From Isaac Anumihe, Abuja
As the business coommunity look forward to the effect of coronavirus subsiding, the International Monetary Fund (IMF) has projected that global growth for 2021 to be 5.5 per cent, which is 0.3 percentage points above its previous forecast. The growth is expected to moderate to 4.2 per cent in 2022.
In its latest World Economic Outlook (WEO), the Fund said that the US economy roared back to life in 2021, with first-quarter growth set to defy even the rosiest expectations as another fresh influx of cash looms.
This was as manufacturing data showed the sector at its highest growth level since August 2018.
“In our latest World Economic Outlook, we are projecting global growth for 2021 to be 5.5 per cent, which is 0.3 percentage points above our previous forecast. And then growth is expected to moderate to 4.2 per cent in 2022.
“The U.S. economy has roared back to life in 2021, with first-quarter growth set to defy even the rosiest expectations as another fresh influx of cash looms. Manufacturing data Monday showed the sector at its highest growth level since August 2018,” it said.
Specifically, IMF observed, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its pre-pandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025.
“The U.S. economic recovery paused at the end of 2020, but it will soon be ready for liftoff. We project U.S. real GDP growth of 5.3 per cent in 2021 and 4 per cent in 2022. We now forecast GDP to surpass our pre-COVID expectation by 2022.
However, it noted, the labour market fallout from the COVID-19 pandemic shock continues, with young and lower-skilled workers particularly hard-hit. But it said that pre-existing employment trends favouring a shift away from jobs that are more vulnerable to automation are accelerating.
Nevertheless, the Fund advocated policy support for job retention as that would help immensely to mitigate impacts of COVID-19.
“Policy support for job retention is extremely powerful at reducing scarring and mitigating the unequal impacts from the acute pandemic shock.
“As the pandemic subsides and the recovery normalises, a switch toward worker reallocation support measures could help reduce unemployment more quickly and ease the adjustment to the permanent effects of the COVID-19 shock on the labour market” it said.
For emerging market economies to reduce their vulnerability to adverse financial spillovers, the Fund suggested that they should adopt transparent and rules-based monetary and fiscal frameworks.
“Monetary policy easing by advanced economies early in the pandemic provided much financial relief to emerging markets. Looking ahead, a multispeed recovery from the crisis will raise challenges. Our analysis suggests that while a US tightening resulting from a stronger US economy tends to be benign for most emerging market economies, a surprise tightening triggers capital outflows from emerging markets.