The International Monetary Fund (IMF) has upgraded its global economic growth forecast for 2021 due to a surge in vaccination activities.
The new IMF global forecast for economic growth is now at 5.5% this year and 4.2% in 2022. The upgrades were made to reflect the developments in vaccination efforts, as well as government spending measures announced at the end of 2020.
Economic growth forecasts
While the global forecast was upgraded, the growth forecast for the UK this year was downgraded to 4.5%. But the IMF now perceives last year’s contraction of the UK economy to be not as bad as it previously estimated.
However, the approximately 10% contraction observed in the UK is still considerably the largest contraction among the G7 group of economies.
Meanwhile, both Japan and the US received significant forecast upgrades. The IMF expects both economies to return to pre-pandemic levels or at least the same level as the end of 2019 later this year.
On the other hand, both the UK and European Union are projected to remain below pre-pandemic levels into 2022.
The IMF said: “The wide divergence reflects to an important extent differences across countries in behavioral and public health responses to infections, flexibility and adaptability of economic activity to low mobility, pre-existing trends, and structural rigidities entering the crisis.”
IMF’s chief economist Gita Gopinath pointed out that rich countries are expected to recover faster than developing nations due to their quicker access to vaccines and their government’s ability to provide expansive support.
Gopinath explained: “With advanced economies generally expected to recover faster, progress made towards convergence over the last decade is at risk of reversing.”
Global economic numbers
Singapore’s economy contracted by 5.8% year over year in 2020 as activity improved in the fourth quarter, based on government data.
The figure is deemed better than the official forecast for an annual contraction of between 6% and 6.5%.
Singapore’s economy dropped by 3.8% in the last quarter of 2020, compared with a year ago. The ministry considers this an improvement from the revised 5.6% year-over-year contraction in the third quarter.
Singapore’s gross domestic product or GDP increased by 2.1% in the fourth quarter on a quarter-on-quarter seasonally-adjusted basis.
Singapore’s economy, which is trade-dependent, was affected by a plunge in activity last year as countries implemented lockdown measures to contain the spread of Covid-19.
China’s economy rose by 2.3% in 2020 as the world struggles to manage the coronavirus pandemic and its economic damages.
According to data from the National Bureau of Statistic, gross domestic product grew by 6.5% in the fourth quarter from a year ago. The figures defy analysts’ forecast.
However, consumer spending remains slow, as retail sales contracted 3.9% for the year. Retail sales for the fourth quarter increased by 4.6% from a year ago.
Online sales of consumer goods increased at a rapid pace of 14.8% last year, data from the statistics bureau shows. However, the proportion of overall retail sales held steady at around one-fourth.
Last November, financial services firm JPMorgan warned that the US economy would shrink by the first quarter of 2021.
According to JPMorgan, recovery of the US economy is being hampered by the resurgence of the coronavirus pandemic, statewide curfews, as well as the division in the US government.
The investment bank claimed that the US gross domestic product (GDP) will become negative by the start of next year as US citizens await the distribution of Covid-19 vaccines.
In a client note, JPMorgan economists wrote that “This winter will be grim…and we believe the economy will contract again” in the first quarter of 2021.
Despite posting a record annualized growth in the third quarter, the US economy is drastically losing its momentum. The company expects the GDP to fall to a slow growth of 2.8% in the fourth quarter and eventually contract by 1% during the first quarter of 2021.