One of the most respected economic reports in the world is the World Economic Outlook (WEO) released by the International Monetary Fund (IMF). This week marks the virtual IMF meetings, and so the release of the April report came just in time.
The IMF sees improved global conditions ahead, lifting its forecast for most developed economies. As always, traders focus on the projections of the years ahead, and in this case, the WEO offered economic projections all the way to the 2023-2026 period.
According to the IMF, the global economy is expected to grow by 6% this year, fueled by the huge fiscal stimulus in the United States and the progress in the vaccination campaigns throughout the developed world. It was also noted that the contraction in 2020 is smaller than initially thought, yet another factor contributing to the improved outlook.
Uncertainty Remains Elevated, But There Is Hope Ahead
Just like central banks warn about the uncertainties ahead, so did the IMF. Also, just like central banks view the current vaccination campaigns ongoing around the world as promising for future economic growth, so does the IMF.
One particularly important point that the IMF emphasized was the diverging impact of the pandemic on different countries. For instance, countries that rely on tourism as a big part of their revenues were hit harder than others. That’s on the negative side. On the positive side, emerging market financial conditions are almost back to pre-crisis levels.
World trade is seen recovering the 2020 decline in the course of next year and then growing at a steady pace toward the end of the forecast period in 2026. The new U.S. administration reversed course on most of Trump’s decisions, and the U.S. is on track to take back its place in international trade, without tariffs, quotas, and other restrictions, common during Trump’s term. As such, global trade is supposed to pick up drastically, should the pandemic ease and the vaccination campaigns are successful.
The IMF also emphasizes rising inequalities within countries as a result of the pandemic. In other words, the pandemic impacted various groups of workers, with the most vulnerable ones being youth, women, and low-skilled workers.
All in all, the report has an optimistic but cautious tone. It urges governments to keep the accommodation conditions in place until the end of the pandemic and, at the same time, it forecasts stronger growth for the years ahead.