The IMF again lowers its forecasts for the global economy
The International Monetary Fund cut its global economic forecasts for 2020, saying the coronavirus pandemic is causing a much deeper recession and slower recovery than originally expected.
The IMF currently estimates a 4.9% decline in global GDP in 2020, below the 3% drop projected in April..
The fund also downgraded its 2021 GDP forecast. He currently expects a 5.4% growth rate, up from a 5.8% forecast in April..
«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 slower than previously thought», – says new IMF report.
The forecast is slightly higher than that of The World Bank and the Organization for Economic Cooperation and Development (OECD), which recently predicted that global GDP would contract 5.2% and 6%, respectively, before recovering in 2021.
But the IMF warned about «higher than usual degree of uncertainty» regarding his forecast, which he said is based on a number of assumptions, including stable financial conditions.
The Foundation also highlighted the challenge of determining the trajectory of the virus and measures to contain it, as well as the impact of voluntary social distancing on costs, the impact of new workplace safety measures, changes in global supply chains and continued unemployment..
«The sharp decline in activity is accompanied by a catastrophic blow to the global labor market», – said the IMF on Wednesday, pointing out that the global cut in working hours in the second quarter of this year is likely to be equivalent to the loss of more than 300 million full-time jobs.
«The labor market hit was particularly severe for low-skilled workers who are unable to work from home. Income loss also appeared to be gender-uneven, with women in lower income groups more affected in some countries», – said the IMF.
While all regions are expected to experience a recession in 2020, there will be significant differences between individual countries..
China, which has benefited from the economic recovery, is expected to grow by 1%, thanks in part to political support from the government. Meanwhile, India’s economy is forecast to contract 4.5% after a longer lockdown and a slower-than-expected recovery. The US economy is forecast to contract by 8%, while production in 19 eurozone countries may decline by 10.2%.
Latin American countries that are still trying to contain the spread of the virus will also be hit. Brazilian economy is expected to contract 9.1%, while production in Mexico could fall by 10.5%.
To cushion some of the economic impact of the pandemic, governments around the world have announced massive stimulus packages and new borrowing. As a result, public finances deteriorate significantly.
«A sharp decline in economic activity and tax revenues, along with significant fiscal support, have further expanded public finances, and global public debt is projected to reach over 100% of GDP this year.», – said the IMF.
Under the baseline scenario, global public debt will hit record highs in 2020 and 2021, at 101.5% of GDP and 103.2% of GDP, respectively. In addition, the average total budget deficit this year will increase to 13.9% of GDP, which is 10 percentage points higher than it was in 2019..
As for Russia, the IMF downgraded its April forecast for Russia’s GDP, which is expected to fall by 6.6% this year, but will grow by 4.1% next year..
IN April, the IMF predicted a fall in Russia’s GDP by 5.5% in 2020 under the influence of the consequences of the spread of coronavirus infection, while in January, the fund expected the country‘s economy to grow by the level of 1.9%. IN In 2021, the fund expected economic growth to accelerate in RF before 3.5%, instead of 2% in January forecast.