What is World Economic Outlook Update, January 2021?

Recently, the International Monetary Fund (IMF) has issued the World Economic Outlook Update.

• According to the IMF, multiple vaccines currently being rolled out around the world raised the prospect of an eventual end to the coronavirus pandemic in 2021.
• Like 2020, 2021 economic outlook is still closely related to COVID-19, which is still the only factor driving everything at this point.
• BAD NEWS: The strength of the projected recovery varies across countries, “depending on the severity of the health crisis, the extent of domestic disruptions to activity (related to the structure of the economy and its reliance on contact-intensive sectors), the exposure to cross-border spillovers, and effectiveness of policy support to limit persistent damage.”
• The pandemic-induced acceleration in inequality by reiterating that close to 90 million people are likely to fall below the extreme poverty threshold during 2020-21

K-SHAPED RECOVERY:

1. The global economy is projected to grow 5.5% in 2021 and 4.2% in 2022.
2. For the Emerging Market and Developing Economies category, Asian economies are projected to do much better – at 8.3 percent overall, leading by India (11.5 percent) and China (8.1 percent), compared with Sub-Sahara Africa at only 3.2 percent.
3. India’s Gross Domestic Product (GDP) will grow by 11.5% in the Financial Year (FY) 2021-22 , 2.7% higher than the projection made in October, 2020. In FY 2022-23, the economy will likely grow 6.8%.
4. This revision for the current fiscal is higher than the government’s first advance estimate of 7.7% and also the RBI’s estimate of 7.5%.
   This great divergence in growth in the aftermath of a major pandemic has historic precedents, and the economics academic across the world termed it as the K-shaped recovery, valid across different social strata within the same country.