Driven by mass vaccinations and enormous amounts of government support, the rebound from the Covid-19 pandemic will produce record economic growth, the International Monetary Fund said Tuesday in its latest forecast.
The global economy is now projected to grow at a rate of 6% in 2021, the IMF said, raising its estimate of 5.5% made in January. If the projection holds, it will mean the fastest economic growth for the world economy in IMF records, which date to 1980.
“A way out of this health and economic crisis is increasingly visible,” IMF chief economist Gita Gopinath said.
US growth even faster: The IMF expects US growth to come in at 6.4% in 2021, the fastest pace since 1984, with the economy surpassing its pre-Covid level this year. Advanced economies as a group will grow at an estimated 5.1% rate, with most returning to pre-pandemic levels next year.
Governments deserve credit: While the pandemic took a terrible economic toll over the last year, it could have been much worse if governments had not responded so aggressively. “Although difficult
to pin down precisely, IMF staff estimates suggest that the contraction could have been three times as large if not for extraordinary policy support,” the report says.
More work to do: The IMF warned that there is still considerable uncertainty about how the recovery will play out, and that policymakers will need to proceed cautiously. The Washington-based financial organization recommended that governments make public investments to boost long-term productivity while avoiding “sudden cliffs” in support for the unemployed:
“Considering the large uncertainty surrounding the outlook, policymakers should prioritize policies that would be prudent, regardless of the state of the world that prevails—for instance, strengthening social protection with wider eligibility for unemployment insurance to cover the self-employed and informally employed; ensuring adequate resources for health care, early childhood development programs, education, and vocational training; and investing in green infrastructure to hasten the transition to lower carbon dependence.”