Motley Fool Australia

The Australian economy will recover from COVID-19 this year, says IMF

covid asx share price represented by man in face mask giving thumbs up
Image source: Getty Images

 The Australian economy’s growth has been forecast to increase more than was first predicted for 2021. The International Monetary Fund (IMF) updated its 2021 global economic growth forecast yesterday. It has increased Australia’s expected GDP growth to 4.5%.

This means Australia could recover from the pandemic-spurred economic downturn this year, after GDP shrunk by 2.4% in 2020.

Beyond Australia, the global economy is projected to grow 6% in 2021.

IMF’s prediction of the Australian economy’s future

Australia’s economy looks like it could be steadying after a turbulent 2020.

At the time of writing, the S&P/ASX 200 (ASX: XJO) has bounced 31.1% since this time last year.

The Reserve Bank of Australia is still holding the official cash rate at 0.1%. It’s not expected to be lifted until at least late 2023.

According to the Sydney Morning Herald, RBA’s governor Philip Lowe has said it won’t increase interest rates until inflation was between 2% and 3%. The IMF predicts Australia will reach 2% inflation in 2024.

Future IMF predictions state Australia’s GPD growth may slow in the coming years. It’s estimated our GPD growth will be 2.8% in 2022, 2.3% in 2023 and 2.2% in 2024.

For comparison, between 2013 and 2019 Australia’s GDP growth stayed between 2.1% and 2.8%.

Simultaneously, our housing prices are increasing exponentially. Motley Fool Australia’s Scott Phillips spoke of Australia’s increasing house prices on Sky News First Edition yesterday.

Global growth forecast

The IMF predicts the economies that suffer most in the coming years will be those of low-income nations.

It also predicts the global economy will grow by 6% in 2021, seemingly led by those hit hardest by the coronavirus pandemic.

India is among the economies the IMF forecasted would have the highest growth in 2021. It is predicted to grow by 12.5%, recovering from its drop of 8% in 2020.

The United Kingdom’s GDP is predicted to bounce back from its 5.3% drop in 2020 to grow by 9.9% in 2021.

The United States’ economy wasn’t hit as hard as others in 2020. Its GDP is predicted to overcome its 3.5% fall by rising 6.4% in 2021.

Finally, China’s GDP saw a drop similar to Australia’s in 2020, falling by 2.3%. Though, the IMF predicts it will experience an 8.4% growth in 2021.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Related Articles…

Brooke Cooper