The International Monetary Fund (IMF) has published its latest World Economic Outlook, with the group now projecting a stronger recovery for the global economy in 2021 compared to its January forecast.
“The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4% this year.
“This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.”
Other advanced economies, including the euro area, will also rebound this year but at a slower pace, the group said.
“Among emerging markets and developing economies, China is projected to grow this year at 8.4%. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”
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The group’s updated data for South Africa shows that annual growth is projected to be 3.1% in 2021 – an improvement of 0.3 percentage points from the 2.8% January forecast. The group forecasts annual growth of 2% in 2022 for the country.
Data published by Statistics South Africa in March showed that South Africa’s economy contracted by 7% last year.
The drop was primarily led by decreases in manufacturing, which contributed -1.4 percentage points based on a contraction of -11.6%.
Trade, catering and accommodation contributed -1.3 percentage points based on a contraction of -9.1%; and transport, storage and communication, contributed -1.3 percentage points based on a contraction of -14.8%.
Widening gap
The IMF said that divergent recovery paths among countries are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.
The average annual loss in per capita GDP over 2020-24, relative to pre-pandemic forecasts, is projected to be 5.7% in low-income countries and 4.7% in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3%.Such losses are reversing gains in poverty reduction, with an additional 95 million people expected to have entered the ranks of the extreme poor in 2020 compared with pre-pandemic projections.
The IMF said that uneven recoveries are also occurring within countries as young and lower-skilled workers remain more heavily affected. Women have also suffered more, especially in emerging market and developing economies.
Because the crisis has accelerated the transformative forces of digitalization and automation, many of the jobs lost are unlikely to return, requiring worker reallocation across sectors—which often comes with severe earnings penalties.
Swift policy action worldwide, including $16 trillion in fiscal support, prevented far worse outcomes, the IMF said. “Our estimates suggest last year’s severe collapse could have been three times worse had it not been for such support.”
Because a financial crisis was averted, medium-term losses are expected to be smaller than after the 2008 global financial crisis, at around 3%.
However, unlike after the 2008 crisis, it is emerging markets and low-income countries that are expected to suffer greater scarring given their more limited policy space, it said.
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