August 3, 2021
IMF World Economic Outlook Revises Growth Forecasts
Every week, Flexport Chief Economist Phil Levy offers a quick analysis of relevant public data for the global trade community.
See what the latest indices reveal and keep up with the facts and figures that could impact your business.
Here’s the chart for the week of August 2, 2021.
This week, it's the IMF World Economic Outlook, July Update.
Source: IMF World Economic Outlook (WEO).
The International Monetary Fund just issued the quarterly update to its global economic projections (prior to this week’s GDP releases).
There was no change to the overall projection for global GDP growth in 2021 (6.0%), and there was a 0.5 percentage point upward revision for the 2022 projection (to 4.9%). But these placid overall projections mask important changes underneath.
One theme of the report was a growing divergence between advanced and developing economies, largely driven by the pandemic and vaccine access.
2021 growth projections for advanced countries were raised by 0.5 percentage points, while the developing world was lowered by 0.4. That included China, whose 2021 growth projection was lowered by 0.3 percentage points to a still-lofty 8.1%. Overall, the IMF saw risks tilting to the downside for growth.
The general growth pattern in the chart is not wildly different from past forecasts. All the economies listed—except China—saw a contraction in 2020 and then significantly better growth forecast for 2021. For all but Japan, that growth is expected to taper off in 2022.
The biggest revisions of the group were for the United States, where the growth forecast was raised by 0.6 percentage points in 2021 and 1.4 in 2022 from what the IMF had predicted in April. The UK was bumped up by 1.7 in 2021, but down by 0.3 in 2022. There were downward 2021 growth revisions for both China and Japan (0.5).
The IMF also looked at trends in inflation and is very much in the camp seeing transitory price pressures. It saw oil prices climbing by 56.6% in 2021, but falling by 2.6% in 2022. Nonfuel commodity prices are predicted to rise by 26.5% in 2021 then fall by 0.8% in 2022.
Putting this into a broader inflation picture, the IMF calls for advanced economies to experience 2.4% inflation in 2021 and 2.1% in 2022. The corresponding forecasts for the US are 4.0% and 3.3%; the Euro Area 1.8% and 1.3%. Two key determinants of this optimistic forecast are continued slack in labor markets – a pool of ready workers keeping wages in check – and relatively low inflation expectations.
World trade volumes (goods and services) fell by 8.3% in 2020, but are seen rising by 9.7% across 2021 and by 7.0% in 2022. This growth is supposed to be predominantly in goods trade, as services trade is still inhibited by cross-border travel restrictions.