With the United States already expecting an economic boom in the next two years, the International Monetary Fund (IMF) is now forecasting a strong recovery for the UK and the rest of the world.
This announcement from the IMF is an upgraded set of the figures that it released as recently ago as January. The new U.K. Forecast is for growth figures of 5.3% in the current year and 5.1% in 2022. Whilst this is good news for the UK, the figures still point to it being late in 2022 before the economy has reached pre-pandemic levels. It is also worth noting that the latter figure is only a slight improvement on the January forecast.
In comparison, recent forecasts have estimated that the U.S. economy, with a growth rate of 6.5%, could have grown to levels exceeding the pre-pandemic figures by the end of this year.
Britain’s economy suffered from a double hammer-blow last year, as well as the pandemic, the encroachment and implementation of Brexit certainly both had a part to play. In 2020, the U.K. economy shrank by 9.9%. This figure was the highest of any of the G7 economies.
Whilst the latest figures are encouraging, they place the U.K. only ahead of Italy. The 5.3% figure also does not compare well globally, as the world economy is forecast to grow by 6% this year and 4.4% in 2022. The up rating of America’s forecast has a large part to play in the overall increase.
Hope tinged with caution
The IMF’s chief economist, Gita Gopinath, wrote on a blog post that the signs are encouraging and – “Vaccinations are likely to power recoveries in many countries in 2021.”
She also sounded a note of caution about the divergence of recoveries. Countries with slower vaccine rollouts and less stable economies are likely to do less well. Developing countries with less access to vaccines and without the economic resources to fund recovery programs are likely to remain in recession, possibly for several years.
Poverty was also stressed as an area that needs to be addressed. Recent gains in poverty reduction were all but wiped out by the pandemic. The report says that the number of people classified as extremely poor is likely to have risen by 95 million last year, with a rise of 80 million in the number classed as malnourished.
The report also stated that this divergent recovery was not just between countries but was also prevalent within countries. Young people with lower skill levels have been harder hit in both developed and developing countries.
It also points out that women are likely to be hit hard as a larger percentage of the workforce is concentrated on sectors such as tourism and hospitality, which were amongst the hardest hit by the pandemic and are facing a slower recovery than the economy as a whole.