global economy to contract with slow coronavirus recovery

The Brazilian indigenous Anita, from the Marubo ethnic group, is notified that she contracted the new coronavirus by a member of the Brazilian Armed Forces medical team.


The International Monetary Fund cut its economic forecasts once again on Wednesday and warned that public finances will deteriorate significantly as governments try to combat the consequences of the coronavirus crisis.

The IMF now estimates a 4.9% contraction in global GDP (gross domestic product) in 2020, less than the 3% drop it forecast in April.

“The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is expected to be more gradual than anticipated,” the IMF said Wednesday in its Outlook update. of the world economy.

The Fund also lowered its GDP forecast for 2021. It now expects a growth rate of 5.4% from the forecast of 5.8% made in April (the positive reading reflects that economic activity will come from a lower base after the strong contraction of 2020 ).

The Washington-based institution explained that the downward revisions were due to social distancing measures that probably remained in force during the second half of the year, with productivity and supply chains affected. And in those nations that still struggle with high infection rates, the Fund hopes that longer blocks will further affect economic activity.

Global public debt is projected to reach more than 100% of GDP this year.

The IMF warned that the forecasts are surrounded by unprecedented uncertainty and that economic activity will depend on factors such as the duration of the pandemic, voluntary social distancing, changes in global supply chains, the new dynamics of the labor market.

“Catastrophic” impact on labor markets

“The sharp decline in activity comes with a catastrophic blow to the global labor market,” the IMF said on Wednesday, indicating that the global decline in working hours in the second quarter of the year is likely equivalent to a loss of more than 300 million full-time jobs.

Hundreds of unemployed Kentucky residents wait in long lines outside the Kentucky Career Center for help with their unemployment claims.

John Sommers II

“The impact on the labor market has been particularly acute for low-skilled workers who do not have the option to work from home. Loss of income also appears to have been uneven across all genders, and women among low-income groups are the most affected, the impact in some countries, “said the IMF.

The US economy will contract by 8%

Looking at the countries’ forecasts, the United States is expected to contract 8% this year. The Fund had estimated a contraction of 5.9% in April.

Similarly, the Fund also lowered its forecasts for the euro area, with the economy now declining 10.2% in 2020.

Brazil, Mexico and South Africa are also expected to contract 9.1%, 10.5% and 8%, respectively.

To mitigate some of the economic impact of the pandemic, governments around the world have announced massive tax packages and new loans. As a result, public finances are seen to deteriorate significantly as a result.

“The sharp contraction in economic activity and tax revenues, coupled with considerable fiscal support, has further expanded public finances, and global public debt is projected to reach more than 100% of GDP this year,” said the Fund. .

According to the IMF base case, global public debt will reach a record high in 2020 and 2021 with 101.5% of GDP and 103.2% of GDP, respectively. In addition, the average general fiscal deficit will rise to 13.9% of GDP this year, 10 percentage points more than in 2019.

There have been more than 9 million confirmed Covid-19 infections worldwide, according to Johns Hopkins University. The United States, Brazil and Russia are currently the nations with the highest number of cases worldwide.