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IMF raises Israel, global growth forecast as vaccinations pave way out of crisis

In report, financial institution warns of ‘daunting challenges’ still ahead, since vaccinations are not being administered at the same pace around the globe

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Vaccinations in Logrono, northern Spain, March 19, 2021. (AP Photo/Alvaro Barrientos)
Vaccinations in Logrono, northern Spain, March 19, 2021. (AP Photo/Alvaro Barrientos)

The International Monetary Fund has raised its economic forecast for Israel to 5% in 2021, compared to a contraction of 2.5% last year, as vaccinations against the coronavirus pandemic are being rolled out globally.

The nation’s economy will grow by 4.3% in 2022, the IMF forecast in its latest World Economic Outlook report. The organization had previously predicted a 4.1% growth for the Israeli economy this year.

The IMF said it expects the global economy to grow by 6% this year, up from its 5.5% forecast in January. Global gross domestic product (GDP) for 2022 is seen increasing by 4.4%, compared to a previous forecast of 4.2%.

There are, however, still “daunting challenges” ahead, the IMF warned, given that vaccinations were not being administered at the same pace around the globe.

“Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible,” Gita Gopinath, the IMF’s chief economist, said in a blog post accompanying the latest World Economic Outlook report.

The US economy is forecast to expand by 6.4% this year, after contracting 3.5% in 2020; while GDP for the Euro area is expected to grow by 4.4% in 2021, compared to a 6.6% drop last year. China’s economy is forecast to grow 8.4% in 2021, and India’s by 12.5%.

“While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023,” Gopinath said.

Swift policy action worldwide, including $16 trillion in fiscal support, prevented far worse outcomes, he added. “Our estimates suggest last year’s severe collapse could have been three times worse had it not been for such support.”

Even so, he said, “a high degree of uncertainty surrounds our projections. Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade.”

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