Expedited vaccine rollouts in many major economies have enhanced the global growth outlook for 2H 2021. The World Bank and IMF revised up their forecasts from 4% and 5.5% to 5.6% and 6% respectively for 2021.
The latest estimate from the WTO sees the volume of world merchandise trade increasing by 8.0% in 2021 after having fallen 5.3% in the previous year. Many agencies and experts opine that inflation is going to be higher than expected, but the debate over whether it is transitory or not is still not settled. In any case, major central banks in the world have not indicated an end to their dovish outlook for the rest of the year.
There is little doubt that the global recovery is going to be even with less developed countries struggling to access vaccines while combating significant stress to their external sector. The IMF has cut the growth outlook for low-income countries by 40 bps.
The economies of Sri Lanka’s key trading partners are expected to recover in 2021. The IMF upgraded growth projections for the US (+0.6 pps) and UK (+1.7 pps) but downgraded the same for India (-3.0 pps) and China (-0.3 pps) in its July economic update.
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