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Economic Indicators

13 Oct 2021

IMF Report; Global Growth Forecast to Fall 5.9% amid Supply Chain Disruptions

IMF Report; Global Growth Forecast to Fall 5.9% amid Supply Chain Disruptions

The Index Today

The International Monetary Fund has lowered the world economy’s growth forecast to 5.9% from 6% for 2021 and increased inflation outlook amid rising supply chain disruptions and global health issues.

The World Economic Outlook report released on Tuesday highlighted the Covid Delta Variant as the number one priority and number of vaccinated people in each country to prevent further outbreak. Economies around the globe should contribute to vaccination efforts and provide financial support to improve the global economy.

It is expected that the prices of food, medicine, automobiles and other products is likely to rise on a global scale. Not only will this threaten economic growth, but will also lead to business closures and unemployment. The International Monetary Fund IMF is a 190-member group which regulates and promotes monetary cooperation.

For emerging markets and developing countries, the growth outlook has improved, going up from 6.3% to 6.4% for the year. However, the overall outlook remains moderate to weak for the next year 2022. The outlook for U.S went down by 0.1%, China’s outlook was trimmed by 0.1% whereas Japan’s outlook went down by 0.4%.

The International Monetary Fund has stated that the rate of inflation is likely to go return to pre-pandemic levels by the mid of next year as inflation is likely to continue. IMF economists wrote, “Should households, business and investors begin anticipating that price pressure from pent-up demand to persist, there is a risk that medium-term inflation expectations could drift upward and lead to a self-fulfilling further rise in prices. For now, there no signs of such a shift.”

The current supply chain bottlenecks and shortages along with rising demand may also contribute to global inflation. TMF reported that the food beverage price index saw an increase of 11.1% between February and August. It is expected that the consumer price inflation may go up to 2.8% for this year whereas consumer prices may see a rise of up to 4.9%. Countries have been asked to help ease the situation by offering debt relief to poorer countries and provision of liquidity.