Washington – The International Monetary Fund on Tuesday forecast that Japan’s economy will grow 2.8% in 2021 from a year before, down 0.5 percentage point from its April estimate as the country continues to struggle to contain the spread of COVID-19.
The global growth projection remained unchanged at 6.0%, as dimmed prospects for Japan and emerging economies such as China and India were offset by improved outlooks for the United States and some other major advanced economies.
In an update of the World Economic Outlook report, the Washington-based institution highlighted the continuing divergence of economic recoveries from the pandemic due to differences in the pace of COVID-19 vaccine rollouts and policy support.
“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs,” the IMF said, drawing a distinction between countries that can expect further normalization of activity later this year — almost all advanced economies — and those that will face resurgent infections and rising deaths from the pandemic.
“The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere,” it added, warning of the highly contagious delta variant that is pushing up the number of cases in many parts of the world.
Japan was the only country among the Group of Seven industrialized nations that faced a downgrade in the IMF’s latest economic outlook. The country’s vaccine rollout initially lagged those of other developed countries, and it has imposed anti-virus business restrictions amid a rise in infection cases.
But the world’s third-largest economy is anticipated to see a stronger rebound in the second half of 2021, supported by further inoculation efforts. The IMF raised its growth outlook for 2022 by 0.5 point to 3.0%.
IMF chief economist Gita Gopinath said no major economic impact was expected from holding the Tokyo Olympics without allowing spectators from the general public at venues in and around the Japanese capital amid the pandemic, given that most of the infrastructure spending — a key factor to lift the economy — for the Games was done in the past.
But she noted at a news conference that Japan was facing “further downside risk” coming from the most recent COVID-19 state of emergency declared for Tokyo from July 12, which was not reflected in the latest report.
On the back of its mass vaccination campaign, the United States is projected to continue to power the global economic recovery, with its growth forecast for 2021 revised upward by 0.6 point to 7.0% and that for 2022 by 1.4 points to 4.9%.
The brighter U.S. outlook, supported by anticipated legislation for additional fiscal support later this year, has largely helped lift global growth prospects for 2022 by 0.5 point from the April estimate to 4.9%, according to the IMF.
China, the world’s second-largest economy, is expected to see a 0.3 point lower growth at 8.1% for 2021, due to a scaling back of public investment and fiscal support, but a 0.1 point higher growth at 5.7% the following year.
India was cited by the IMF as among countries whose recovery has met with severe setbacks in the face of renewed waves of COVID-19 infections. The country’s growth forecast for 2021 was slashed by 3.0 points to 9.5%.
World trade volumes are projected to expand 9.7% in 2021 from the previous year, up 1.3 points from the April estimate.
The IMF acknowledged that better world cooperation to boost widespread vaccine access may improve the global economic outlook, but noted that downside risks “dominate in the near term.”
Among the risks are slower distribution of vaccines and recent upward pressures on prices becoming more persistent and leading to an abrupt tightening of monetary policy in the United States and elsewhere, it said.
Higher interest rates in the United States are feared to lead to significant capital outflows from emerging and developing economies, delivering a blow to such countries already hit by the global health crisis.
In most advanced economies, inflation is expected to subside to pre-pandemic ranges in 2022 and major central banks are anticipated to leave policy rates unchanged throughout the end of that year, the IMF said in its report.
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