The IMF and the World Bank open their virtual spring meetings.
The IMF on Tuesday projected an impressive 12.5 per cent growth rate for India in 2021, stronger than that of China, the only major economy to have a positive growth rate past year during the COVID-19 pandemic.
International Monetary Fund chief economist Gita Gopinath said the upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 per cent this year. "Thanks to unprecedented policy response, the Covid-19 recession is likely to leave smaller scars than the 2008 global financial crisis", the report read. While the Canadian economy has expanded for nine straight months through January, output remains about three per cent below pre-pandemic levels. "Output losses have been particularly large for countries that rely on tourism and commodity exports and for those with limited policy space to respond". In the case of policymakers - in advanced economies - taking steps towards policy normalisation, that would then result in a rapid rates rise, the report explained.
For now, the International Monetary Fund continues to strike an optimistic tone about the path of the global economy.
The IMF said it expects the global economy to grow by 6% this year, up from its 5.5% forecast in January.
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In the IMF's estimation, the global rebound will gradually lose momentum and return to pre-COVID levels of just above 3 per cent growth.
According to the latest edition of the World Economic Outlook (WEO) released on Tuesday, India is projected to grow at 12.5 per cent during the current fiscal (FY 2021-22). This reflects solid upgrades from 5.5% and 4.2% forecasted in the prior update, respectively. The World Bank expects the SA economy to grow to 3% in 2021.
The IMF said that uneven recoveries are also occurring within countries as young and lower-skilled workers remain more heavily affected.
The report also said that the recovery in emerging markets is expected to be slower than in advanced economies - with significant divergence across countries - driven by the less supportive stance of central banks over the past few months, in response to higher commodity prices; higher domestic inflation; the improved economic outlook and higher USA rates.
The report called for worldwide cooperation, specifically to ensure adequate vaccine access globally, including by sufficiently funding COVAX, the global vaccine facility.
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The IMF also reiterated its recommendation for allocating $650 billion in new Special Drawing Rights (SDR), a pool of reserves aimed in part at helping IMF-member countries struggling with the pandemic.
"Multiple instruments will be needed to prevent what I think is really a troubling feature: that after a couple of decades of income groups converging, we're actually beginning to see a divergence, at least for some time", Gopinath told Yahoo Finance.
U.S. Treasury Secretary Janet Yellen has advocated her support for the new allocation, despite some congressional concerns about other nations like Russian Federation and China possibly benefitting from the SDRs.
"We do want to make sure that the SDR allocation goes to support relief and economic support in the lowest-income countries", Yellen said Monday.
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