International Monetary Fund forecasts stronger recovery for world economy

IMF boosts eurozone’s growth forecast

The International Monetary Fund has raised its forecasts for both the USA and the global economies, crediting rapid COVID-19 vaccine rollouts and relief efforts.

Overall, the International Monetary Fund forecasts that the global economy will expand 6% this year, before slowing toward a 3% pace by 2026.

In 2020 the current account deficit was 3.5%, up by 0.3 percentage points from the autumn report, while in 2022 it is projected to drop to 1.6%.

"Thanks to unprecedented policy response, the Covid-19 recession is likely to leave smaller scars than the 2008 global financial crisis", the report read.

That's even more optimistic than the Bank of Canada's expectation for four per cent economic growth this year, though the central bank's last official estimate was made in January as COVID vaccines were just beginning to be administered.

The government announced last week that the country's exports expanded for a sixth straight month in March, increasing 16.6 percent from a year earlier to $53.8 billion.

IMF boosts eurozone’s growth forecast

The global economy is estimated to have contracted by 3.3% in 2020, and the International Monetary Fund expects this would have been three times worse without the "extraordinary" policy support rolled out by nations.

The report also highlighted the impact on the commercial real estate sector, which is subject to sector-specific shocks, as well as to economy-wide shocks, with the COVID-19 crisis representing a combination of both. Concerns about the credit quality of hard-hit borrowers and the profitability outlook are likely to weigh on the risk appetite of banks during the recovery, said the report. In a blog, she said the USA would grow by 6.4 per cent in 2021.

The report also said that the recovery in emerging markets is expected to be slower than in advanced economies - with significant divergence across countries - driven by the less supportive stance of central banks over the past few months, in response to higher commodity prices; higher domestic inflation; the improved economic outlook and higher United States rates.

The organization now expects the global economy to grow by 6% this year, up from 5.5% forecast in January. Countries will again encounter the obstacles they faced before the pandemic, including aging work forces in most rich countries and in China.

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. "Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis", she said in her foreword to the report. "However, emerging market economies and low-income developing countries have been hit harder and are expected to suffer more significant medium-term losses". "Close to 95 million more people are estimated to have fallen below the threshold of extreme poverty in 2020 compared to pre-pandemic projections", the report read.

Uneven recoveries are also occurring within countries as young and lower-skilled workers remain more heavily affected.

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