The International Monetary Fund (IMF) recently sharply lowered its forecast for global growth this year, foreseeing far more severe economic damage from the coronavirus pandemic than it did two months ago, and predicting a global economy shrink of 4.9 per cent this year—significantly worse than the 3 per cent drop it had estimated in its previous report in April.
The global economic damage from the recession will be worse than from any other downturn since the Great Depression of the 1930s, it said while releasing an update to its World Economic Outlook released in April.The International Monetary Fund recently sharply lowered its forecast for global growth this year, foreseeing far more severe economic damage from the coronavirus pandemic than it did two months ago, and predicting a global economy shrink of 4.9 per cent this year-significantly worse than the 3 per cent drop it had estimated in its previous report in April.#
It predicted that the US gross domestic product (GDP) will fall by 8 per cent this year, even more than its April estimate of a 5.9 per cent drop. That would be the worst such annual decline since the US economy demobilised in the aftermath of World War II.
IMF chief economist Gita Gopinath said no country has been spared and the pandemic is disproportionately hurting low-income households, "imperiling the significant progress made in reducing extreme poverty in the world since 1990," global newswires reported.
In recent years, the proportion of the world's population living in extreme poverty—equivalent to less than $1.90 a day—had fallen below 10 per cent from more than 35 per cent in 1990. IMF said the COVID-19 crisis threatens to reverse this progress.
It forecast that more than 90 per cent of developing and emerging market economies will suffer declines in per-capita income growth this year. For 2021, the IMF envisions a rebound in growth, so long as the viral pandemic doesn't erupt in a second major wave. It expects the global economy to expand by 5.4 per cent next year, 0.4 percentage point less than it did in April.
In China, the world's second-largest economy, growth this year is projected at 1 per cent. In Latin America, where most countries are still struggling to contain infections, the two largest economies, Brazil and Mexico, are projected to shrink by 9.1 per cent and 10.5 per cent respectively.
A steep fall in oil prices has triggered deep recessions in oil-producing countries, with the Russian economy expected to contract by 6.6 per cent this year and Saudi Arabia's by 6.8 per cent.
IMF cautioned the virus could surge back, forcing renewed shutdowns and possibly renewed turmoil in financial markets similar to what occurred in January till March, and such turbulence could tip vulnerable countries into debt crises that would further hamper efforts to recover.
Its updated forecast included a downside scenario that envisions a second major outbreak occurring in early 2021. Under this scenario, the global economy would contract again next year by 4.9 per cent, IMF estimates.
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