0.1 percentage points less than previously forecast.

For 2022, the IMF maintained its estimate of global growth at 4.9%.

All these forecasts, however, remain very uncertain, Gopinath said, recalling that they are based in particular on a vaccination target of 40% of the world population by the end of this year and 70% for the first half of 2022.

– "Dangerous divergence" –

For Gopinath, it is very clear that "the pandemic ends nowhere until it ends everywhere".

A prolonged recession "could reduce global GDP by a cumulative $ 5.3 trillion over the next five years", he alerted.

For the IMF chief economist, the biggest concern is the "dangerous divergence" on the economic outlook between countries.

The GDP of advanced economies should return to its pre-pandemic trajectory in 2022.

But the GDP of emerging markets and developing economies (excluding China) is expected to remain 5.5% below pre-pandemic forecasts in 2024, bringing "a significant decrease in the improvement of the standard of living" of these populations.

What’s more, "Food prices have risen the most in low-income countries where food insecurity is most acute, increasing the burden on the poorest households and the risk of social unrest"Gopinath pointed out.

Still, the IMF estimates that inflation will return to pre-pandemic levels by the middle of next year, in both advanced and emerging economies.

For the institution, the absolute priority remains to control the pandemic.

"The global community must redouble its efforts to ensure equitable access to vaccines for all countries, overcome doubts about vaccines when there is an adequate supply, and ensure better economic prospects for all"Gopinath concluded.


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