IMF lifts global growth forecast

THE International Monetary Fund (IMF) upgraded its global economic growth forecast for the second time in three months, while warning about widening inequality and a divergence between advanced and lesser-developed economies.

The global economy will expand 6 percent this year, up from the 5,5 percent pace estimated in January, the IMF said in its World Economic Outlook published on Tuesday.

That would be the most in four decades of data, coming after a 3,3 percent contraction last year that was the worst peacetime decline since the Great Depression.

The IMF sees advanced economies less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more – a contrast to 2009, when rich nations were hit harder.

With the US gross domestic product next year forecast to be even bigger than projected before Covid-19, the IMF’s projections show little residual scarring from the pandemic for the world’s number one economy.

The fund, which with the World Bank is holding its spring meetings virtually last week, underscored that policy makers should scale back government support “gradually,” to avoid “fiscal cliffs.”

Central bankers should also give“clear forward guidance” on monetary policy to minimise the danger of disruptive capital flows.

The IMF reiterated its call for wealthy nations to help poorer ones combat Covid-19, and underlined the need to prioritise health-care spending more broadly to defeat the pandemic.

President Joe Biden’s US$1,9 trillion stimulus package passed last month will help boost US GDP to above its pre-pandemic level this year and will have sizable positive spillovers for trading partners.

That’s much worse than the 11 percent the IMF sees in advanced economies.