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Summary
- IMF has downgraded its prediction for the British economic growth to 4.5 per cent for this year.
- UK’s forecast for 2022 is revised up to 5.0 per cent.
- Global growth forecast is also upgraded by 0.3 percentage points to 5.5 per cent for this year.
The International Monetary Fund has suggested that the UK economy will recover at a slower rate this year than what was predicted earlier. In its World Economic Outlook, it revised the nation’s growth forecast from 5.9 per cent to 4.5 per cent for 2021.
The worldwide fund had also estimated that the British economy would shrink by 10 per cent last year due to the uncertainties because of the deadly coronavirus pandemic. It is the largest fall in any G7 country.
(Source - © Kalkine Group 2020)
Global estimates
The outlook has forecasted the world economy to grow by 5.5 per cent for this year, which is 0.3 per cent points higher as the vaccines are getting rolled out and various economic stimulus policies begin to show results.
For instance, IMF has upgraded the growth outlook for the US by 2 percentage points to 5.1 per cent for 2021 after US President Joe Biden rolled out the $1.9-trillion financial support package.
Moreover, the international organization noted that the world economy contracted by 3.5 per cent last year, which was 0.9 per cent below the earlier estimates, primarily owing to a stronger than expected recovery in H2 2020.
Further, as per the outlook, the Japanese economy is likely to grow by 3.1 per cent while the Eurozone’s growth is projected to be around 4.2 per cent this year. India is projected to grow impressively by 11.5 per cent while Chinese economy is expected to grow by 8.1 per cent in 2021. Spanish economy is projected to grow by 5.9 per cent while the national output of France is likely to expand by 5.5 per cent for this year.
New variant playing havoc
Gita Gopinath, Chief Economist, IMF, said that the third wave of coronavirus in the UK, which led to a prolonged set of restrictions, is one of the main reasons for the growth downgrade. The new strain of the virus has delivered a fresh blow to the British economy as it is spreading very rapidly, she added.
Further, the report highlighted that for the UK and the entire euro region, the economic activity shall continue to remain below the end-2019 levels into the year 2022.
On the positive side, Britain’s outlook for the next year has been hiked to 5.0 per cent, which is 1.8 percentage points more than the earlier level.
Additionally, the report noted that while the Brexit agreement managed to eliminate a key downside risk regarding a no-deal, but the UK’s departure from the European Union could still knock off 1 per cent growth during Q1 2021.
At the same time, IMF noted that all the numbers were subject to higher than usual uncertainty. Gopinath said that the new wave of infections across many countries including the UK along with the variants posed high risks and the health crisis can’t be said to over until the cases are under control everywhere.
