The IMF expects the US and China to be by far the most successful at steering their economies through the pandemic, leaving Europe and other emerging markets trailing in their wake.

In its updated forecasts for the global economy, the fund predicts that by 2022 recoveries in the US and China will leave their economies no more than 1.5 per cent smaller than projected before the pandemic.

Other advanced economies will still be 2.5 per cent short of their pre-pandemic path, while emerging economies excluding China will in 2022 be 8 per cent smaller than expected in forecasts issued exactly a year ago.

But the reasons for the expected success in China and the US, the world’s two largest economies, are sharply divergent.

China successfully implemented what the IMF called “effective containment measures” to aggressively curb the spread of Covid-19. In contrast the US has struggled to contain the virus — which continues to spread at a rampant pace — but its government spent more on economic stimulus than almost any other country, earning praise from the fund for its decisive approach.

Bar chart of (%) showing GDP losses in 2022 compared with pre-Covid forecasts

Even before the Biden administration’s proposed $1.9tn additional fiscal stimulus, the IMF said the US’s relative success compared with the eurozone was partly because European countries locked down their economies more tightly to contain the virus and partly because their economies were less flexible and able to adapt to lockdowns.

In general, the IMF’s forecasts showed better performance in countries with greater access to vaccines and those most willing to spend more on policy stimulus, which it did not expect to be inflationary.

Gita Gopinath, the IMF’s chief economist, said: “Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens”.

The fund’s conclusion is that globally the race is likely to be won by humans rather than the virus and reinforces the emerging new policy consensus that the best economic results will come where countries put aside worries about inflation and the possibility of excessive stimulus.

The IMF’s new forecasts split the economic prospects around the world into three broad groups.

China and the US would recover almost all of the ground lost due to the Covid-19 crisis. Other advanced countries were in a middling group, with a deeper economic hit and slower recoveries, which the IMF thinks could be speeded up with greater policy support.

Emerging economies with the exception of China have been hardest hit and will sustain the greatest lasting damage from the crisis, the IMF said. Containment of the virus had not been as effective as in China, while oil exporters and tourism-based economies were hit especially hard.

“Close to 90m people are likely to fall below the extreme poverty threshold during 2020-21,” the IMF said.

With unemployment expected to remain at higher than normal levels across the world, there was little immediate danger of inflation and price rises were expected to average about 1.5 per cent in advanced economies, below target levels, while being below historical averages at about 4 per cent in emerging economies.

For a durable and widespread recovery, the world needed to contain coronavirus, Ms Gopinath said, enabling poorer countries to have access to vaccines in addition to the rich world.

Welcoming the US’s decision to join the Covax facility to bring the necessary funding and logistics to vaccinate against Covid-19 in poorer countries, she said, “the health and economic arguments for this are overwhelming”.

But she added that new variants of coronavirus were a reminder that the economic damage from the pandemic was still far from over and would not disappear until the virus was controlled everywhere.

“Faster progress on ending the health crisis will raise global income cumulatively by $9tn over 2020 to 2025, with benefits for all countries, including around $4tn for advanced economies,” Ms Gopinath said.