According to IMF’s economic forecast the Australian economy is to grow by 4.5% this year. However, the International Monetary Fund warns that recovery depends, by and large, on vaccine rollout.
The IMF’s upgrade reaffirm the fact that Pacific nation has outperformed all major advanced economies over the past year, the federal treasurer, Josh Frydenberg, has said.
The IMF forecasted that the Australian economy would grow by 4.5% this year and 2.8% in 2022 respectively. In January, the IMF forecasted the economy would grow by 3.5% in 2021.
“What this report confirms is that we’ve outperformed all major advanced economies over the past year,” Frydenberg said. “There’s still a long way to go but Australians can see the light at the end of the tunnel.”
Besides Australia, IMF also projected that a stronger recovery for the global economy in 2021 and 2022 as opposed to its previous predictions made in January.
World Economy
According to the report, the global economy is expected to expand and grow by 6.0% in 2021 and 4.4% in 2022 as opposed to previous year’s figures of 5.5% and 4.2% respectively.
What is obvious is that projected figures may vary given the higher degree of uncertainty with a lot of possibilities of downside and upside risks.
“Much still depends on the race between the virus and vaccines. Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade.”
Irrespective of the reserve bank’s efforts to stimulate the economy through record low interest rates, the IMF still presumes that the Australian inflation to be still below the central bank’s 2-3% target band at the end of next year.
According to IMF forecasts, the rate of inflation would be at 1.7% this year and 1.6% in 2022 respectively.
The Reserve Bank governor, Philip Lowe, reiterated on Tuesday he did not presume to lift the cash rate from its record low 0.1% until 2024 when he expects that the inflation will be comfortably within the target band.
The IMF also anticipates that the Australia’s unemployment rate would not be comfortably below 6% until next year, projecting a rate of 5.5% in 2022.
As expected in February, the unemployment rate declined to 5.8%. This may change after the government’s jobkeeper wage subsidy program ended last month. There are geo-political factors, besides global uncertainty, with a host of unforeseeable challenges that may determine the real GDP growth and the expected expansion of the Australian economy. Be that as it may, all other indications are for a robust rebound of the Australian economy.
