Women, wearing face masks, walk through a business street in New York on Tuesday. Associated Press

The International Monetary Fund on Tuesday raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

It said multiple vaccine approvals and the launch of vaccinations in some countries in December had boosted hopes of an eventual end to the pandemic that has now infected nearly 100 million people and claimed the lives of over 2.1 million globally.

But it warned that the world economy continued to face “exceptional uncertainty” and new waves of COVID-19 infections and variants posed risks, and global activity would remain well below pre-COVID projections made one year ago.

Close to 90 million people are likely to fall below the extreme poverty threshold during 2020-2021, with the pandemic wiping out progress made in reducing poverty over the past two decades. Large numbers of people remained unemployed and underemployed in many countries, including the United States.

In its latest World Economic Outlook, the IMF forecast a 2020 global contraction of 3.5%, an improvement of 0.9 percentage points from the 4.4% slump predicted in October, reflecting stronger-than-expected momentum in the second half of 2020.

It predicted global growth of 5.5% in 2021, an increase of 0.3 percentage points from the October forecast, citing expectations of a vaccine-powered uptick later in the year and added policy support in the United States, Japan and a few other large economies.

It said the US economy - the largest in the world - was expected to grow by 5.1% in 2021, an upward revision of 2 percentage points attributed to carryover from strong momentum in the second half of 2020 and the benefit accruing from $900 billion in additional fiscal support approved in December.

The forecast would likely rise further if the US Congress passes a $1.9 trillion relief package proposed by newly inaugurated President Joe Biden, economists say.

China’s economy is expected to expand by 8.1% in 2021 and 5.6% in 2022, compared with its October forecasts of 8.2% and 5.8%, respectively, while India’s economy is seen growing 11.5% in 2021, up 2.7 percentage points from the October forecast after a stronger-than-expected recovering in 2020.

The Fund said countries should continue to support their economies until activity normalized to limit persistent damage from the deep recession of the past year.

Low-income countries would need continued support through grants, low-interest loans and debt relief, and some countries may require debt restructuring, the IMF said.

The global economy is expected to see a strong rebound this year but the coronavirus crisis is causing severe damage, IMF chief economist Gita Gopinath said  on Tuesday.

“Now at $22 trillion, the projected cumulative output loss over 2020 to 2025, relative to the pre-pandemic projected levels remains substantial,” Gopinath told reporters.

Saudi Arabia’s economy will grow 2.6% this year, the International Monetary Fund (IMF) said on Tuesday, after the economy of the world’s top oil exporter shrank last year due to low oil prices and the coronavirus crisis.

Saudi Arabia itself has estimated its economy could swing back to growth of 3.2% this year after a 3.7% contraction in 2020.

The IMF in October had forecast 3.1% growth in 2021 for the country, following a 5.4% contraction last year. The IMF is now predicting 2.6% expansion this year, from a 3.9% contraction last year, it said in its latest World Economic Outlook.

It expects the Saudi economy to expand by 4% next year.

The IMF said that multiple vaccine approvals and the launch of vaccinations in some countries in December had boosted hopes of an eventual end to the pandemic, but warned that the world economy continued to face “exceptional uncertainty”.

Turkey’s economy will grow by about 6% in 2021, before settling back to a growth rate of about 3.5% annually from 2022, International Monetary Fund staff said on Monday, but they urged Ankara to deploy additional targeted stimulus to address COVID-19 pandemic needs.

The 6% GDP growth projection in the preliminary findings of the IMF’s annual review of Turkey’s economy compare with a previous 2021 growth projection of 5% for Turkey issued in October as part of the IMF’s last World Economic Outlook.

The IMF plans on Tuesday to issue new projections for the WEO, which had previously estimated that Turkey’s economy would shrink 5.0% in 2020.

The IMF said the more optimistic forecast is due to the rollout of a vaccine, recovery of trading partner growth and carry-over of positive momentum at the end of 2020.

Turkey implemented direct fiscal measures of just 2.5% of GDP in 2020 but more “targeted and temporary” fiscal support was needed, the IMF said.

“Turkey has some fiscal space to expand support in 2021, possibly in the order of 1% of GDP. Additional social transfers to vulnerable households and informal workers would help support those most affected by the pandemic,” the IMF staff said.