IMF downgrades growth outlook for India
WASHINGTON: The International Monetary Fund (IMF) maintained its 6 per cent 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 pandemic.
The Fund has cut this year’s economic growth forecast for some Asia countries including India, as a spike in coronavirus cases from new variants and slow vaccinations cloud the region’s recovery prospects.
The downgrade, which contrasted with an upward revision in the IMF’s forecast for advanced nations, highlights the divergence emerging across countries on the pace of recovery from pandemic-induced strains.
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 on Tuesday.
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 per cent. 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 per cent 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.
“Close to 40 per cent of the population in advanced economies has been fully vaccinated, compared with 11 per cent 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 per cent in 2021 and 4.9 per cent in 2022 – up 0.6 and 1.4 percentage points, respectively, from the forecasts in April. The projections assume the US 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.
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.