The International Monetary Fund (IMF) World Economic Outlook Report has revised the country’s 2021 economic outlook upwards from 4% to 5%.
The October report released on Tuesday expects growth to then slow down at 2.2% in 2022.
The IMF also noted momentum in global economic recovery has weakened due to an increase in the COVID-19 Delta variant that is holding back return to normalcy.
IMF Chief Economist Gita Gopinath says compared to their July forecast global growth projections have been revised downwards from 6% to 5.9%and remain unchanged in 2022.
The Organisation says economic outlook for low-income developing countries is worst due to pandemic dynamics.
Food prices have also increased in most low-income economies, causing food insecurity and threats of social unrest.
Gopinath says, “Pandemic outbreaks and critical links to global supply chains have resulted in longer than expected supply disruptions. Risks to economic prospects have increased and policy trade-offs have become more complex. The downgrade also reflects more fickled near-term prospects for the advanced economic group in part due to supply interruptions.”
Gopinath says the great vaccine divide will be a deal-breaker for economic recovery.
She says, “While over sixty percent of the population in advanced economies are fully vaccinated and some are receiving booster shots, about 96% of the population in low-income countries remain unvaccinated. Many emerging markets and developing economies are facing tighter financing conditions and de-anchoring inflation expectations are withdrawing policy support despite larger shortfalls in output.”
The IMF projects global headline inflation to return to pre-pandemic levels in the middle of next year in emerging and developing economies.
Gopinath says, “Central banks should be ready to act quickly if the risk of raising inflation expectations became material in this unchartered recovery, Central banks should chart contingent actions, announce clear triggers and act in line with our communication.”
Projections for some commodity exporters have been upgraded on the back of rising commodity prices. However, Pandemic disruption has caused the labour market recovery to significantly lag in most countries.
The IMF has warned that if COVID-19 should have a prolonged impact in the medium term, it could reduce global GDP by 5.3 trillion dollars in the next five years.
The IMF, an organisation of 190 countries is calling on all countries to work together to secure financial stability and increase COVID-19 vaccinations.
In August, SA’s finances were boosted with a R65 billion injection from the IMF’s Special Drawing Rights: