Regional Economic Outlook 10/19/2021
Navigating Waves of New Variants
Pandemic Resurgence Slows the Recovery
The COVID-19 pandemic has taken a turn for the worse in some parts of the world, and the global economy is projected to grow by 5.9 percent in 2021 and by 4.9 percent in 2022 (0.1 percentage point lower for 2021 than in the July 2021 World Economic Outlook Update). Vaccine access has emerged as the principal fault line along which the global recovery splits into those that can look forward to further normalization of activity (mostly advanced economies) and those that face mounting hospitalizations and death tolls because of resurgent infections. Beyond 2022, global growth is projected to moderate to about 3.5 percent over the medium term. The ongoing rise in inflation is expected to be transitory, though uncertainty remains high.
The Asian outlook for 2021 has been downgraded by more than 1 percent to 6.5 percent compared with the April 2021 World Economic Outlook because of new peaks of the pandemic cycle driven by the highly contagious Delta variant. As vaccination rates accelerate, the region is expected to grow slightly faster in 2022 than anticipated earlier. Although Asia and Pacific remains the fastest growing region in the world, the divergence between Asian advanced economies and emerging market and developing economies is deepening, reflecting vaccination coverage and policy support, and medium-term output levels in emerging market and developing economies are expected to remain below pre-pandemic trends. Risks are tilted to the downside, mainly because of uncertain pandemic dynamics, vaccine efficacy against virus variants, supply chain disruptions, and potential global financial spillovers from US monetary normalization in the presence of domestic financial vulnerabilities.
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