 Sub-Saharan Africa
The world remains in the grip of the COVID-19 pandemic and a seemingly accelerating pace of climate change, both of which underscore the need for increased global cooperation and dialogue. Solutions to these global problems must involve all countries and all regions, especially sub-Saharan Africa, with the world’s least vaccinated population, most promising renewable energy potential, and critical ecosystems.
Sub-Saharan Africa’s economy is set to expand by 3.7 percent in 2021 and 3.8 percent in 2022. This follows the sharp contraction in 2020 and is much welcome, but still represents the slowest recovery relative to other regions
Growing divergences: The economic outlook points to divergences at three levels: between sub-Saharan Africa and other regions, within sub-Saharan Africa, and within countries. These divergences reflect the region’s slower vaccines rollout, more limited fiscal space, and regional disparities in resilience. The outlook remains extremely uncertain, and risks are tilted to the downside. In particular, the recovery depends on the path of the global pandemic and the regional vaccination effort, food price inflation, and is also vulnerable to disruptions in global activity and financial markets.
Looking ahead, sub-Saharan Africa’s potential remains undiminished. The region is at a critical juncture to implement bold transformative reforms
to capitalize on this potential.
Western Hemisphere
The outlook for Latin America and the Caribbean shows that an initial rebound in economic activity was stronger than expected as lockdowns were gradually eased; however, the recovery has been uneven and incomplete. Real GDP is projected to grow by 6.3 percent in 2021, followed by a more moderate growth of 3 percent in 2022.
Public debt has increased by more than 10 percentage points relative to 2019, and employment recovery continues to be slow. Inflation is also on the rise in many countries but is expected to revert to around 3 percent by 2023. Central banks in the region will likely face difficult trade-offs keeping long-term inflation expectations anchored amid increasing inflationary pressures and persistent labor-market slack.
A lasting legacy:Â The pandemic is expected to leave long-lasting scars in the region. Gaining medium-term growth momentum is crucial, especially in narrowing the gap opened by the pandemic and avoiding a further divergence relative to advanced economies.Â
Countries should continue to allocate sufficient resources for health spending including vaccination and targeted support to households and firms. Policies should foster inclusive growth, including through progressive and growth-friendly tax reforms and measures to intensify climate change adaptation and mitigation.
Asia and Pacific
Asia continues to offer the greatest support for the global recovery this year, though headwinds from the resurgent pandemic have dimmed the outlook somewhat.
The Asia-Pacific economy will rebound from last year’s contraction with 6.5 percent growth, led by China and India, according to the latest IMF projections. That represents a downgrade of 1.1 percentage point from the last Regional Economic Outlook in April, reflecting the spread of the more contagious Delta variant amid initially low vaccination rates. Still, even this slower pace of expansion would be the fastest of all major regions. Asia’s 2022 forecast was raised to 4.9 percent, though output in emerging and developing economies may remain below pre-pandemic trends in coming years.
Uncertainty ahead: Inflation remains a concern, but Asia’s pressures are more subdued than other regions. Surging commodity prices and supply strains have been relatively contained, keeping import prices from rising significantly and passing through to consumers.
Still, risks remain. The pandemic’s path is uncertain, supply disruptions could endure, and financial markets may turn volatile as the Federal Reserve scales back support for the U.S. economy. Natural disasters also pose a growing threat to Pacific Island nations and low-income countries.
Given these challenges, the latest assessment calls for policymakers to respond accordingly. They should first address the health crisis with swift vaccination and equitable sharing of vaccines. Economic support should continue where possible until the recovery is firmly established.
Middle East and Central Asia
Since the beginning of this year, the Middle East and North Africa region has made good progress and the recovery is ongoing despite the new outbreaks. Yet, the recovery is uneven, incomplete, and fragile. In the Middle East and North Africa, real GDP growth is expected to expand by 4.1 percent in 2021 and 2022. In the Caucasus and Central Asia, real GDP is expected to grow by 4.3 percent in 2021 and 4.1 percent in 2022.
New challenges: With the emergence of new challenges, such as rising inflation and increasing inequities, countries will face delicate policy tradeoffs. Ramping up vaccine acquisition and distribution remains the top short-term priority and will require strong global and regional cooperation. Additional fiscal support should be well-targeted and improving policy frameworks will be important to reduce tradeoffs. Rising inflation warrants close monitoring, and central banks may need to raise interest rates preemptively if inflation proves persistent.
The crisis presents opportunities that could lead to a transformational recovery for the region marked by more resilient, inclusive, and greener economies. Leveraging global trends, such as the use of digital technologies, will help improve the efficiency of safety nets and ensure the region stays competitive globally. Investing in climate-resilient technology will be key to addressing the global existential crisis while also creating new job opportunities.
Next week, the region's economic outlook, with a focus on the Caucasus and Central Asia, will be the subject of an October 27, 7 a.m. ET panel discussion focused on policies that can help the region emerge from the crisis. Register now.Â
Europe
An increasingly resilient recovery is taking hold in Europe, buttressed by gradual increases in vaccination rates and mobility. The Regional Economic Outlook for Europe now forecasts 5.2 percent growth for advanced economies and 6 percent for emerging economies in 2021.
Strongly accommodative macroeconomic policies and COVID-19 support schemes have paved the way for the recovery. However, uncertainty remains elevated due to risks of new infection waves and virus variants amid uneven vaccination rates across countries. It is therefore imperative to continue increasing vaccinations and to strongly support international efforts to speed up vaccine access globally.
Downside risks:Â For 2022 growth is projected at 4.4 percent in advanced European economies and 3.6 percent in emerging European economies. However, risks are tilted to the downside owing to potential virus mutations, prolonged supply disruptions, and high energy prices among others.
Moving forward, Europe faces two major post-pandemic policy challenges: controlling inflation and dialing back fiscal support.Â
Finance & Development Magazine
 Innovation in institutions, understanding, technology, and leadership is critical to confronting climate change, Kelly Levin and Andrew Steer write in an article for our most recent issue of Finance & Development Magazine. Innovation in all of the above areas has brought the world to where it is on climate change and will drive further progress, they write.
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