The International Monetary Fund (IMF) places a downward revision for global economic growth in 2021
Produced twice a year, the second World Economic Outlook by the IMF was released this morning with the organization now forecasting global economic growth of 5.9% in 2021 and 4.9% in 2022, down 0.1% from the July 2021 forecast. From an economic and health viewpoint, near-term fissures are anticipated to leave enduring impacts over the medium-term environment, particularly relating to supply chain disruptions in advanced economies and worsening COVID-19 conditions in emerging and developing economies where widespread vaccine availability lags the developed world. The group notes that “rising inflation reflects pandemic-related supply-demand mismatches and higher commodity prices compared to their low base from a year ago.” The expectation is that inflationary pressures will be path-dependent based on the ongoing pandemic and any new variants.
The IMF also found that even with muted employment rates and given the risk of lasting price increases, central banks will need to act swiftly to “get ahead of price pressures, even if that delays the employment recovery,” essentially warning that monetary policy may need to be tightened even with a lagging employment recovery. Going forward, it is paramount that central banks keep clear communication on policy to alleviate concerns in a somewhat uncertain recovery.