BOFIT Viikkokatsaus / BOFIT Weekly 2021/31
The IMF’s July World Economic Outlook sees global growth at 6 % this year (i.e. no change from its April WEO). According to the latest forecast, the global economy will grow by 4.9 % next year, which is half a percentage point more than in the IMF’s April WEO. The increases in this year’s forecast reflect the massive stimulus programmes implemented for the most part in rich industrialised countries. For example, the US economy is now expected to grow by 7 %, a 0.6 percentage point increase from the April WEO. The increase in next year’s forecast for global economy is also driven mainly by the improved outlook for rich countries.
The IMF lowered its 2021 outlook for many emerging economies, including China and India. The covid pandemic has seriously eroded India’s economic prospects, causing the IMF to reduce its forecast by three percentage points to 9.5 %. The World Bank and the OECD have also produced similar growth forecasts for China and India. Next year, China’s GDP growth is expected to slow significantly as it has recovered from the trough of the covid crisis.
Looking at the Russian figures, e.g. the sharp rise in crude oil prices is reflected in a higher growth outlook for this year, with GDP rising by 4.4 %. In this respect, the IMF is substantially more optimistic than the earlier-released forecasts of the EBRD and World Bank. The 2022 growth forecasts of all these institutions, on the other hand, are nearly identical at around 3 %.
If the IMF forecast materialises, GDP growth between 2019 and 2022 would be 17 % in China, 10 % in India and 4 % in Russia. It is worth noting, however, that the expected growth pace varies widely across countries – poor countries typically grow faster than rich countries. The picture is quite different when comparing the July 2021 WEO forecasts to the October 2019 WEO forecasts. India’s GDP, for example, is forecast next year to be nearly 13 % below the level that was expected in 2019 as the covid pandemic has hit the Indian economy particularly hard. Both China and Russia have taken much smaller hits to their GDP, each only dropping about 1 % from the 2019 WEO forecast.
Recent GDP growth forecasts for select countries (%)
Sources: International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD), World Bank and Organisation for Economic Co-operation and Development (OECD).