The World Economic Outlook’s latest forecast projects global growth for 2021 at 5.5 percent, 0.3 percentage point higher than the report’s October forecast, moderating to 4.2 percent in 2022.

The upgrade for 2021 reflects the positive effects of the onset of vaccinations in some countries, additional policy support at the end of 2020 in some countries including the United States and Japan, and an expected increase in contact-intensive activities as the health crisis wanes.

“After a severe recession in 2020, we are projecting the global economy to grow by 5.5 percent in 2021 and 4.2 percent next year. The 2021 number is 0.3 percentage above our October forecast. And it reflects the positive effects of the vaccine success that we saw towards the end of last year and the additional policy support that was provided in some countries. But it has been offset some by the resurgence of virus in several economies and the containment measures that have been put in place that are having a negative effect on activity,” said Gita Gopinath, IMF’s Chief Economist and Director of the Research Department.

However, Gopinath warned that there is a great deal of uncertainty around this forecast. Greater success with vaccinations additional policy support could improve outcomes, while slow vaccine rollout, virus mutations, and premature withdrawal of policy support can worsen outcomes.

“We are in a race between a mutating virus and vaccinations. And a lot depends on the outcome of this race. So, if we have better news on vaccinations, faster rollout, then things could improve much better. But on the other hand, if you have virus mutations that retard vaccinations, the many more resurgences that can have a negative effect on activity. And also, a lot depends upon how much policy support stays in place. If things go bad and financial conditions worsen, that will have a big knock-on effect because we are living at the time with very high levels of death in the world,” said Gopinath

 She also added that if vaccines and therapies remain effective against new virus strains, the world may be able to exit this crisis with less scarring than was feared but that will require much more on the policy front. 

“The foremost recommendation is to accelerate the roll out of vaccinations in individual countries, but also to make it available to all countries in the world, because that’s the only way we can end this health crisis if it ends everywhere. Fiscal policy should continue to provide effective support until we have a durable recovery and monetary policy should remain accommodative as long as inflation is not at risk,” said Gopinath.