International Monetary Fund downgrades expectations for United Kingdom economic recovery in 2021

Daniel Fowler
January 27, 2021

The global economy contracted by an estimated 3.5 per cent in 2020 amid the unprecedented health crisis. China is next with 8.1 per cent growth in 2021 followed by Spain (5.9 per cent) and France (5.5 per cent).

The Indian economy is estimated to post a narrower contraction of 8% in the current financial year but is projected to report double-digit expansion next year as well as in 2022-23, the International Monetary Fund (IMF) said on Tuesday. It predicted global growth of 5.5% in 2021, an increase of 0.3 percentage points from the October forecast, citing expectations of a vaccine-powered uptick later in the year and added policy support in the United States, Japan and a few other large economies.

The IMF did not break out country specific reasons for its projections but said in general that forecasts were impacted by "renewed waves and new variants of the [COVID-19] virus".

"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", Gopinath said.

Surging infections in some countries and new Covid-19 variants that led to renewed lockdowns, as well as logistical problems with vaccine distribution, pose "important counterpoints to the favorable news", the report said.

"The economic crisis in 2020 remains the worst peacetime global contraction since the Great Depression".

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The global financial agency now says the world's economy will expand by 5.5% this year, following a 3.5% drop in 2020 that was the most severe since the end of World War II.

The euro-area growth forecast was cut by a full percentage point, to 4.2 percent, on the expectation that the cooling at the end of previous year will continue.

It said the United States economy - the largest in the world - was expected to grow by 5.1 per cent in 2021, an upward revision of 2 percentage points attributed to carryover from strong momentum in the second half of 2020 and the benefit accruing from $900 billion in additional fiscal support approved in December.

The IMF forecast warned that the world is still not out of the woods economically as it seeks to recover from the devastating pandemic.

The IMF expects vaccines and additional fiscal spending by some major economies, including the U.S. and Japan, will underpin the economy, and the normalization of the economic activity will continue in the second half of 2021.

"IMF says low-income countries need support through grants, loans and debt relief; debt restructuring may be unavoidable for some".

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