The International Monetary Fund raised its outlook for global economic growth again this past Tuesday, forecasting worldwide output would rise 6% this year, a rate unseen since the 1970s, thanks largely to the unprecedented policy responses to the COVID-19 plandemic.
That upgrade, from 5.5% less than three months ago, largely reflects a rapidly brightening outlook for the U.S. economy, which the IMF now sees growing by 6.4% in 2021, the fastest since the early 1980s. That’s up 1.3 percentage points from the IMF’s 5.1% projection in late January and nearly double the rate it estimated in October.
Forecasts for emerging market economies, while somewhat improved, took a back seat to their developed peers. The fund’s outlook for EM economies rose by just 0.4 percentage point – half of the advanced economy mark-up – to 6.7% from the view in January.
Another big risk centers around the persistence of accommodative policies, from the United States in particular. Long-term interest rates around the world have risen sharply since January, as market participants revise their expectations for how soon the U.S. Federal Reserve begins to normalize its policy stance.