The International Monetary Fund estimated a 4.9 percent drop in global GDP for 2020 on Wednesday, sharply revising its earlier prediction of a 3 percent drop from the devastating impacts of the coronavirus pandemic.
“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,” IMF said in a statement.
“The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s,” it added.
The U.S. economy is projected to contract as much as 8 percent this year before expanding 4.5 percent in 2021, comparable to the forecast for the eurozone’s 10.2 percent drop in 2020 before rising 6 percent next year. Last year, the U.S. and eurozone rose 2.3 percent and 1.3 percent, respectively.
An expansion of 1 percent this year is expected in China, where the coronavirus was first detected in late December, followed by an 8.2 percent jump in 2021.
Global public debt levels also are forecast to skyrocket to a new record level of 101.5 percent 0f GDP this year, and 103.2 percent of GDP in 2021. Fiscal deficits similarly are expected to rise to 13.9 percent of GDP on average this year, or 10 percent higher than in 2019.
However, the Washington-based fund, which stabilizes the world’s monetary system and provides emergency loans for nations to weather economic crises, warned of a higher-than-usual degree of uncertainty with this forecast.
“For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity,” it said. “Alternative outcomes to those in the baseline are clearly possible, and not just because of how the pandemic is evolving.”
For the first time, all regions are projected to experience negative growth in 2020. There are, however, substantial differences across individual economies. Find out more about individual growth projections in the latest #WEO https://t.co/WpXSzg9YxA pic.twitter.com/C1QKE5iay2
— IMF (@IMFNews) June 24, 2020
The #COVID-19 pandemic pushed economies into a #GreatLockdown, which helped contain the virus and save lives, but also triggered the worst recession since the Great Depression. Read @GitaGopinath’s latest blog on the #WEO https://t.co/fqM8iURHFv pic.twitter.com/Iu4svMBEIm
— IMF (@IMFNews) June 24, 2020
Slower recovery foreseen
The IMF also lowered its GDP forecast for 2021 to a growth rate of 5.4 percent, down from its earlier 5.8 percent forecast in April.
In April, the IMF forecast the global economy will likely suffer the worst financial crisis since the 1930s-era Great Depression due to COVID-19 pandemic disruptions and shutdowns.
It said then that it expected the global economy to contract by 3 percent in 2020, a huge departure from its forecast in January of 3.3 percent growth in global GDP for this year.
That would make the economic devastation from coronavirus-fueled lockdowns greater even than the damage from the 2008 global financial crisis.
Part of the impact stems from the need for social distancing and other health measures that businesses must adopt as they start to reopen, along with the labor market’s “scarring” from the massive reordering to workplaces and economies due to the huge amount of job losses and business closures, according to the IMF.
“Now this crisis is a crisis like no other, and will have a recovery like no other,” IMF’s chief economist, Gita Gopinath, told an IMF webcast news conference.