World Economy in 2020 to Weaken More Sharply Than Forecast

In its latest analysis, released Tuesday, the International Monetary Fund (IMF) predicts that the global economy will shrink 4.9 percent this year, a greater drop than its earlier prediction of a 3 percent contraction.  

For 2021, the IMF is anticipating growth of 5.4 percent, down from 5.8 percent. The world economy’s cumulative loss for this year and next could hit $12.5 trillion, according to a Bloomberg report.

The IMF expects the U.S. economy to contract by 8 percent this year, up from its prior estimate of 5.9 percent. The Dow and S&P 500 closed down more than 2.5 percent, with the NASDAQ off 2.2 percent.

“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 IMF report explains.

Overall, the advanced economies will likely shrink 8 percent, while emerging and developing economies contract by 3 percent. Brazil and Mexico, however, may see their economies shrink by 9.1 percent and 10.5 percent, respectively.

According to IMF chief economist Gita Gopinath, the present economic downturn resembles the roughly 10 percent drop in global economic output of the 1930s.

Fiscal measures worldwide have totaled some $11 trillion. 

“The steep contraction in economic activity and fiscal revenues, along with the sizable fiscal support, has further stretched public finances, with global public debt projected to reach more than 100 percent of GDP this year,” the IMF says.

See also:

• Risk on the Rise in Southeast Asia
• Fed Catalogs Devastation to U.S. Economy
• Covid-19 Impacts on Trade

From: ThinkAdvisor