The World Economic Outlook April 2021 predicted the global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO.
The World Economic Outlook April 2021 Predicts Global Growth At 6 percent in 2021
New Delhi (ABC Live India): The IMF on
April 6, 2021 released World Economic Outlook 2021, the Outlook predicted
that the global prospects remains highly uncertain one year into the pandemic.
New virus mutations and the accumulating human toll raise concerns, even as
growing vaccine coverage lifts sentiment. Economic recoveries are diverging
across countries and sectors, reflecting variation in pandemic-induced
disruptions and the extent of policy support.
The outlook depends not just on the
outcome of the battle between the virus and vaccines—it also hinges on how
effectively economic policies deployed under high uncertainty can limit lasting
damage from this unprecedented crisis.
Global growth is projected at 6
percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021
and 2022 are stronger than in the October 2020 WEO. The upward revision
reflects additional fiscal support in a few large economies, the anticipated
vaccine-powered recovery in the second half of 2021, and continued adaptation
of economic activity to subdued mobility.
High uncertainty surrounds this
outlook, related to the path of the pandemic, the effectiveness of policy
support to provide a bridge to vaccine-powered normalization, and the evolution
of financial conditions.
One year into the COVID-19 pandemic,
the accumulating human toll continues to raise concerns, even as growing
vaccine coverage lifts sentiment. High uncertainty surrounds the global
economic outlook, primarily related to the path of the pandemic.
The contraction of activity in 2020
was unprecedented in living memory in its speed and synchronized nature. But it
could have been a lot worse. Although difficult to pin down precisely, IMF
staff estimates suggest that the contraction could have been three times as
large if not for extraordinary policy support.
Much remains to be done to beat back
the pandemic and avoid divergence in income per capita across economies and
persistent increases in inequality within countries. Improved outlook:
After an estimated contraction of –3.3
percent in 2020, the global economy is projected to grow at 6 percent in 2021,
moderating to 4.4 percent in 2022. The contraction for 2020 is 1.1 percentage
points smaller than projected in the October 2020 World Economic Outlook (WEO),
reflecting the higher-than-expected growth outturns in the second half of the
year for most regions after lock<!--[if !supportFootnotes]--><!--[endif]-->downs were eased and as economies adapted to new
ways of working.
The projections for 2021 and 2022 are
0.8 percentage point and 0.2 percentage point stronger than in the October 2020
WEO, reflecting additional fiscal support in a few large economies and the
anticipated vaccine-powered recovery in the second half of the year.
Global growth is expected to moderate to 3.3
percent over the medium term—reflecting projected damage to supply potential
and forces that predate the pandemic, including aging-related slower labour
force growth in advanced economies and some emerging market economies.
Thanks to unprecedented policy
response, the COVID-19 recession is likely to leave smaller scars than the 2008
global financial crisis.
However, emerging market economies and
low-income developing countries have been hit harder and are expected to suffer
more significant medium-term losses. Divergent impacts: Output losses have been
particularly large for countries that rely on tourism and commodity exports and
for those with limited policy space to respond. Many of these countries entered
the crisis in a precarious fiscal situation and with less capacity to mount
major health care policy responses or support livelihoods.
The projected recovery follows a
severe contraction that has had particularly adverse employment and earnings
impacts on certain groups. Youth, women, workers with relatively lower educational
attainment, and the informally employed have generally been hit hardest. Income
inequality is likely to increase significantly because of the pandemic. Close
to 95 million more people are estimated to have fallen below the threshold of
extreme poverty in 2020 compared with pre-pandemic projections.
Moreover, learning losses have been
more severe in low-income and developing countries, which have found it harder
to cope with school closures, and especially for girls and students from
low-income households. Unequal setbacks to schooling could further amplify
income inequality. High uncertainty surrounds the global outlook.
Future developments will depend on the
path of the health crisis, including whether the new COVID-19 strains prove
susceptible to vaccines or they prolong the pandemic; the effectiveness of
policy actions to limit persistent economic damage (scarring); the evolution of
financial conditions and commodity prices; and the adjustment capacity of the
The ebb and flow of these drivers and
their interaction with country-specific characteristics will determine the pace
of the recovery and the extent of medium-term scarring across countries
(Chapter 2). In many aspects, this crisis is unique. In certain countries,
policy support and lack of spending opportunities have led to large increases
in savings that could be unleashed very quickly should uncertainty dissipate.
At the same time, it is unclear how much of
these savings will be spent, given the deterioration of many firms’ and
households’ balance sheets (particularly among those with a high propensity to
consume out of income) and the expiration of loan repayment moratoria.
In sum, risks are assessed as balanced in the short
term, but tilted to the upside later on. Considering the large uncertainty
surrounding the outlook, policymakers should prioritize policies that would be
prudent, regardless of the state of the world that prevails—for instance,
strengthening social protection with wider eligibility for unemployment
insurance to cover the self-employed and informally employed (see Chapter 2 of
the April 2020 WEO); ensuring adequate resources for health care, early child<!--[if !supportFootnotes]--><!--[endif]-->hood development programs, education, and vocational
training; and investing in green infrastructure to hasten the transition to
lower carbon dependence.
Moreover, as discussed in Chapters 2
and 3, they should be prepared to flexibly adjust policy support, for example,
by shifting from lifelines to reallocation as the pandemic evolves, and linked
to improvements in activity, while they safeguard social spending and avoid
locking in inefficient spending outlays. It is important to anchor short-term
support in credible medium-term frameworks (see the April 2021 Fiscal Monitor).
Where elevated debt levels limit scope
for action, effort should also be directed at creating space through increased
revenue collection (fewer breaks, better coverage of registries, and switching
to well-designed value-added taxes), greater tax progressivity, and by reducing
wasteful subsidies. Policy priorities:
The factors shaping the appropriate
stance of policy vary by country, especially progress toward normalization.
Hence, countries will need to tailor their policy responses to the stage of the
pandemic, strength of the recovery, and structural characteristics of the
Once vaccination becomes widespread
and spare capacity in health care systems is generally restored to pre-COVID-19
levels, restrictions can begin to be lifted.
While the pandemic continues, policies
should first focus on escaping the crisis, prioritizing health care spending,
providing well-targeted fiscal support, and maintaining accommodative monetary
policy while monitoring financial stability risks.
Then, as the recovery progresses,
policy<!--[if !supportFootnotes]--><!--[endif]-->makers will need to limit long-term economic
scarring with an eye toward boosting productive capacity (for example, public
investment) and increasing incentives for an efficient allocation of productive
It is a delicate balance, especially
given the prevailing uncertainty. Therefore, when support is eventually scaled
back, it should be done in ways that avoid sudden cliffs (for instance,
gradually reducing the government’s share of wages covered under furlough and
short-time work programs while increasing hiring subsidies to enable
reallocation as needed).
All the while, long-term
challenges—boosting productivity, improving policy frameworks, and addressing
climate change—cannot be ignored. Differential recovery speeds across countries
may give rise to divergent policy stances, particularly if advanced economies
benefit sooner than others from wide vaccine coverage.
Clear forward guidance and
communication from advanced economy central banks is particularly crucial, and
not just for calibrating the appropriate domestic monetary accommodation. It
also vitally bears on external financial conditions in emerging markets and the
impact that divergent policy stances have on capital flows (Chapter 4).
Strong international cooperation is
vital for achieving these objectives and ensuring that emerging market
economies and low-income developing countries continue to narrow the gap
between their living standards and those of high-income countries.
On the health care front, this means
ensuring adequate worldwide vaccine production and universal distribution at
affordable prices—including through sufficient funding for the COVAX
facility—so that all countries can quickly and decisively beat back the
The international community also needs
to work together to ensure that financially constrained economies have adequate
access to international liquidity so that they can continue needed health care,
other social, and infrastructure spending required for development and
convergence to higher levels of income per capita.
Countries should also work closely to
redouble climate change mitigation efforts. Moreover, strong cooperation is
needed to resolve economic issues underlying trade and technology tensions (as well
as gaps in the rules-based multilateral trading system). Building on recent
advances in international tax policy, efforts should continue to focus on
limiting cross-border profit shifting, tax avoidance, and tax evasion.