CANBERRA, AAP – The International Monetary Fund has upgraded its global economic forecasts, including for Australia, but warns the recovery from recession still depends on the rollouts of coronavirus vaccines.
It says multi-speed recoveries are under way in all regions, but with stark differences in the pace of vaccine rollout, the extent of economic policy support, and structural factors, such as reliance on tourism.
“The outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis,” the IMF said on Tuesday.
In it latest World Economic Outlook it is now projecting a stronger recovery for the global economy in 2021 and 2022 compared to its previous predictions made in January.
The world economy is now expected to grow by six per cent in 2021 and 4.4 per cent in 2022, compared with 5.5 per cent and 4.2 per cent respectively previously.
For Australia, the IMF is expecting the economy to grow by 4.5 per cent this year and 2.8 per cent in 2022. In January, the IMF had expected the economy to growth by 3.5 per cent in 2021.
But the Washington-based institution warns a high degree of uncertainty surrounds these projections, with many possible downside and upside risks.
“Much still depends on the race between the virus and vaccines,” it says.
“Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade.”
Despite the Reserve Bank’s efforts to fuel the economy through record low interest rates, the IMF expects inflation to be still below the central bank’s two to three per cent target band at the end of next year.
It forecasts the rate of inflation to be 1.7 per cent this year and 1.6 per cent in 2022.
The IMF also does not expect Australia’s unemployment rate to be comfortably below six per cent until next year, forecasting a rate of 5.5 per cent in 2022.
The jobless rate did unexpectedly dip to 5.8 per cent in February, but there is now uncertainty about the employment outlook after the government’s JobKeeper wage subsidy program came to an end last month.