The International Monetary Fund has revised its global growth forecast for 2021 but warned that new COVID variants could derail the economic recovery.
In its latest World Economic Outlook, the IMF said it expects the global economy to grow at 5.5% this year, up three-tenths of a percentage point from its estimate in October.
“Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” IMF chief economist Gita Gopinath said in a blog post. “There remains tremendous uncertainty and prospects vary greatly across countries.”
The IMF is forecasting lower global GDP growth of 4.2% for 2022.
The outlook forecast U.S. growth of 5.1% this year, an increase of 2 percentage points over its previous forecast. The IMF expects China to grow at a rate above 8%. The eurozone is expected to grow at 4.2%, down 1% from the previous forecast.
“China returned to its pre-pandemic projected level in the fourth quarter of 2020, ahead of all large economies. The United States is projected to surpass its pre-COVID levels this year, well ahead of the euro area,” Gopinath said.
The IMF said global economies will continue to rely on government support through fiscal stimulus.
The Biden administration is currently supporting a $1.9 trillion pandemic relief package, though that bill is seen as unlikely to pass a Senate that is split 50-50.
“The bottom line is this: We’re in a national emergency, and we need to act like we’re in a national emergency,” Biden said last week.
Vermont Senator Bernie Sanders, the chair of the Senate Budget Committee, said that Democrats were preparing legislation that could be passed through the budget reconciliation process.
“We’re working on it right now,” Sanders said. “I think there is a consensus. If Republicans are not prepared to come on board, that’s fine. We’re not going to wait. We’re going forward soon and aggressively.”