Up goes China’s economy as COVID-19 slows down the world

Proportion of worldwide growth coming from China will increase from 26.8% in 2021 to 27.7% in 2025, much higher than the US share of expected global output

Despite a marginal fall in growth, the Chinese economy will still account for more than one-quarter of global growth.

The COVID-19 pandemic augurs well for China, economically. The crisis will produce lasting impact on the world, benefitting China more, according to Bloomberg calculations, which were arrived at using International Monetary Fund (IMF) data.

It is not that the virus and its growth all over the world have not impacted China. The IMF estimates China will grow by 8.2% next year, down from the IMF’s April estimate of 9.2%. Despite the marginal fall in growth, the Chinese economy will still account for more than one-quarter of global growth. In comparison, the U.S. economy is estimated to rally around a 3.1% increase which will account for 11.6% of global growth in 2021 in purchasing power parity terms.

Just to get an idea of how strong the Chinese growth engine is, the Bloomberg analysis shows the proportion of worldwide growth coming from China to increase from 26.8% in 2021 to 27.7% in 2025, much higher than the U.S share of expected global output. India, Germany and Indonesia round out the top five largest growth engines, next year.

The IMF says the global economic scenario is not all gloomy. The world gross domestic product (GDP) may shrink 4.4% this year, slightly better than the 4.9% drop seen in June. Next year, the IMF says, the growth trajectory is likely to improve with a 5.2% growth.

In January, before the pandemic spread all over the world, the IMF estimated 3.3% global growth for 2021 and 3.4% in 2021.

“While the global economy is coming back, the ascent will likely be long, uneven, and uncertain,” Gita Gopinath, IMF’s director of research, wrote in the report.

The five countries that were hit the worst and suffered most Covid-19 deaths — U.S., Brazil, India, Mexico and U.K. — are likely to suffer a total GDP decline of nearly $1.8 trillion in nominal terms and $2.1 trillion after having been adjusted for differences in purchasing power, the Bloomberg reported.

Living standard will suffer a setback with poverty likely to rise for the first time in more than two decades. “The poor are getting poorer with close to 90 million people expected to fall into extreme deprivation this year,” said Gopinath.

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Russia, the ninth-largest contributor of total growth in 2021, is set to climb up to fifth position in five years as Germany suffers an economic slowdown.

After a comeback in 2021, global growth may gradually slow down again to 3.5% in the medium term, according to the IMF report.

China is the only exception with the country’s output likely to exceed 2019 levels this year. In contrast, output in advanced as well as emerging markets/developing economies is expected to remain below 2019 levels even in 2021.

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