WASHINGTON, D. C., RAW – The International Monetary Fund has maintained its 6.0 per cent global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for developing countries struggling with surging COVID-19 infections.

The divergence is based largely on better access to COVID-19 vaccines and continued fiscal support in advanced economies while emerging markets face difficulties on both fronts, the IMF said in an update to its World Economic Outlook.

“Close to 40 per cent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies and a tiny fraction in low-income developing countries,” Gita Gopinath, the IMF’s chief economist, said during a news conference.

“Faster than expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades,” she said.

The IMF significantly raised its forecasts for the United States, which it now expects to grow at 7.0 per cent in 2021 and 4.9 per cent in 2022 – up 0.6 and 1.4 percentage points respectively from the forecasts in April.

The projections assume the US Congress will approve President Joe Biden’s roughly $US4 trillion ($A5.4 trillion) in proposed infrastructure, education and family support spending largely as envisioned by the White House.

Positive spill-overs from the US spending plans, along with expected progress in COVID-19 vaccination rates, are boosting the IMF’s 2022 global growth forecast to 4.9 per cent, up 0.5 percentage point from April.

The Fund gave its biggest upgrade to the United Kingdom, lifting its 2021 growth by 1.7 percentage points to 7.0 per cent, reflecting better adaptation to COVID-19 restrictions than previously anticipated.

The euro zone received a smaller 0.2 percentage point upgrade for 2021 while Japan had a 0.5 percentage point cut, reflecting higher infections and tighter restrictions in the first half of the year.

India, which has struggled with a massive wave of coronavirus infections this year, had the biggest cut in its growth forecast – three percentage points – to 9.5 per cent for 2021.

The IMF also reduced its 2021 forecast for China by 0.3 percentage point, citing a scaling back of public investment and overall fiscal support.

The IMF also forecast lower prospects for Indonesia, Malaysia, the Philippines, Thailand and Vietnam where recent waves of COVID-19 infections are weighing on activity.

The Fund forecast that emerging Asia would grow 7.5 per cent this year, down 1.1 percentage points from the April forecast.

Low-income countries had a downgrade of 0.4 percentage point in their 2021 growth, with the Fund citing the slow rollout of vaccines as the main factor impeding their recovery.

Gopinath said the IMF views inflation pressures as transitory due to “supply-demand mismatches” as economies reopen, with high inflation readings this year, especially in the US, returning to normal levels next year.

But she said that if supply bottlenecks proved long-lasting, they could cause inflation expectations to become unanchored next year, which would be a concern.

“While we are seeing wages going up for some sectors, we are not seeing that as a broad-based phenomenon and inflation expectations are anchored,” she said.

“However, we still aren’t out of the woods yet.”

If the US central bank reassesses its inflation outlook and takes pre-emptive action to tighten monetary policy, this would add a “double-hit” to emerging markets, adding capital outflows and higher borrowing costs to their growth challenges, the IMF said.