According to the International Monetary Fund’s October 2021 World Economic Outlook (WEO) report, the global economy is still recovering from the COVID-19 pandemic despite its resurgence. The report indicated that the unequal access to vaccines and vaccine hesitancy have left people vulnerable to the virus. In addition, the report stated that vaccinations have been effective at mitigating the negative health effects of the pandemic, yet the rapid spread of the Delta variant and the threat of new variants that could reduce the vaccine’s effectiveness deem the future path towards recovery as uncertain. In this regard, the report unveiled that the global economy contracted by 3.1% in 2020, less than previously estimated in the July 2021 WEO update (-3.2%). Delving further into details, the IMF reported economic contractions of 3.4% in the United States, 6.3% in the Euro area, 9.8% in the United Kingdom, and 4.6% in Japan during the year 2020, with an economic contraction in emerging markets and developing economies of 2.1%. The IMF projects the world economy to recover in 2021 and achieve a growth of 5.9% before slowing to 4.9% in 2022, in comparison with previous estimates of 6.0% for 2021 and 4.9% for 2022. The lower than previous expectations growth figures owe to supply disruptions in advanced economies and worsening pandemic dynamics in low-income developing countries. According to the IMF, the drop in the 2021 projections is partially offset by stronger short-term prospects for some commodity-exporting emerging market and developing economies. Furthermore, the IMF report stated that the global growth target after the year 2022 is expected to average around 3.3% over the medium term. In this vein, the report projected economic growth in 2021 to rebound to 6.0% in the United States, 5.0% in the Euro area, 2.4% in Japan, 6.8% in the UK and 6.4% in emerging markets and developing economies. In parallel, the report noted that inflation levels have been rising, reflecting pandemic-induced supply-demand mismatches and higher commodity prices than a year earlier. In details, the report mentioned that some emerging market and developing economies are experiencing persistent price pressures amid high food prices, higher oil prices, and exchange rate depreciation which has triggered an increase in the prices of imported goods. The report noted in this respect that there is great uncertainty surrounding inflation prospects mainly resulting from the path of the pandemic, the length of the supply disruptions, and how inflation expectations may change in this environment.

On the regional front, the WEO report projected an economic contraction in the Middle East & Central Asia (MECA) region of 2.8% in 2020 and a real growth of 4.1% in 2021 and 4.1% in 2022. Growth forecasts for the MECA region were revised from -2.6% for 2020, 4.0% for the year 2021 and 3.7% for the year 2022 in the IMF’s July 2021 WEO update.

Locally, the IMF estimated that the Lebanese economy contracted by 25% in real terms in 2020, unchanged from its April 2021 WEO report. The IMF did not provide growth estimates for Lebanon for the years 2021 onwards citing the high degree of uncertainty surrounding the outlook of the Lebanese economy. It also estimated the country’s current account deficit to GDP ratio at 17.8% in 2020.