According to the International Monetary Fund (IMF), developing economies will expand faster this year than previously expected, but those outside Asia will lag behind their more developed counterparts, potentially sabotaging progress on closing the gap in living standards.
The IMF increased its overall forecast for growth across emerging market and developed economies to 6.7 percent in 2021, up from 6.3 percent in its January survey, in its World Economic Outlook, published at the start of the IMF and World Bank spring meetings. The growth forecasts for all regions have been upgraded to 2021.
However, the fund retained its 5.0 percent growth forecast for emerging markets for 2022, while increasing its growth estimates for mature economies this year and next to 5.1 percent and 3.6 percent, respectively.
Though China and the United States both returned to pre-COVID-19 GDP levels in 2020 and are expected to do so this year, many emerging markets will not do so until well into 2023, according to IMF Chief Economist Gita Gopinath.
“In comparison to pre-pandemic expectations, the divergent recovery paths are likely to create considerably wider differences in living standards between developed countries and others,” Gopinath said.
According to the IMF, cumulative per capita income in emerging markets, except China, will be 20% lower in 2020–2022 than pre-pandemic estimates, while it will be just 11% lower in advanced economies.
“An additional 95 million people are expected to join the ranks of the poorest people in 2020, and 80 million more people are expected to be malnourished than before,” Gopinath added.
The disparities were highlighted by a geographic breakdown of growth forecasts across emerging markets. Following the lifting of trade restrictions in large countries like India, Asian economies are projected to grow by 8.6% this year and 6.0 percent in 2022.
In the meantime, emerging Europe is expected to rise by 4.4 percent this year, Latin America and the Caribbean by 4.6 percent, and the Middle East and Central Asia, as well as Sub-Saharan Africa, are expected to grow by 3.7 percent and 3.4 percent, overall.
Except of Asia, all regions were falling short of advanced economies’ growth rates, which are expected to reach 5.1 percent in 2021 thanks to massive stimulus initiatives like the $1.9 trillion pandemic relief plan introduced by Washington in the United States.
“The epidemic threatens to exact a large toll on Sub-Saharan Africa (especially, for example, Ghana, Kenya, Nigeria, and South Africa),” according to the study, which also noted that growth rates were significantly lower than expected prior to the pandemic, with tourism-dependent economies being the hardest hit.