IMF raises global growth forecasts, expects 'low levels' of COVID-19 by end of 2022

The International Monetary Fund (IMF) on Tuesday raised its projections for global growth, due in large part to the fund’s expectation to see “low levels” of COVID-19 across the world by the end of 2022.

“Multiple vaccine approvals and the launch of vaccination in some countries in December have raised hopes of an eventual end to the pandemic,” the IMF noted in an update to its World Economic Outlook report.

The IMF now expects global GDP to grow 5.5% in 2021, an upgrade from its 5.2% projection published in October last year.

Among advanced economies, the United States received the largest upward revision in growth expectations, with the IMF now projecting 5.1% growth in 2021, compared to its last forecast of 3.1%.

The IMF specifically applauded fiscal packages from late last year in the United States and Japan, urging governments to prioritize further support “until a vaccine-powered normalization of activity is underway.”

IMF Chief Economist Gita Gopinath told Yahoo Finance Tuesday that the outlook could improve further if strong fiscal support comes alongside positive developments on vaccine rollout and overall case counts.

“But I want to emphasize: there remains tremendous uncertainty,” Gopinath said.

The IMF report warned that renewed lockdowns and obstacles to vaccine distribution remain downside risks. Gopinath also expressed concern about the emergence of new variants of the virus in the United Kingdom and South Africa.

“If it indeed is the case the new strains of the virus reduce the effectiveness of vaccines enough that the recovery takes much longer, then we could have a negative downgrade,” Gopinath said.

[Read more: Moderna shares surge as it says it is working on new vaccine against South African variant]

The IMF said “softening” would be expected in the early part of this year amid new lockdowns, but hopes that the second quarter will see “rising momentum” in vaccine distribution.

Broadly, the IMF expects the second half of this year to deliver strong growth. India saw one of the largest upgrades, with 2021 growth now expected to be 11.5%. China’s economy is projected to grow 8.1% this year, a notch down from the 8.2% forecast from October.

Some countries saw larger downgrades despite the overall optimism. Expectations for 2021 growth in the United Kingdom, for example, were downgraded to 4.5%, compared to the 5.9% projection in October.

Gopinath said she had specific concerns over the impact of the virus on emerging and developing countries, and called on advanced economies and the international community to offer aid in the form of grants and debt restructuring.

“The absolute first thing that’s needed is to get vaccines, therapies, testing — anything that helps with ending this health crisis — more broadly available,” Gopinath told Yahoo Finance.

The IMF is due to release its next round of World Economic Outlook projections in April.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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