IMF Expects Less Economic Growth From US Amid Supply Chain Chaos

The International Monetary Fund cut its global growth forecast for 2021 on Tuesday, citing supply chain disruptions and pandemic-related health concerns.

In the International Monetary Fund’s (IMF) World Economic Outlook report, released Tuesday, the IMF’s economists share anticipations for global economic growth measuring 5.9% in 2021, a downgrade from their 6% projection in July.

The downgrade comes as supply chain disruptions in advanced economies worsen and the COVID-19 pandemic accelerates in emerging markets, according to the report. The IMF predicts global economic growth of 4.9% in 2022.

“This modest headline revision … masks large downgrades for some countries,” Gita Gopinath, chief economist at the IMF, said in the report.

“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.

The IMF cut its 2021 growth estimate for the U.S. by one point to 6% due to worsening supply chain disruptions, according to the report. China’s 2021 growth projection was reduced by just 0.1% from the July predictions to 8%.

The Fund forecasts a moderate global economic growth of 3.3% beyond 2022.

The IMF said the biggest priority is to “vaccinate adequate numbers in every country and prevent more virulent virus mutations,” according to the report.

The group also raised its inflation target, saying, “inflation risks are skewed to the upside and could materialize if pandemic-induced supply-demand mismatches continue longer than expected.”

“Although central banks can generally look through transitory inflation pressures and avoid tightening until there is more clarity on underlying price dynamics, they should be prepared to act quickly if the recovery strengthens faster than expected or risks of rising inflation expectations become tangible,” the IMF warned in the report.