The International Monetary Fund (IMF) has projected an increase in metals prices in 2021 from 2020 levels. The international economic body has pegged the global economy to grow 6pc in 2021 and 4.9pc in 2022. India’s GDP growth rate has been slashed to 9.5pc for FY22 from the previous forecast of 12.5pc declared by the IMF.
Commodity Prices
Commodity prices could continue to rise at a faster pace than anticipated by IMF in its prior report. The global recovery is gaining pace and could push demand and prices higher. Metal prices could rise by 30pc compared to 2020 levels. The IMF predicts a particularly strong increase in prices for metals and food.
The increase is due to the low base year effect of 2020 when commodity prices were under pressure. Prices are also rising on a temporary supply-demand mismatch. Container freight prices have climbed significantly since mid-2020, notes the IMF report. Inflation is forecast to return to pre-pandemic levels in most countries by 2022 as soon as the temporary supply-demand bottlenecks are taken care of. The uncertainty, however, is still high.
Economic Outlook
Forecasts for emerging markets were revised downwards, while the forecast for advanced economies upwards. Most emerging countries still face resurgent infections and rising COVID-19 death tolls. The forecast was upgraded for advanced countries, supported by the financial support by the US in the second half of 2021, and improved health measures announced.
Government Policies
The IMF has suggested some fiscal and monetary policies to tide over the problems and hindrances the emerging countries are reeling under. It suggests policies should prioritize health spending, including vaccine production, distribution infrastructure, personnel, and public health campaigns, to boost take-up rates. Central banks should look through transitory inflation pressures and have been advised to avoid tightening until there is more clarity on the underlying price dynamics.
The global recovery is not assured until the pandemic is beaten back globally, highlights IMF.