World economic outlook remains precarious

Despite maintaining its 2021 global growth forecast of 6%, the International Monetary Fund (IMF) still warns of uneven growth as developed countries have stronger growth than developing economies.

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Illustrative image

The world economic outlook remains precarious as the progress of vaccination remains the factor dividing resilience; as well as the emergence of new variants continuing to be an unpredictable danger.

The recently released IMF world economic growth forecast is unchanged from April 2021, but the US - the world's largest economy is now forecast to grow faster, at about 7%, thanks to President Joe Biden's US$1.9 trillion economic stimulus package and high vaccination rates.

Growth in Canada and the UK has also been revised up to 6.3% and 7% respectively, while the GDP of the Eurozone is forecast to grow by 4.6%. In Latin America, Mexico is expected to grow, supported by the positive spillover from the US economy.

Meanwhile, the IMF lowered India's economic growth forecast to 9.5% in the context of the country struggling to cope with a high number of Covid-19 infections. The IMF also forecasts a less positive outlook for Indonesia, Malaysia, the Philippines and Thailand, where Covid-19 waves are active.

Growth forecasts for low-income countries fell by 0.4 percentage points. The IMF added it is not possible to guarantee economic recovery in the countries with low infection rates as long as the SARS-CoV-2 virus is present.

The risk from new variants of Covid-19 threaten the economic recovery, especially in developing countries lacking vaccine supply. The recovery process will slow if the rate of Covid-19 vaccination is not accelerated. IMF chief economist Gita Gopinath warned that the emergence of highly infectious virus variants could derail the recovery and wipe out US$4.5 trillion cumulatively from global GDP by 2025.

Uncertainty about the global economic outlook has been flagged by experts as the Delta variant poses major risks. Financial and medical support to ensure a balanced distribution of vaccines is an important factor in reducing the potential risks to world economic recovery. The IMF wants a US$50-billion plan that offers a "feasible cost to end the pandemic" by distributing vaccines and addressing immediate needs in lower income countries.

In order to close the growth gap, the IMF has called for the urgent priority to be the equitable distribution of vaccines around the world.