International Monetary Fund scales up Indias FY22 GDP growth forecast to 12.5%; experts unsure

Vaccinations in Logrono northern Spain

The IMF expects the USA economy will grow 6.4% this year, its strongest growth in decades.

The IMF said that the United Kingdom economy would outgrow the eurozone after its slump in 2020 but is unlikely to regain its pre-pandemic size until some time in 2022.

The new global forecasts are growth of 6% and 4.4% this year and next.

Yellen recently called on the 20 largest economies to work together to "stop the race to the bottom" by setting a new minimum that would allow governments more stability in collecting tax revenue. "Over the past few months, markets have priced a shift towards a less supportive stance by central banks, in response to higher commodity prices; higher domestic inflation; the improved economic outlook and higher United States rates -and some central banks have already hiked".

The IMF forecast, if realised, would mark the fastest pace of global growth since 1976 but also comes off the steepest annual downturn of the post-war era a year ago as the pandemic brought commerce around the world to a near standstill at times.

The projections for Japan and Germany has been notched up to positive growth of 3.3 percent and 3.6 percent respectively. "And then so instead of six (percent growth), it would be four and a half, and for 2022 instead of 4.4 would be 3.4".

The report says the cumulative losses in income per person over the period 2020 to 2022 are likely to be 20% for those countries, compared with a less severe but still large figure of 11% for the developed world.

The report added that "output losses have been particularly large for countries that rely on tourism and commodity exports and for those with limited policy space to respond". But many others in the group are not expected to do so until well into 2023.

The IMF also highlighted that income inequality would likely increase significantly, mainly due to the pandemic.

In 2021, consumer prices are expected to increase by 0.7%, compared to 0.8% projected in October.

"The worldwide community also needs to work together to ensure that financially constrained economies have adequate access to global liquidity so that they can continue needed health care, other social, and infrastructure spending required for development and convergence to higher levels of income per capita", the IMF report said.

"Policymakers should take early action and tighten selected macroprudential policy tools while avoiding a broad tightening of financial conditions".

In an interview with AFP, on the sidelines of the International Monetary Fund's Spring meetings, Petya Koeva Brooks, deputy director of the IMF Research Department, said the fund has not calculated the impact on growth of Biden's $2 trillion proposal, since it has not yet been approved. Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. The report said: "As the vaccination drive continuously upscales in India, and guided by the learnings of India's successful management of the pandemic during its first wave, India is now well armed to combat any downside risk posed by the recent surge in Covid-19 cases".