By Tom Burnett CFA
On January 26, 2021, the International Monetary Fund (“IMF”) released its first World Economic Outlook report for 2021. In general, the Report offers a more optimistic outlook for global growth than it put forth in its October 2020 Report.
The latest projection calls for global GDP to increase by 5.5%, over the weak performance of COVID-19 ravaged 2020. The Report now puts the 2020 GDP level as down by 3.5% from 2019. The Report also expects global growth to continue next year when growth of 4.2% is forecast. Importantly, the latest Report raises the 2021 global growth outlook from 5.2% in the October report to the current estimate of 5.5%.
For the U.S., the decline in GDP was 3.4% in 2020, but growth of 5.1% is now forecast for 2021. In October, the forecast was for growth of only 3.1%. The more positive outlook is a direct result of the vaccination program now in effect across the the country. Presumably, a successful vaccination program will permit the economy to open up and return to a more normal growth pattern
The Report has a less positive view about the EU prospects, due to uncertainties arising from the tangled Brexit negotiations. The Report logs EU performance as down by 7.2% in 2020, with a recovery of 4.2% in 2021. The U.K. Is the primary culprit with a decline of GDP of 10.0% in 2020. This year, the U.K. Is expected to grow by 4.5%.
China is the star performer in the COVID-19 era. The Report pegs 2020 growth at 2.3%, making it the only major economic unit in the world with GDP growth last year. China is now expected to lead the world again this year with a forecast of GDP growth of 8.1%. The Report sees China leading the way next year with a growth estimate of 5.6%, well above the 2.5% forecast for the U.S. economy.
The Report notes that world trade declined by 9.6% last year, but should grow by 8.1% in 2021 and by 6.3% in 2022.
Finally, the Report notes that inflation on the “Advanced Economies” was just 0.7% last year, but an increase to 1.3% is expected for 2021.
The IMF will issue its updated forecasts in April.
Tom Burnett CFA is Director of Research