By David Lawder

WASHINGTON (Reuters] – The persistent supply chain disruptions, pricing pressures and the price wars in the world are limiting the economy’s recovery after the COVID-19 pandemic. That was what the International Monetary Fund stated on Tuesday when it reduced growth prospects for the United States of America and other major industrial countries.

The IMF has reduced its global growth projections for 2021 to 5.9%, down from 6.0% in July’s World Economic Outlook. At 4.9%, it left the 2022 global economic growth forecast unaffected.

According to the IMF, “This minor headline revision however masks substantial downgrades for certain countries.” Due to the worsening of pandemic dynamics, “the outlook for the low income developing country group has darkened significantly.” This downgrade is also due in part to worsening pandemic dynamics and more challenging near-term prospects of advanced economies.

Global manufacturing activity was hit hard by shortages in key components like semiconductors. Clogged ports, lack of cargo containers and labor crunch have all contributed to global production activity.

Inflation spikes are caused by mismatches between demand and supply. This is partly due to excess savings in rich countries. While the IMF expects that inflation will return to prepandemic levels in 2013, it warned that prolonged supply disruptions may lead to inflation expectations not being supported.

U.S. GROWTH LOWDOWN

These effects are disproportionately affecting the United States. The IMF has lowered its U.S. growth forecast for 2021 by one percentage point to 6.0% from 7.0% in July. This is the highest level since 1984.

The IMF warned that U.S. economic growth may shrink more because it assumes that President Joe Biden will be able to approve the proposed $4 trillion in infrastructure spending and Social Spending over a decade. Now, lawmakers seek to agree on a smaller package. The IMF warned that significant cuts would decrease the growth prospects of the United States as well as its trading partners.

This report was released at the beginning of the IMF/World Bank fall meeting. It also reduced growth forecasts for industrial economies. German growth fell by half a point, from 3.1% in July to 2.4%. Japan’s growth declined by 0.4 to 2.4%.

British growth was only 0.2% lower than the IMF forecast, which is 6.8%. This makes it the G7’s fastest-growing economy.

China’s 2020 growth outlook was cut by 0.1 points to 8.0%. This is due to the IMF noting a slower-than-expected scaling back of public investments. India’s growth forecast was stable at 9.5%. However, prospects for other emerging Asian nations have declined due to the worsening pandemic.

The IMF lowered its projections by 1.4 points in the ASEAN-5″ grouping consisting of Indonesian, Malaysian, the Philippines and Singapore.

Higher commodity and oil prices have led to some modest gains in growth for commodity-exporting nations like Nigeria, Saudi Arabia and Saudi Arabia.

VACCINE DIVIDE

It also warns of dangerous divergence of economic prospects caused by the “great vaccine divide”. Low-income countries where 96% remain unvaccinated face lower growth, longer periods of poverty and de-anchored inflation.

According to the report, “increased poverty is expected to reach 65 to 75 million in 2021” compared to prepandemic projections. The report also stated that countries with low income need to spend $250 billion more to defeat COVID-19 and get back to their pre-pandemic growth rates.

These countries have an expected cumulative output that will be 6.7% lower than the pre-pandemic level next year. According to the IMF, advanced economies in 2022 will be producing nearly 1 percent more output than they did pre-pandemic.