The Washington-based international financial institution World Bank has increased its global growth forecast for 2021 to 5.6 percent, predicting the fastest economic rebound in the past 50 years for the pandemic hit the globe.
Global gross domestic product (GDP) will expand 5.6 percent this year, up from 4.1 percent forecast in January, the Washington-based development organization said in its semi-annual Global Economic Prospects report. That will be fueled largely by a 6.8 percent expansion in the US and 8.5 percent in China.
“This recovery is uneven and largely reflects sharp rebounds in some major economies, most notably the United States, owing to substantial fiscal support, amid highly unequal vaccine access,” the World Bank said in the report.
The projected global expansion would make 2021 the fastest year of growth since 1973’s 6.6 percent, the bank said. Many emerging markets and developing economies were seeing increased COVID-19 cases, difficulties with mass vaccination and withdrawal of support, the bank noted, while calling for wider distribution of vaccines to low-income countries.
About 90 percent of advanced economies are expected to return to pre-pandemic levels next year, measured by income per person, versus just a third of developing countries.
In the US and some other wealthy countries, vaccines have become much more widely distributed which boosted their output, as forecasts lag for emerging market and low-income countries.
By 2022, this will leave global output about 2.0 percent below pre-pandemic projections and about two-thirds of emerging market economies will still not have made up last year’s per-capita income losses.
If vaccine distribution to developing countries can be accelerated, the currently forecasted 2022 global GDP growth of 4.3 percent could be substantially increased to around 5.0 percent, World Bank economist Ayhan Kose said.
World Bank said in its January 2021 Global Economic Prospects that the global economy was on track to expand 4.1 percent in 2021, assuming that the initial vaccine rollout becomes widespread throughout the year.
World Bank President David Malpass has been urging rich nations including the US to free up surplus vaccine doses to developing countries as quickly as possible. The World Bank report also noted risks associated with rising inflation pressures that will add about one percentage point to global inflation in 2021.
The report said that the fall in inflation last year was the “most muted and shortest-lived of any of the five global recessions over the past 50 years.” And the increase in inflation since May 2020 has been faster than in previous recoveries, but it said that inflation expectations were expected to remain well-anchored, pointing to low and stable inflation in the long term.
“If this increase is temporary and inflation expectations remain well-anchored, this may not warrant a monetary policy response. If, however, inflation expectations risk becoming unanchored, EMDE central banks may be compelled to tighten monetary policy more than would be appropriate for their economies’ recoveries,” the bank said.
The report said market concerns about inflation could raise borrowing costs in emerging markets and low-income countries that are also more challenged by short-term inflation because of rising food costs.