I.M.F. Lowers Economic Growth Forecast for 2021

Pandemic outbreaks in critical links of global supply chains have resulted in longer than expected supply disruptions, feeding inflation in many countries. Overall, risks to economic prospects have increased and policy trade-offs have become more complex. Compared to our July forecast, the global growth projection for this year has been revised down marginally to 5.9 percent, and is unchanged for 2022 at 4.9 percent. What we’re seeing is supply-demand mismatches that have lasted a long time because the pandemic has also lasted a long time. So while we’ve seen a rebound in demand, supply hasn’t been able to rebound as fast, and that combination has led to high levels of inflation. We’ve seen that in commodity prices. We’re also seeing that in supply chain breakdowns. So again, the expectation is that some of this will persist into next year, but then, over time, we expect that these will iron out, and we should expect to see inflation coming back to much more normal ranges. But again, I’m just going to emphasize that there is tremendous uncertainty. We have never seen a recovery of this kind, where you have shortages in the labor market at the same time that you have high levels of unemployment, the fact that you have ports that aren’t able to offload container ships. So this is very unique, and we have to be particularly vigilant.