BACKED by vaccine rollouts an higher than expected growth outturns in the second half of the year, the International Monetary Fund (IMF) has projected the world economy to expand 6 per cent in 2021-22, up from its 5.5 per cent forecast in January.

However, it warned of "daunting challenges" and "multi-speed recoveries" posing financial risks in its biannual World Economic Outlook, as mutations appear, daily cases rise and speeds differ for administering the shots across the globe.

The organisation said it is projecting a stronger recovery for the global economy compared with the January forecast, with growth projected to be 6 percent in 2021 and 4.4 percent in 2022 after an estimated historic contraction of 3.3 percent in 2020.

"Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible," said IMF chief economic Ms Gita Gopinath.

The vaccination campaign, economies continuing to adapt to new ways of working, and additional fiscal support in large economies, particularly the United States, have improved the outlook, said the Washington-based global financial institution.

"Nonetheless, the future presents daunting challenges. The pandemic is yet to be defeated and virus cases are accelerating in many countries. Recoveries are also diverging dangerously across and within countries as economies with slower vaccine roll out, more limited policy support and more reliant on tourism do less well," she cautioned.

She said faster vaccine rollouts can raise the growth forecast of both developed and developing countries, while a more prolonged pandemic with more virus variants can lead to a sharp downgrade.

The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizable upgrade for the United States that is expected to grow at 6.4 percent this year.

"Multi-speed recoveries could pose financial risks if interest rates in the US rise further in unexpected ways. This could cause inflated asset valuations to unwind in a disorderly manner, financial conditions to tighten sharply, and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies," she added.

Other advanced economies, including the Euro area, is also expected to rebound in 2021, but at a slower pace. Emerging and developing economies' growth is 6.7 per cent for 2021.

China, which has already returned to pre-pandemic Gross Domestic Product (GDP), is projected to grow at 8.4 percent. However, many other countries are not expected to do so until 2023.

"Now these diverging recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations," Ms Gopinath said, sharing that the losses will see an additional 95 million people entering extreme poverty in 2020.

The average annual loss in per capita GDP over 2020-24 relative to pre-pandemic forecasts is projected to be 5.7 percent in low income countries, 4.7 percent in emerging markets and 2.3 percent in advanced economies.

Uneven recoveries are also occurring within countries as young and low skilled workers and women remain more heavily affected. The within-country income inequality is expected to increase.

As a result, the IMF urged nations to work together to ensure universal vaccinations and governments to continue to ensure adequate access to international liquidity. The major central bank should provide clear guidance on future actions with ample time to prepare. Low income countries will benefit from further extending the pause on debt repayments under the debts service suspension initiative and operationalising the G20 common framework for orderly debt restructuring.

"Without additional effort to give all people a fair shot, across country, gaps in living standards could widen significantly, and decades long progress in global poverty reduction could reverse," Ms Gopinath said.