On Tuesday, the International Monetary Fund degraded prospects for economic growth globally, noting that while advanced economies are determined to rebound in the near-term, low-income developing countries continue to struggle with the spread of COVID - 19.
The divergence in economic prospects across countries remains a major concern, said IMF Chief Economist Gita Gopinath.
The IMF updated its World Economic Outlook, lowering its forecast for global growth in 2021 to 5.9% from 6.0% in its July forecast It maintained its projection of 4.9% growth in 2022.
But the report notes that while growth in developing economies is largely expected to return to the pre-pandemic trend in 2022, emerging market and emerging economies excluding China will remain 5.5% below the trend in 2024.
Gopinath said this would result in a larger setback to improvements in their living standards. The report specifically detailed the downgrades in the outlook for five Southeast Asian countries Indonesia, Malaysia, Philippines, Thailand and Vietnam where the IMF slashed growth prospects to 2.9% from 4.3% in 2021.
Worker shortages and COVID - 19 restrictions in advanced export countries like Vietnam have already been felt in developed nations such as the U.S. where companies like Nike have been pinched on inventory.
A supply disruption also led the IMF to degrade some growth projections for advanced nations as well.
The IMF is now forecasting the U.S. economy to grow by 6.0% this year, a downgrade from 7.0% it had forecast in June. The IMF expects a slightly better 2022, projecting 5.2% growth an upgrade from the 4.9% it forecast in July The IMF also downgraded 2021 growth prospects for Germany, Spain, Japan, the United Kingdom and Canada. China is predicted to grow by 8.0% in 2021, a tickdown from the 8.1% it had forecast in July.
Broadly, the IMF emphasized the need to expand vaccination campaigns targeted at low-income countries, where the report said 96% of the population remains unvaccinated.
The World Economic Outlook also warned policymakers of the risks of inflation as supply chain problems continue to push prices higher.
Central banks should be prepared to act rapidly if the risks of rising inflation expectations become more material in this uncharted recovery, Gopinath said, although she noted that the pace of price increases should increase by mid-2022.
Brian Cheung is a reporter covering the Fed, Economics and Banking for Yahoo Finance. You can follow him on Twitter @Bcheungz?