The International Monetary Fund (IMF) downgraded its outlook for the coronavirus-ravaged world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
The fund said Wednesday it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, the fund sees growth of 5.4%, down from 5.8%.
IMF chief economist Gita Gopinath said that the cumulative loss for the world economy this year and next as a result of the coronavirus induced recession is expected to reach $12.5 trillion.
“A high degree of uncertainty surrounds this forecast with both upside and downside risks,” Gopinath said in a virtual press conference for the update to the World Economic Outlook. “On the upside, better news on vaccines and treatments and further policy support could trigger a faster recovery. On the downside, further waves of infections can reverse increased mobility in spending and rapidly tighten financial conditions, triggering debt distress.”
Announced fiscal measures amounting to about $11 trillion globally, up from $8 trillion estimated in April, have helped cushion the blow to workers and businesses.
But emergency spending by governments is set to push the global debt ratio above 100% for the first time, the IMF said. The jump in the burden this year alone is forecast to be close to 19 percentage points, dwarfing the increase in 2009 during the global financial crisis.
In the U.S., GDP is expected to contract 8 percent in 2020, compared with the previous 5.9 percent projection. The world’s largest economy may grow 4.5 percent next year, the IMF said.
The euro area will probably shrink 10.2 percent in 2020 before expanding 6 percent in 2021, the fund said.
The IMF sees advanced economies shrinking the most, contracting 8 percent, compared with 6.1 percent previously. Emerging-market and developing economies will see a 3 percent contraction, compared with the 1 percent forecast in April. China will still manage to expand 1 percent, supported by policy stimulus.
For commodity exporters like Nigeria the economy is now expected to shrink by 5.4% in 2020, as impact of the coronavirus pandemic bites harder coupled with effects of weak oil prices.
“The disruptions due to the pandemic, as well as significantly lower disposable income for oil exporters after the dramatic fuel price decline, imply sharp recessions in Russia (–6.6 percent), Saudi Arabia (–6.8 percent), and Nigeria (–5.4 percent), while South Africa’s performance (–8.0 percent) will be severely affected by the health crisis,” it said in the report.