IMF: Successful vaccine drives spurring rich nations’ recoveries

Washington, Jul 27 (EFE).- The International Monetary Fund said Tuesday that high vaccination rates in wealthy countries will enable them to rebound strongly this year and next from the pandemic-triggered economic crisis.

But that financial institution, which left its 2021 forecast for global growth unchanged at 6 percent, lamented that unequal immunization drives worldwide will cause “widening gaps in the global recovery.”

In its latest World Economic Outlook Update, the IMF raised its growth projection for the world’s advanced economies but lowered its forecast for emerging market and developing countries, mainly due to a worsening situation in Asia.

Looking ahead to 2022, the IMF raised its global growth forecast to 4.9 percent – up from 4.4 percent in April – due primarily to expectations of stronger growth rates in rich countries.

“These revisions reflect to an important extent differences in pandemic developments as the delta variant takes over,” the Fund’s chief economist, Gita Gopinath, said in the report.

“Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries,” she said, urging greater solidarity on that front.

The IMF is projecting that the US economy will grow 7 percent this year – following a contraction of 3.5 percent in 2020 – and 4.9 percent in 2022.

The Fund is considerably more optimistic about 2022 growth in the world’s largest economy than in April, when the Fund forecast growth of 3.5 percent.

Part of the reason for the rosier assessment is fiscal support from President Joe Biden’s administration, which has proposed two multi-year spending packages equivalent to 18 percent of 2021 GDP: the American Families Plan ($2 trillion) and the American Jobs Plan ($2.3 trillion).

The Washington-based institution noted, however, that a great deal of uncertainty persists “given the uncharted nature of this recovery.”

While the IMF downplayed concerns about US consumer price increases, agreeing with the US Federal Reserve that they are likely temporary, it said continued supply disruptions and sharply rising housing prices could lead to persistently high inflation.

It added that the emergence of highly infectious virus variants could derail the recovery and cautioned that stimulus spending in the US may prove weaker than expected.

In the Euro Area, the IMF is forecasting growth of 4.6 percent in 2021 and 4.3 percent next year, up from its April projections for 4.4 percent and 3.8 percent growth, respectively.

Among the biggest economies of the eurozone, Spain – which has been particularly hard hit by the pandemic – is expected grow 6.2 percent this year and 5.8 percent in 2022.

France is forecast to grow 5.8 percent in 2021 and 4.2 percent next year, while Italy’s economy is expected to expand by 4.9 percent this year and 4.2 percent next year and Germany is projected to grow by 3.6 percent in 2021 and then 4.1 percent in 2022.

In nearly every case, those forecasts were unchanged from April or more bullish.

The IMF has grown more pessimistic, however, about the major Asian economies.

China is expected to grow 8.1 percent this year (down from 8.4 percent in April) and India is projected to grow only 9.5 percent (compared to 12.5 percent in the April forecast).

“Growth prospects in India have been downgraded following the severe second COVID wave during March-May and expected slow recovery in confidence from that setback,” the IMF report said. EFE

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