The IMF cut its growth predictions by a full percentage point to 6 per cent on Tuesday in its World Economic Outlook, down from 7 per cent in July, reflecting the problems the country has had with supply chains, inflation and weaker consumer spending in the third quarter.
This cut marks the largest reduction suffered by a G7 economy. This could have a knock-on effect on the global economy. The global economy is expected to grow 5.9 per cent this year. That’s down by 0.1 per cent from the July forecast.
“Rapid spread of Delta and the threat of new variants have increased uncertainty about how quickly the pandemic can be overcome,” said the financial institution. “Policy choices have become more difficult, confronting multidimensional challenges – subdued employment growth, rising inflation, food insecurity, the setback to human capital accumulation, and climate change – with limited room to manoeuvre.”
Growth forecasts for China, Japan and Germany have also been cut. Shortages of materials are hampering German production, Japan has been battling an uptick in coronavirus cases and endured lockdowns between July and September, and China has scaled back on public spending.
The implications of Covid-19 on low-income countries is worsening. Although around 60 per cent of residents in world-leading economies are fully vaccinated, there are shockingly low vaccination rates in developing countries – where only 96 per cent of people are unvaccinated, states the IMF. The organisation told wealthy countries to act on their vaccine and climate change promises to low-earning countries as it warned of global repercussions.
Predictions for 2022 remained unchanged, the IMF expects the world’s strongest economies to return their pre-pandemic growth next year, as issues with supply chains and inflation subside. It expects a growth of 1 per cent in 2024.