The Strategist

IMF cuts global growth forecast due to supply problems and pandemic

10/13/2021 - 03:42

The International Monetary Fund has lowered its forecast for global economic growth this year, citing supply problems in rich countries as well as health threats from the spread of the highly contagious delta strain of coronavirus.

The IMF also raised its inflation forecast, urging regulators to be prepared to act quickly if the recovery is faster than expected or if inflation risks become more pronounced. Prices of a wide range of goods, from medicines to cars, are rising around the world. This threatens the global economic recovery from the devastating effects of the pandemic on businesses and jobs.

With 190 countries as members, the IMF helps maintain international financial stability and monetary cooperation. The Fund also serves as a last resort for countries experiencing financial crises.

In a report released on Tuesday, IMF economists cite ensuring that enough people in each country are vaccinated to prevent dangerous new mutations of the coronavirus as a top priority. They stress the importance of leading economies delivering on their promises to provide vaccines and helping finance vaccination programmes before new strains derail the nascent recovery. "Policy decisions are increasingly difficult to make... given the limited room for manoeuvre," the fund's economists said.

The IMF has lowered its forecast for global growth in 2021 to 5.9 percent, down from a July report forecasting growth of 6 percent. Such a reduction was the result of a change in the forecast for the leading economies, whose GDP growth, the IMF believes, will be 5.2% and not 5.6%, mainly because of supply problems that caused an imbalance between supply and demand.