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IMF revises up global growth forecast to 4.9% for 2021

Inflation expected to return to pre-pandemic levels in most countries next year

The International Monetary Fund (IMF) revised up its global economic growth forecast to 4.9% for 2021, according to its World Economic Outlook Update released Tuesday.

The 0.5 percentage points upgrade is a revision from a previous estimate of 4.4% made in its April report.

The IMF said the revision “derives largely from the forecast upgrade for advanced economies, particularly the US, reflecting the anticipated legislation of additional fiscal support in the second half of 2021 and improved health metrics more broadly across the group.”

It said it anticipates the American economy to grow 4.9% next year, up from its previous projection of 3.5%. The Euro area’s estimated growth was also revised up to 4.3% from 3.8%.

Overall, advanced economies are expected to expand 4.4% in 2022 from 3.6%, while the forecast on emerging markets and developing economies was revised up to 5.2% from 5%.

The IMF did not change economic growth projections for 2021 at 6% and noted that inflation is expected to return to pre-pandemic levels in most countries next year but said uncertainty remains high.

“Central banks should generally look through transitory inflation pressures and avoid tightening until there is more clarity on underlying price dynamics,”it said.

“Clear communication from central banks on the outlook for monetary policy will be key to shaping inflation expectations and safeguarding against premature tightening of financial conditions,” it added.

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