The International Monetary Fund (IMF) recently projected the global economy to grow at 6 per cent this year. For 2022, it raised the global growth forecast to 4.9 per cent from the earlier 4.4 per cent. Prospects for emerging market and developing economies have been marked down for 2021, especially for emerging Asia, by the IMF in an update to its World Economic Outlook (WEO).

By contrast, the forecast for advanced economies is revised up. These revisions reflect pandemic developments and changes in policy support.

The 0.5 percentage-point upgrade for 2022 derives largely from the forecast upgrade for advanced economies, particularly the United States, reflecting the anticipated legislation of additional fiscal support in the second half of 2021 and improved health metrics more broadly across the group.

“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalisation of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls,” it said.

Countries lagging in vaccination, such as India and Indonesia, would suffer the most among G20 economies, it said.

The cuts in economic growth forecasts for this year were high in case of India, Asean members and Saudi Arabia, while the projections for the UK, Italy and the US have been raised by 170 bps, 70 bps and 60 bps, respectively.

The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere, the multilateral institution said.

IMF also revised up its predictions of global trade volume growth by a sharp 130 basis points (bps) for 2021 to 9.7 per cent and 50 bps for 2022 to 7 per cent.

“Inflation is expected to return to its pre-pandemic ranges in most countries in 2022 once these disturbances work their way through prices, though uncertainty remains high,” it said.

However, IMF expected elevated inflation in some emerging market and developing economies, related in part to high food prices. Nevertheless, central banks “should generally look through transitory inflation pressures and avoid tightening until there is more clarity on underlying price dynamics,” it added.