IMF cuts global growth outlook as supply bottlenecks hobble pandemic recovery

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WASHINGTON, Oct 12 (Businesshala) – Persistent supply chain disruptions and pricing pressures are hindering the global economy from recovering from the COVID-19 pandemic, the International Monetary Fund said on Tuesday, as it helped the United States and other major industrial powers. for cut development outlook.

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In its World Economic Outlook, the IMF lowered its 2021 global growth forecast to 5.9% from 6.0% forecast made in July. It left the 2022 global growth forecast unchanged at 4.9%.

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“This minor title revision, however, masks the major downgrade for some countries,” the IMF said in the report. “The outlook for the low-income developing country group has deepened significantly due to worsening pandemic dynamics. The downgrade reflects more difficult near-term prospects for the advanced economy group, partly due to supply disruptions.”

Global manufacturing activity has been slammed by shortages of key components such as semiconductors, closed ports and shortages of cargo containers, and a labor crisis as global supply chains optimized for efficiency return to normalcy after pandemic-induced shutdowns last year. Struggled to return.

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The demand-supply mismatch, due to excess savings created in wealthy countries, has led to a rise in prices, leading to inflation. The IMF said it expects inflation to return to pre-pandemic levels next year, but warned that continued supply disruptions risked undermining inflation expectations.

US growth slowdown

The United States is bearing the brunt of these effects, and the IMF lowered its 2021 US growth forecast by a full percentage point to 6.0% from 7.0% in July – a level seen as the strongest momentum since 1984 Was.

The IMF said US growth could shrink further, as its forecasts assume a deeply divided US Congress would approve President Joe Biden’s proposed infrastructure and social spending of $4 trillion over a decade. Lawmakers are now trying to reach consensus on a smaller package, and the IMF said a significant shortfall would reduce growth prospects for the United States and its trading partners.

The report, which was released at the start of the IMF and World Bank meeting, also cut growth projections for other industrialized economies. German growth fell half a percentage point to 3.1% from July’s forecast, while Japan’s growth fell 0.4 points to 2.4%.

The IMF’s forecast for British growth this year fell just 0.2 points to 6.8%, making it the fastest growth forecast among G7 economies.

China’s 2021 growth forecast was lowered by 0.1 point to 8.0% after the IMF cited a faster-than-expected scale of public investment spending. India’s forecast was unchanged at 9.5%, but prospects have dimmed as the pandemic worsens in other emerging Asian countries.

The IMF cut its forecast for the “ASEAN-5” grouping of Indonesia, Malaysia, the Philippines, Singapore and Thailand by 1.4 points.

Some commodity-exporting countries such as Nigeria and Saudi Arabia saw a slight increase due to the rise in oil and commodity prices.

vaccine divide

The report also warns of an alarming divergence in economic prospects driven by the “Great Vaccine Divide” with low-income countries where 96% of the population remains illiterate, with long-term low growth, greater poverty, and the potential for death. is facing. – Stable inflation expectations.

“About 65 million to 75 million additional people are projected to be in extreme poverty in 2021 compared to pre-pandemic estimates,” the report said, adding that low-income countries need to fight COVID-19. And regaining that requires some $250 billion in additional spending. Their pre-pandemic development path.

Currently, these countries are projected to have cumulative production next year which is 6.7% below pre-pandemic levels. Meanwhile, 2022 output in advanced economies will be about 1% above pre-pandemic levels, the IMF said.

Reporting by David Lauder Editing by Paul Simao


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