The International Monetary Fund (IMF) on Tuesday projected that the global economy would grow by 5.9 percent in 2021, down by 0.1 percentage point from July's forecast, according to the latest World Economic Outlook (WEO).
"The global recovery continues but momentum has weakened, hobbled by the pandemic," IMF Chief Economist Gita Gopinath told a virtual press briefing during the annual meetings of the IMF and the World Bank Group.
Fueled by the highly transmissible Delta variant, the recorded global COVID-19 death toll has risen close to 5 million and health risks abound, "holding back a full return to normalcy," Gopinath noted.
"Pandemic outbreaks in critical links of global supply chains have resulted in longer than expected supply disruptions, feeding inflation in many countries," she continued.
Noting that overall risks to economic prospects have increased and policy trade-offs have become "more complex," the IMF chief economist said the "modest headline revision" for the global economy "masks large downgrades for some countries."
"The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics," she said.
Stressing that the "dangerous divergence" in economic prospects across countries remains a major concern, Gopinath said these divergences are a consequence of the "great vaccine divide" and large disparities in policy support.
While almost 60 percent of the population in advanced economies are fully vaccinated and some are now receiving booster shots, about 96 percent of the population in low-income countries remain unvaccinated, according to the IMF.
The IMF chief economist urged the global community to step up efforts to ensure equitable vaccine access for every country, overcome vaccine hesitancy where there is adequate supply, and secure better economic prospects for all.
The latest WEO report showed that advanced economies are on track to grow by 5.2 percent this year, down by 0.4 percentage point from July's forecast, which reflects more difficult near-term prospects, in part due to supply disruptions.
The United States and the euro area are projected to see economic growth of 6.0 percent and 5.0 percent respectively.
Emerging market and developing economies, meanwhile, are projected to grow by 6.4 percent in 2021, up by 0.1 percentage point from July's forecast. That is in part due to the upgraded projections for some commodity exporters on the back of rising commodity prices, according to the report.
Low-income developing countries are on track to grow by 3.0 percent this year, down 0.9 percentage point from July's forecast.
The Chinese economy is expected to grow by 8.0 percent this year, down by 0.1 percentage point from July's forecast. The slight downward revision reflects stronger-than-anticipated scaling back of public investment, the report showed.
In response to a question from Xinhua, Gopinath said the IMF is aware that China has formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Noting that the CPTPP is a high quality trade agreement, the IMF chief economist said she believes "it would be good for the world" to have more countries join such an agreement.
The latest WEO report also highlighted inflation risks in certain countries. The IMF projects that headline inflation will likely return to pre-pandemic levels by mid-2022 for the group of advanced economies and emerging and developing economies. There is, however, considerable heterogeneity across countries with upside risks for some, like the United States, Britain, and some emerging market and developing economies.
There is "tremendous uncertainty," Gopinath noted. "We have to be particularly vigilant, and make sure that these particular supply side shocks don't end up with de-anchoring inflation expectations, or creating wage price spirals."
"Monetary policy will need to walk a fine line between tackling inflation and financial risks and supporting the economic recovery," she noted.