MNI: IMF Raises 2022 Global Growth Forecast to 4.9% From 4.4%

The IMF raised its 2022 global economic growth forecast half a percentage point to 4.9% on Tuesday on greater U.S. and EU fiscal support, while holding the call for this year at 6% because of disparities with developing nations around vaccinations to contain the pandemic.

There is still USD4.6 trillion of fiscal support available in advanced economies, yet even with that inflation is likely temporary and should be passed over by central banks, the Washington-based fund said in an updated World Economic Outlook.

"Central banks should avoid prematurely tightening policies when faced with transitory inflation pressures but should be prepared to move quickly if inflation expectations show signs of de-anchoring," IMF research director Gita Gopinath wrote in a blog post about the report.

U.S. growth forecasts were boosted by 0.6pp for this year to 7.0% -- the fastest since 1984 -- and by 1.4pp next year to 4.9%. EU growth is seen at 4.6% this year and raised 0.5pp next year to 4.3%. Inflation in the EU will be 1.3% next year and in the U.S. it will slow from 4.0% this year to 3.3% next year, the IMF predicts.

India's growth was slashed 3pp to 9.5% this year on struggles containing the pandemic. Low-income nations have vaccinated a "tiny fraction" of their populations, behind rates of 11% in emerging markets and 40% in rich nations. China's economy remains resilient with 8.1% GDP growth this year.

"While more widespread vaccine access could improve the outlook, risks on balance are tilted to the downside," Gopinath wrote in the report. "Variants could derail the recovery and wipe out USD4.5 trillion cumulatively from global GDP by 2025. Financial conditions could also tighten abruptly amid stretched asset valuations, if there is a sudden reassessment of the monetary policy outlook, especially in the United States."