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IMF cuts global growth forecast

By Michele Maatouk

Date: Tuesday 12 Oct 2021

LONDON (ShareCast) - (Sharecast News) - The International Monetary Fund downgraded its forecasts for global growth on Tuesday as it cautioned that supply chain issues were denting growth.
In its World Economic Outlook, the IMF cut the global GDP growth forecast for this year by 0.1 percentage points from its July estimate to 5.9%. It maintained the growth forecast for next year at 4.9%.

IMF chief economist Gita Gopinath said: "This modest headline revision masks large downgrades for some countries.

"The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions."

Gopinath said pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries.

"Overall, risks to economic prospects have increased, and policy trade-offs have become more complex."

For the UK, the IMF downgraded its growth forecast for this year by 0.2 percentage points from July to 6.8%.

The IMF said in the report that inflation risks are skewed to the upside and could materialise "if pandemic-induced supply-demand mismatches continue longer than expected".

It said central banks "should be prepared to act quickly if the recovery strengthens faster than expected or risks of rising inflation expectations become tangible".