A Bit More Brightness in the IMF's World Picture

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Friday, January 29, 2021  / 09:45 AM / By FBNQuest Research / Header Image Credit: Twitter; @IMFNews


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This month's update to the IMF's quarterly World Economic Outlook has a slightly less grim estimate for global growth last year than three months ago, and a slightly better forecast for 2021. The contraction for 2020 under the shadow of Covid-19 has been adjusted from -4.4% to -3.5%, and this year's projection has been upped from 5.2% to 5.5%. Revisions for 2021 of a minimum 100bps are few: for the US and India from 3.1% to 5.1% and from 8.8% to 11.5% respectively on the positive side, and from 5.2% to 4.2% for the Eurozone on the negative side. The forecasts hinge upon the assumption that vaccines will be broadly available in advanced economies and some EMs this summer, and in most countries by H2 '22.

 

Related Link: WEO January 2021: Policy Support and Vaccines Expected to Lift Activity

 

The picture is a little brighter than in October because of a stronger-than-expected performance in several important economies including the US in H2 '20 along with robust fiscal stimulus in Japan and the US.

 

This update bravely pushes out its forecasting horizon to 2022, for which it sees world output growth of 4.2%, with advanced economies (3.1%) again lagging emerging market and developing economies (EMDEs, at 5.0%).

 

The Fund has world trade growth in goods and services in EMDEs at 9.2% this year and 6.7% in 2022.

 

Around its base case the update has upside and downside risks, which are determined by progress (or otherwise) on the rollout of vaccines, the easing of restrictions and lockdowns, and the containment of new strains of the virus.

 

The pandemic has reversed the advances made in poverty reduction in EMDEs over the past two decades, and up to 90 million people are expected to fall below the threshold for extreme poverty in 2020 and 2021. The World Bank last month suggested that the recession in Nigeria has pushed an additional 6.6 million people into poverty and that the total below its threshold will reach 100 million by 2022.

 

For Nigeria, the Fund has trimmed its forecast for 2021 growth from 1.7% to 1.5%. Ours is 2.0%.

 

The update's assumptions, based on the futures markets, for the Fund's basket of three crude blends (including UK Brent) are now an increase of 21.2% this year to USD50.0/b and a modest 2.4% decline in 2022 to USD48.8/b.


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E= estimates
F= forecasts

    Trends in world output growth (% chg y/y) 

 

2020E

2021F

2022F

World

-3.5

5.5

4.2

US

-3.4

5.1

2.5

Eurozone

-7.2

4.2

3.6

Japan

-5.1

3.1

2.4

Brazil

-4.5

3.6

2.6

Russia

-3.6

3.0

3.9

India

-8.0

11.5

6.8

China

2.3

8.1

5.6

SSA

-2.6

3.2

3.9

Nigeria

-3.2

1.5

2.5

South Africa

-7.5

2.8

1.4

Sources: IMF, World Economic Outlook update, Jan '21; FBNQuest Capital Research

 

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