The International Monetary Fund on Tuesday raised its forecast for global economic growth in 2021 but warned that there was still “extraordinary uncertainty” about the outlook.
In its latest World Economic Outlook report, the global lender raised the world growth forecast for this year to 5.5% from 5.2% in October. World economic growth is projected at 4.2% in 2022.
The upgrade for this year reflects the positive effects from the start of vaccinations in some countries, additional fiscal support in the US and Japan, and at least a partial return to business and consumer normality as the health crisis abates.
Meanwhile, in the US, at the end of its two-day meeting on Wednesday, the Federal Reserve announced that it kept its benchmark interest rate anchored close to zero. Along with the commitment to zero rates, the central bank said it will keep buying at least $120 billion of bonds a month for the foreseeable future.
The post-meeting statement noted that growth has “moderated in recent months”. In addition to repeating its belief that the path of the economy is dependent on the virus progression, the statement added “progress on vaccinations” to its watchlist.
“The economy is a long way from our monetary policy and inflation goals, and it’s likely to take some time for substantial further progress to be achieved,” Fed chairman Jerome Powell said at a scheduled conference after the meeting.
Finally, the German economy is set to contract in the first quarter as the restrictions imposed in response to a surge in coronavirus infections hit the German economy this winter.
The DIW Institute said on Wednesday that it projects output will contract by 3% in the first quarter of 2021 after stagnating in the fourth quarter, the think tank estimated.
Sentiment has recently deteriorated noticeably in the car industry, noted Simon Junker, an expert at DIW Institute.
The recent lockdown has further worsened the performance of many companies, which increases the risk of a wave of bankruptcies, at least in the sectors particularly affected.
This report was compiled by Bank of Valletta for general information purposes only.