On its way to recovery, the global economy is projected to grow 6% in 2021 and 4.9% in 2022, the International Monetary Fund reported.
The IMF expects inflation to return to pre-pandemic levels in most countries in 2022, and warned that central banks should avoid tightening through transitory inflationary pressures.
"Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls," the IMF report said. "The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere."
Countries with higher vaccination rates (mostly advanced economies) have a brighter outlook for returning to pre-pandemic levels, whereas less vaccinated countries do not, the IMF said.
The current economic forecast for the year has not changed from what it was in April, according to the report, although there have been offsetting revisions. These revisions were due to prospects for developing nations and especially Asia being decreased, while projections in the west increased by 0.5%. The higher projections for the west were attributed to the expected United States economic stimulus in the second half of the year and better health metrics.
The IMF report also anticipates that inflation will return to where it was prior to the coronavirus in most of the world in 2022, although it is expected to remain in some developing countries, particularly in regard to food prices. Despite this, the IMF believed that central banks should not tighten the money supply as of yet, but that they might need to if inflation lasts for longer than expected. The report also said that communication from central banks to keep the public's expectations of inflation under control would be key.
The IMF report also said that the pandemic worsening simultaneously in both the developing world and the west while the money supply was tightened would cause economic under performance relative to expectations. The public's expectations for inflation quickly increasing could also cause economic disruptions. The IMF believed that the worldwide distribution of coronavirus vaccines should be a top priority.
The IMF has a $50 billion proposal with the goal of ending the coronavirus pandemic. It was endorsed by the World Health Organization, World Trade Organization and World Bank.