Most developed countries should start to return to normal by the second half of the year as Covid-19 vaccinations accelerate, the top forecaster at the International Monetary Fund said Tuesday.
“It’s a very dark and difficult winter, but there is light at the end of the tunnel,” Gita Gopinath, the IMF’s chief economist, told CNBC’s Steve Liesman in a “Squawk on the Street” interview. “In terms of the outlook, what is true as of now is that we’re starting out the year at a somewhat stronger point than we had expected into 2020, which is a good thing. But right now, it’s a race between the virus and the vaccine.”
In its most recent forecast, released in October, the IMF said it expects global growth in 2021 to rebound to 5.2% after a 4.4% contraction last year. The U.S. growth estimate was at 3.1% for 2021 off a 4.3% decline in 2020.
The agency soon will update that outlook, though Gopinath did not indicate whether an upgrade was likely.
Though the vaccine rollout has been slow, Gopinath still expects most developed countries to be covered by this summer. Gopinath cautioned that the recovery will be at different speeds. Globally, she sees full coverage by the end of 2022.
“There is the vaccine and stimulus-driven recovery that one would expect in the second half of the year,” she said.
Countries that handled the virus better in its early stages have seen stronger recoveries. Gopinath cited China in that regard, while she said some Latin America countries have lagged.
“What we’re seeing is that having an early enough lockdown … helps bring about the recovery somewhat faster,” she said. “But there is no simple solution with how to deal with this pandemic.”
Governments and central banks have provided trillions in stimulus since the Covid pandemic declaration in March 2020.
While there’s been some speculation that the Federal Reserve and its counterparts could start dialing down their measures sometime this year if inflation start to pick up, Gopinath said that’s not likely.
“I expect central banks to be pretty cautious about rolling back any support,” she said.