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IMF upgrades 2021 growth forecast on stimulus in Japan, US

Women carry shopping bags on Dec. 10, 2020, in New York. The spread of COVID-19 vaccines will power a stronger global economic recovery in 2021, the International Monetary Fund forecast on Jan. 26, 2021. (AP Photo/Mark Lennihan)

WASHINGTON (Kyodo) -- The International Monetary Fund on Tuesday forecast the global economy to grow 5.5 percent in 2021 from a year before, upgrading its October estimate by 0.3 percentage point as Japan and the United States rolled out fresh stimulus funding to weather the coronavirus pandemic.

    Japan is expected to see a 3.1 percent economic expansion this year, up 0.8 point from the earlier estimate, while U.S. growth is projected at 5.1 percent, up 2.0 points, the Washington-based institution said in its update of the World Economic Outlook report.

    "The upgrade for 2021 reflects the positive effects of the onset of vaccinations in some countries, additional policy support at the end of 2020 in economies such as the United States and Japan and an expected increase in contact-intensive activities as the health crisis wanes," IMF chief economist Gita Gopinath said.

    But the report also noted "exceptional uncertainty" surrounding the latest projection, such as the possible difficulty of containing the virus surge, including from new variants, the risk of rapid infections and deaths before vaccines are widely available, and stronger-than-expected lockdowns to stop the spread of the virus.

    The expected rebound follows an estimated 3.5 percent pandemic-induced contraction in 2020, which is less dire than previously projected but remains "the worst peacetime global contraction since the Great Depression" in the 1930s, Gopinath said.

    Relative to pre-pandemic projected levels, the anticipated cumulative output over 2020-2025 stands to take a "substantial" loss worth some $22 trillion, she added.

    The IMF attributed the upward revision of Japan's 2021 forecast to the "additional boost" from the fiscal measures introduced at the end of last year. The Japanese government approved in December a fresh economic package worth 73.6 trillion yen ($709 billion).

    The United States also came up with a $900 billion coronavirus relief package in December, the second-largest stimulus package in the country's history.

    The strength of the projected recovery varies significantly across countries, with the United States and Japan projected to regain end-2019 activity levels in the second half of 2021, while in the euro area activity is expected to remain below end-2019 levels into 2022, the IMF said.

    Next year, the global economy is projected to grow 4.2 percent, unchanged from the October projection.

    Japan's growth is likely to moderate to 2.4 percent in 2022, up 0.7 point from the earlier estimate, while the United States is expected to see a growth rate of 2.5 percent the same year, downgraded by 0.4 point, according to the IMF.

    China, which managed to achieve what the IMF calls a "strong recovery" such as through effective virus containment measures and central bank liquidity support, is expected to grow 8.1 percent this year and 5.6 percent in 2022.

    The eurozone economies are likely to expand 4.2 percent this year and 3.6 percent next year.

    Growth in world trade volume was revised downward by 0.2 point from the October forecast to 8.1 percent in 2021 and upgraded 0.9 point to 6.3 percent in the following year, according to the IMF.

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