China and United States to power 6% global growth in 2021, International Monetary Fund says

Tuesday, 06 Apr, 2021

"This could cause inflated asset valuations to unwind in a disorderly manner, financial conditions to tighten sharply, and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies".

The 190-country lending agency said Tuesday that it expects the world economy to expand 6 per cent for 2021, up from the 5.5 per cent it had forecast in January.

Global recovery from the pandemic is expected to be asynchronous and uneven among advanced, emerging and frontier market economies as well as within regions, economies, sectors and firms.

Bringing in the two predicted recovery years, the UK's performance over 2020 to 2022 would be ahead of one of the G7 countries, Italy.

The latest World Economic Outlook - released at the start of the IMF's and World Bank's spring meetings - reflects a dramatic divergence between the outlook for the United States and much of the rest of the world courtesy of another US$1.9 trillion in pandemic relief spending recently enacted in Washington.

Government debt in emerging markets -excluding China- is expected to reach 61 percent of GDP in 2021 and gross financing needs are anticipated to remain elevated at 13 percent of GDP in 2021, coming off record levels in 2020, the International Monetary Fund (IMF) announced on Tuesday.

The IMF's projection is more sanguine compared to the 3 percent growth estimate by the Bank of Korea and the 3.2 percent growth forecast made by South Korea's Finance Ministry. In a blog post, Gopinath said the pandemic is yet to be defeated and virus cases are accelerating in many countries.

IMF boosts eurozone’s growth forecast
After a contraction of 8%, IMF projects 12.5% growth for India

"The worldwide community also needs to work together to ensure that financially constrained economies have adequate access to global 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", the IMF report said.

The IMF welcomed President Joe Biden's plan to focus on improving United States infrastructure as a way to boost the world's largest economy, a top fund economist said on Tuesday. This requires better targeted measures to leave space for prolonged support if needed. The path of the pandemic and the ability of the authorities to provide policy support will be important for that outcome. That is a process that has been accelerated as a result of the health crisis.

"Now, when it comes to the monetary and fiscal policies, we do think that there is already a lot of support in train", and some that "is not incorporated in our forecast" including the 750-billion-euro Next Generation EU fund.

But she is also concerned about how those recoveries are diverging.

The European Union says alongside the development partners community, it has been supporting Nepal in its green, resilient and inclusive recovery from the adverse impacts of the pandemic.

The new growth projection is 1.0 per cent higher than the multilateral institution's 2021 forecast in January. According to Johns Hopkins University's coronavirus tracker, the COVID-19 has so far infected 131,707,267 people and killed 2,859,868 people across the world since it first broke out in central China's Wuhan city in 2019.