WASHINGTON: Supply chain disorders around the world are price increases and drying momentum out of the recovering economy from the Pandemic Covid-19, the IMF warns on Tuesday.
The ongoing hit from the pandemic and failure to distribute vaccines around the world worsen economic gaps and dark outleasts for developing countries, the IMF said in the economic outlook for the latest world.
The global economy is expected to grow 5.9 percent this year, only slightly lower than projected in July, before slowing to 4.9 percent by 2022, the report said.
But the overall number covered a large downgrade and struggling on several countries, including the United States, Germany and Japan who felt the impact of supply congestion, said the chief economist IMF Gita Gopinath.
“This recovery is very unique,” he told AFP on the sidelines of the annual meeting of the International Monetary Fund and the World Bank.
Apart from the return of strong demand, “the supply side has not been able to return as soon as possible,” partly hampered by the deployment of the Delta variant of Covid-19, which has made workers reluctant to return to their work.
The lack of labor “feeds into price pressure” in the big economy, he said, slowing down this year’s growth expectation.
The price of energy has reached a multi-year high in the past few days, with oil above $ 80 per barrel, burdening the household.
But Gopinath said he expected energy prices to start backward at the end of the first quarter of 2022.
In developing countries with low income, prospects “had increased rapidly because the deterioration of the dynamics of the pandemic,” he said in a blog post on a new estimate.
The setback, which he faces on “the division of a large vaccine,” will have an impact on the recovery of living standards, and a prolonged decrease in pandemic “can reduce global GDP cumulative $ 5.3 trillion over the next five years,” he warned.
“Divergence dangerous in the economic outlook throughout the country remains a major concern,” Gopinath said.
The developing economy is expected to regain “pre-pandemic trend routes in 2022 and exceed 0.9 percent by 2024,” he said.
However, in the developing market and developing economies, not including China, output “is expected to remain 5.5 percent below pre-pandemic estimates in 2024.” In the midst of the dangers of long-term scarring, “Therefore, the most important policy priority is to vaccinate at least 40 percent of the population in each country at the end of 2021 and 70 percent in mid 2022,” he said.
The world’s largest economy has benefited from massive fiscal stimulus, but delta waves and supply problems have damaged progress, encouraging the IMF to cut US growth estimates for this year to six percent, a full percentage of July.
US growth is expected to slow down to 5.2 percent next year, a little faster than previously thought, but policy makers will face fine balancing acts amid the risk of increasing inflation and work left behind, which is recorded by funds.
Wages also threaten to rise when entrepreneurs compete for rare workers, Gopinath said.
While inflation is expected to return to “more normal level” in the mid 2022 in most countries, it can take longer in the United States, he told reporters.
“There is an extraordinary uncertainty, we have never seen this kind of recovery,” he said, noting a shortage of labor which disturbed employers even in high unemployment, and supply could not meet demand.
US consumer prices rose 5.3 percent every year in August, more than double the Federal Reserve’s two percent goal.
The market on Wednesday will oversee the September government inflation report.
US Treasury Secretary Janet Yellen said he believed in price increases would be “temporary.” “But I don’t intend to suggest that these pressures will disappear on the next one or two months,” he told CBS News.
“This is an unprecedented surprise for the global economy.” However, if higher inflation becomes entrenched, he can force the central bank to respond aggressively, and the increase in interest rates will slow down recovery, the IMF is warned.