GLOBAL – The International Monetary Fund in its latest World Economic Outlook has projected that global economy will contract by 4.4% this year, the worst annual plunge since the great depression of the 1930s.
The IMF however notes that the current projection is an upward revision of 0.8 percent when compared to its update in June.
IMF says that this revised upgrade owes to somewhat less dire outcomes in the second quarter, as well as signs of a stronger recovery in the third quarter, offset partly by downgrades in some emerging and developing economies.
The IMF projects that the global economy will rebound to 5.2 percent in 2021, -0.2 percent below the fund’s June projection.
Except for China, where output is expected to exceed 2019 levels this year, output in both advanced economies and emerging market and developing economies is projected to remain below 2019 levels even next year.
Countries that rely more on contact-intensive services and oil exporters face weaker recoveries compared to manufacturing-led economies, the IMF said.
The divergence in income prospects between advanced economies and emerging and developing economies (excluding China) triggered by this pandemic is projected to worsen.
The IMF says that it is upgrading the forecast for advanced economies for 2020 to -5.8 percent, followed by a rebound in growth to 3.9 percent in 2021.
For emerging market and developing countries (excluding China) IMF projects a -5.7 percent growth in 2020 and then a recovery to 5 percent in 2021.
With this, the cumulative growth in per capita income for emerging-market and developing economies (excluding China) over 2020–21 is projected to be lower than that for advanced economies.
After the rebound in 2021, global growth is expected to gradually slow to about 3.5 percent into the medium term.
IMF further noted that considerable global fiscal support of close to $12 trillion and the extensive rate cuts, liquidity injections, and asset purchases by central banks helped saved lives and livelihoods and prevented a financial catastrophe.
Despite of this efforts, there is still much that needs to be done to ensure a sustained recovery with IMF advocating for greater international collaboration in responding to the health crisis.
IMF estimates that if medical solutions can be made available faster and more widely relative to our baseline, it could lead to a cumulative increase in global income of almost $9 trillion by end-2025, raising incomes in all countries and reducing income divergence.
“While the global economy is coming back, the ascent will be long, uneven and uncertain,” Gita Gopinath, the IMF’s chief economist, wrote in the new outlook. “Recovery is not assured while the pandemic continues to spread.”
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