Inflation Warning: International Monetary Fund Lowers Global Growth

The International Monetary Fund lowered its global growth forecast to 5.9 percent, down from the 6 percent projected in July, according to a report they published.

The global economic recovery is losing momentum as the resurgence of the coronavirus and widespread supply chain disruptions threaten to be a drag on a world economy that is trying to find its footing, the International Monetary Fund said on Tuesday.

“Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries,” the report reasons out. “Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.”

The organization slashed its growth estimates for the U.S. to 6%, down a full percentage point from July. It marked the biggest reduction suffered by any G7 nation. The IMF also reduced its growth outlooks for both Spain and Germany by 0.5 percentage points and decreased Canada’s by 0.6 percentage points.

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“Rapid spread of Delta and the threat of new variants have increased uncertainty about how quickly the pandemic can be overcome,” the report said.

“Policy choices have become more difficult, confronting multidimensional challenges — subdued employment growth, rising inflation, food insecurity, the setback to human capital accumulation, and climate change — with limited room to maneuver.”

Global growth is expected to slow to 4.9 percent in 2022 and then moderate to about 3.3 percent in the medium term, the I.M.F. said.

Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world.

Gita Gopinath, the I.M.F.’s chief economist, called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus.

She also urged vaccine manufacturers to support the expansion of vaccine production in developing countries. As a whole, the IMF expected the world’s advanced economies to grow by 5.2% this year, compared with an average growth expectation of just 3% for low-income nations.

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