IMF Lowers Global Growth Expectations Amid Inflation Concerns

October 12, 2021

The International Monetary Fund (IMF) lowered its 2021 growth forecast for the global economy, noting that higher prices and ongoing pandemic-related supply chain disruptions are likely to slow economic growth, particularly in the developed world.

The organization cut its global growth forecast for the year to 5.9%, down only slightly from the 6% forecast made in July. Though only a small downgrade for the globe as a whole, it was driven by a larger reduction in expectations for the world’s advanced economies, which are now expected to grow at a pace of 5.2%, down from a previous estimate of 5.6%. The group attributes its more pessimistic outlook to global supply chain issues.

For developing economies, the group’s outlook improved. Emerging markets are now expected to grow at a pace of 6.4% in 2021, up from a previous projection of 6.3%. The increase is driven by rising energy prices and strong demand for commodities.

The group’s expectation that global growth will moderate to 4.9% in 2022 remained unchanged.

The IMF maintains the view that inflation will moderate to pre-pandemic levels by the middle of next year but does warn that the inflation outlook is “highly uncertain” due to the unprecedented nature of the post-pandemic recovery. The group warns that if supply-chain disruptions prove to be more severe or long-lasting than current expectations, inflation’s impact could further diminish economic growth. The report also notes that some current economic factors like higher housing costs and increased import prices for food and energy could keep consumer prices elevated beyond current expectations.

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