By Tom Burnett CFA
On July 1, 2021, the International Monetary Fund (“IMF”) released its Concluding Statement following a detailed staff review of the current economic and political environment. The following projections are from this Concluding Statement.
Real GDP is expected to grow by 7.0% in 2021, after declining by 3.5% in 2020. Growth is projected at 4.9% in 2022. The unemployment rate should average 4.4% in the fourth quarter this year and decline to 3.1% on average during the final quarter of 2022. The Statement expects the fed funds rate to bottom out this year and rise from the current rate of 0.1% to an average of 0.4% by the end of 2022. Th e yield on the 10-year Treasury bond should average 1.9% during the fourth quarter of this year, rising to 2.4% by the end of 2022. The yield is currently 1.45%.
Inflation is now forecast to average 4.3% during the 2021 Q4, falling off to 2.4% in the final quarter of 2022.
These positive economic projections are subject to the containment of the Covid-19 outbreak and the continued progress in the national vaccination programs. Any material resurgence in the virus leading to lockdowns will Imperil the positive expectations. The Statement also recognizes the nation’s extremely supportive monetary and fiscal policies. If these policies are reduced or diffused, then the positive growth expectations would have to be adjusted downward.
Tom Burnett CFA is Director of Research