The IMF said the “unprecedented political response” to the pandemic means that “recession is likely to leave less scars than the global financial crisis of 2008.” The group estimates that global production fell 3.3% in 2020, while the US economy fell 3.5%.
The IMF expects that the spread of the coronavirus vaccine and the massive government stimulus will combine this year to produce the fastest annual growth rate in the United States since 1984 under President Ronald Reagan. But many other countries will have to wait until 2022 or 2023 to regain all the production lost during the pandemic. According to the IMF, global output growth will slow to 4.4% next year.
“Multispeed recovery is under way in all regions and across income groups, linked to strong differences in the pace of vaccine rollout, the extent of economic policy support and structural factors such as dependence on tourism,” said Gita Gopinath, director of research at the IMF. . “The divergent recovery pathways are likely to create significantly larger gaps in living standards between developing countries and others.”
But some nations in Asia will still surpass the United States. The IMF expects China, which was the only major economy to avoid recession last year, to grow 8.4% by 2021 – much stronger than the country’s official forecast of more than 6%. Production in India will expand 12.5% in the fiscal year to March 2022.
The IMF continued to credit government stimulus and vaccine rollout for stronger growth projections. It said consumer prices could be volatile, however it does not expect high inflation levels to take root due to weak wage growth and unemployment.
Nevertheless, the IMF warned that a “high degree of uncertainty surrounds” its projections, reflecting the wide range of potential coronavirus developments. “Greater advances in vaccinations could raise the prognosis, while new virus variants avoiding vaccines could lead to a sharp downgrade,” the group said in its report.
While advanced economies were hit harder than developing countries as a result of the global financial crisis in 2008, the IMF expects the opposite to be the case in the pandemic. The group also said that young people, women and lower skilled workers have been more likely to lose their jobs due to coronavirus.
“Once the health crisis is over, policy efforts can focus more on building resilient, inclusive and greener economies, both to strengthen the recovery and to increase potential output,” Gopinath said.