By Tom Burnett CFA
On October 12, 2021, The International Monetary Fund (“IMF”) released its updated projection for world economic growth. The IMF issues these projections in July and October of each year. In the latest report, the IMF projects global GDP growth of 5.9% in 2021 and 4.9% in 2022. The 2021 forecast is 0.1% lower than the projection issued in July of 2021. The IMF lowered its forecast for 2021 due to supply chain interruptions and limited Covid vaccine access in many of the world’s poorer countries. The threat posed by Covid variants such as the Delta version also adds uncertainty to the growth projections. The IMF did not alter its 2022 projection which remains at growth of 4.9%. World GDP fell by 3.1% in 2020, due to the negative impact of the Covid outbreak and the measures imposed to contain it.
The IMF report projects U.S. GDP growth of 6.0% in 2021 and 5.2% in 2022. These estimates are 1.0% lower for 2021 and 0.3% higher for 2022 than the estimates from the July report. In 2020, the U.S. GDP fell by 3.4%.
The 2021 forecast for the EU bloc expects growth of 5.0% in 2021 and 4.3% in 2022. The 2021 forecast is 0.4% higher than what the July report projected. The 2022 estimate is unchanged from the July report. In 2020, the EU GDP fell by 6.3%. The UK performance was clouded by the Brexit uncertainty and its GDP fell by 9.8% in 2020, the worst performance of any developed economy. The UK is expected to rebound by 6.8% in 2021, but that estimate is 0.2% lower than what was forecast in the July report.
China was the only major economy to report GDP growth in 2020 with its positive 2.3% performance. The current estimates for 2021 and 2022 are also positive with an 8.0% rate forecast for 2021 and a 5.6% growth rate projected for 2022. Both of the latest growth rates for 2021 and 2022 are lower by 0.1% from the July expectations.
World trade which fell by 8.2% in 2020 is now expected to grow by 9.7% in 2021 and by 6.7% in 2022. Inflation is projected to increase to 2.8% in 2021 from 0.7% in 2020.
In general, the IMF report looks for the global economy to continue its rebound from the depressed levels of 2020, but the growth prospects are now thought to be less certain than the July report indicated.
Tom Burnett CFA is Director of Research