According to the International Monetary Fund (IMF) forecast, the optimism of new vaccines will help the global economy rebound this year by 5.5%, but the coronavirus crisis is causing severe damage, slashings tens of trillions of dollars off GDP.
“Now at USD22 trillion,” a figure equal to the size of the entire US economy, “the projected cumulative output loss over 2020 to 2025, relative to the pre-pandemic projected levels, remains substantial,” IMF chief economist Gita Gopinath told reporters.
The vaccines should contain the spread of the virus and allow governments around the world to ease lockdowns and encourage a return to normal economic activity. Economies worldwide will need support from their governments to offset the damage from the pandemic and warns that coronavirus mutations could cloud the outlook for global health and economic growth, IMF said in a statement.
However, the 190-country lending organisation cautioned the outlook is beset by “extraordinary uncertainty,” and governments will need to continue to act to prevent lasting damage after Covid-19 caused the worst peacetime economic crisis since the Great Depression.
The upgrade in growth after sinking to 3.5% in 2020 reflects “expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies,” including the United States and Japan, the report said.
According to its latest World Economic Outlook (WEO), the IMF said that it expects the US economy to expand 5.1% in 2021 after collapsing 3.4% last year.
US new president, Joe Biden, is pushing for another massive rescue plan costing USD1.9 trillion that would provide further support to families, businesses and struggling state and local governments.
In a statement, Gopinath said preliminary estimates indicate that level of spending would boost US GDP 1.25% this year, and 5% over three years.
Meanwhile, the second-largest world economy, China, is expected to record 8.1% growth after wringing out a 2.3% increase in 2020.
However, In Europe, where governments have ordered new lockdowns and even curfews amid surging cases and the more infectious virus strains, the IMF slashed growth forecasts. The 19 countries European countries that share the euro currency will collectively register 4.2% growth this year after seeing economic output crater 7.2% in 2020. The Japanese economy is forecast to grow 3.1%, reversing a 5.1% decline in 2020.
While the IMF noted that London’s last-minute deal on its exit from the European Union prevented a key risk to the outlook, the fund cut the forecast for Britain as well.
The Indian economy is forecast to expand 11.5% in 2021, fastest among major economies, and a turnaround from 2020’s decline of 8%, thanks to a faster-than-expected recovery at its factories and farms.
IMF also expects global trade to rebound this year, record 8.1% growth after falling 9.6% last year.