The International Monetary Fund lowered its growth outlook for the global economy this year, which is now set for a “hobbled” recovery, owing to weakening momentum as result of Covid-19 outbreaks, uneven access to vaccines, supply chain disruptions and risks from rising inflation.

The fund revised down growth in 2021 to 5.9 per cent from its 6 per cent estimate in July, while keeping its 2022 projection unchanged at 4.9 per cent.

“The global recovery continues but the momentum has weakened, hobbled by the pandemic,” said Gita Gopinath, the IMF’s chief economist.

“Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.”

The fund’s revision reflects the effects of supply disruptions on advanced economies, which crimped their growth projections. In contrast, projections for some commodity exporters have been upgraded as a result of higher energy prices. The world economy could sustain as much as $5.3 trillion in losses over the next five years if the pandemic has a prolonged effect, the fund said.

Advanced economies are now set to grow by 5.2 per cent this year, compared with an earlier 5.6 per cent estimate. The US, the biggest of the group and world’s largest economy, is forecast to expand 6 per cent instead of a previous 7 per cent estimate. The country’s economy is now estimated to have shrunk 3.5 per cent last year.

Germany, Europe’s largest economy, is set to expand 3.1 per cent. France the euro area’s second-largest economy is forecast to grow 6.3 per cent. Japan, the world’s third-largest economy, which ended its Covid-19 state of emergency on October 1, is projected to grow 2.4 per cent this year after shrinking 4.6 per cent in 2020. The UK, the world’s fifth-largest economy, is expected to expand 6.8 per cent in 2021 after shrinking 9.8 per cent last year.

Persistent divergence and uneven economic recovery across countries is “dangerous” and “remains a major concern”, Ms Gopinath said.

Emerging market and developing economies are now projected to grow 6.4 per cent this year, with China and India hitting 8 per cent and 9.5 per cent, respectively.

The Middle East and Central Asia are forecast to grow 4.1 per cent after shrinking 2.8 per cent in 2020. Saudi Arabia, the Arab world’s largest economy, is forecast to grow 2.8 per cent instead of a previous 2.4 per cent estimate after shrinking 4.1 per cent last year. The kingdom, the world’s largest exporter of oil has benefited from the rally of crude prices that have hit a three-year high. Oil prices are up about 60 per cent since the start of the year.

Futures prices point to oil prices averaging $65.7 per barrel in 2021, 59 per cent higher than the 2020 average and are expected to fall to $56.3 in 2026, according to the fund.

“Market tightness is expected to continue in line with the International Energy Agency’s oil demand recovery projections. Risks to oil prices are balanced in the near term,” it said.