IMF cuts global growth forecast, blames Delta, vaccine inequality for slowdown

The International
Monetary Fund (IMF) said on Tuesday that economic recovery in most developed
countries has weakened due to the impact of the Delta variant of the
coronavirus. The IMF cut growth forecasts for the United States, Japan and
Germany blaming continued rise in COVID-19 cases. The fund further said that
developing countries risk falling back in terms of economic growth due to
vaccine inequality.

Last year saw the
global economy take a hit due to the lockdowns imposed in several countries to
contain the COVID-19 pandemic. However, the economy rebounded sharply in the
first half of the year as economic activity resumed.

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In the latest
World Economic Outlook of the IMF, it said that the momentum has since weakened
as the highly transmissible Delta variant has stopped a full return to normalcy.

Gita Gopinath, IMF’s
chief economist blamed the recent slowdown to continued health risks, higher
inflation and disruptions in supply chain. She also ascribed blame to shortages
in raw materials and rising commodity prices adding that “risks to economic
prospects have increased”.

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Laying out its
projections, the IMF said that it expects the US, world’s largest economy, to
grow by only 6% this year, down from the forecast of 7% in July. Meanwhile,
Japan is expected to grow at 2.4% and Germany at 3.1%. The United Kingdom’s
economy is expected to grow by 6.8%.

In relatively good
news for India, IMF has kept its growth forecast for the world’s second-most
populous country unchanged at 9.5%. The global growth projection has been
sliced from 6% to 5.9%.

By and large, the IMF
expects most of the advanced economies to return to their pre-pandemic growth
trends next year as supply chain issues get sorted out. But emerging economies,
with the exception of China, could fall back and remain 5.5% below their
pre-pandemic forecast by 2024.

“These divergences
are a consequence of the ‘great vaccine divide’ and large disparities in policy
support,” IMF’s chief economist Gita Gopinath said.