International Monetary Fund Managing Director Kristalina Georgieva speaks at a press conference in Washington D.C., on March 4, 2020.
Liu Jie | Xinhua | Getty Images
LONDON — The International Monetary Fund is even more optimistic about global growth this year, but has insisted there is still “high uncertainty” ahead.
Back in January, the IMF struck an upbeat tone in its global economic forecasts, estimating a GDP (gross domestic product) rate of 5.5% this year. At the time, this represented a 0.3 percentage point increase from previous forecasts.
However, U.S. President Joe Biden‘s massive fiscal plan and an improved vaccine rollout over the past three months have made the IMF even more confident about the rest of the year.
“We now expect a further acceleration: partly because of additional policy support — including the new fiscal package in the United States; and partly because of the expected vaccine-powered recovery in many advanced economies later this year,” IMF’s Managing Director Kristalina Georgieva said in a speech on Tuesday.
“This allows for an upward revision to our global forecast for this year and for 2022.”
The new forecasts will be announced on Tuesday, when the Fund releases its latest World Economic Outlook.
Earlier this month, Biden signed a fiscal stimulus plan that will send direct payments of up to $1,400 to most Americans. The program, which is already underway, is also expected to prop up the world economy; the Organization for Economic Cooperation and Development has estimated that the bill will add about 1 percentage point to global growth this year.
The rate of coronavirus vaccinations around the world is also picking up pace. On Monday, Biden said that 90% of adults in the United States will be eligible for a Covid-19 vaccine by April 19. Meanwhile, the U.K. plans to have offered the first Covid-19 shot to all of its eligible population by the end of July, and the European Union is expecting to have 70% of the adult population vaccinated this summer.
However, the IMF has warned that one of the risks to the outlook is the high uncertainty provoked by the pandemic, including potential new variants.
“One of the greatest dangers facing us is extremely high uncertainty,” Georgieva said.
At the same time, it has noted that there is an uneven economic recovery taking place.
“While the outlook has improved overall, prospects are diverging dangerously not only within nations but also across countries and regions. In fact, what we see is a multi-speed recovery, increasingly powered by two engines — the U.S. and China,” Georgieva said.
“They are part of a small group of countries that will be well ahead of their pre-crisis GDP levels by the end of 2021. But they are the exception, not the rule.”
As a result, the IMF is advising countries to ramp up vaccine production, distribution and deployment. It also advised they keep loose fiscal policies and invest in climate-friendly policies.
“This is how we can protect people’s health — and accelerate the recovery. Faster progress in ending the health crisis could add almost $9 trillion to global GDP by 2025. But the window of opportunity is closing fast. The longer it takes to speed up vaccine production and rollout, the harder it will be to achieve these gains,” Georgieva added.