IMF projects global economy to grow by 6% in 2021, highlighting widening divergence

WASHINGTON -- The International Monetary Fund (IMF) on Tuesday maintained its global economic growth forecast at 6 percent for 2021, with economic prospects diverging further across countries since April's forecast, according to the latest World Economic Outlook.

"The global economic recovery continues, but with a widening gap between advanced economies and many emerging market and developing economies," IMF Chief Economist Gita Gopinath told a virtual press briefing.

"Our latest global growth forecast of 6 percent for 2021 is unchanged from the previous outlook, but the composition has changed," said Gopinath.

In April, the IMF upgraded its 2021 global growth forecast to 6 percent from January's forecast of 5.5 percent due to vaccination progress and additional fiscal support in large economies.

According to the latest projection, growth prospects for advanced economies this year have improved by 0.5 percentage points to reach 5.6 percent, while those for emerging market and developing economies this year are downgraded by 0.4 percentage points to 6.3 percent.

Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries, Gopinath noted.

"Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades," she said.

Gopinath noted that divergences in policy support are a second source of the deepening divide, as advanced economies continued to roll out sizable fiscal support with $4.6 trillion of announced pandemic-related measures available in 2021 and beyond.

On the other hand, in emerging market and developing economies, most measures expired in 2020, and they are looking to rebuild fiscal buffers, she said, adding that some emerging markets like Brazil, Hungary, Mexico, Russia and Turkey have also begun raising monetary policy rates to head off upward price pressures.