The International Monetary Fund has downgraded its global economic forecasts for 2020, and is now predicting the coronavirus pandemic will cause a much deeper recession and slower recovery than originally expected.
The IMF forecast that global GDP will this year, a noticeable downgrade from its previous estimate in April when it projected GDP to shrink by 3%.
The IMF previously warned that the global economy was facing its worst financial crisis since the Great Depression—and now, despite some countries beginning to reopen, it says that the economic decline could be much worse.
The IMF said the current global economic crisis, dubbed the Great Lockdown, is “unlike anything the world has seen before,” with a higher degree of uncertainty about a recovery.
The coronavirus pandemic is causing an “unprecedented decline in global activity,” the organization : The global labor market has taken a “catastrophic” hit, global consumer spending is plunging and companies have significantly cut back on business investment.
The IMF is still forecasting a rebound in 2021, expecting the global economy to next year—though that is still almost 7% below pre-coronavirus estimates.
The U.S. economy is expected to contract by 8% in 2020, but the IMF sees it rebounding 4.5% in 2021—slightly lower than the 4.7% it had previously forecast in April.
The fund also broadly praised central banks like the Federal Reserve for providing stimulus to help shore up financial markets, but warned that much of the economic recovery next year will depend on that ongoing support.
Big number: $11 trillion.
Governments around the world have so far announced nearly $11 trillion in fiscal stimulus measures, the IMF said.
For the first time since the Great Depression, “both advanced and emerging market economies will be in recession in 2020,” IMF chief economist Gita Gopinath . There will still be “substantial differences across individual economies,” however: China is forecasted to post economic growth of 1%, in part because the country got a head start on its recovery. Other economies like India, for example, are forecast to shrink nearly 5%, while countries in Latin America like Mexico and Brazil could see GDP contract by around 10%, the IMF said.
“The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,” the organization said in its>.
What to watch for
The IMF noted that one big difference from previous financial crises is that in the current recession, the services industry has been more severely impacted than manufacturing. “It is possible that with pent-up consumer demand there will be a quicker rebound, unlike after previous crises,” Gopinath said. The IMF’s economic predictions aren’t quite as gloomy as those recently provided by the World Bank and Organization for Economic Cooperation and Development, which forecast global GDP to contract by 5.2% and 6%, respectively.
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