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We can beat the region
The IMF’s World Economic Outlook (WEO) was released on Tuesday, in which, as usual, new forecasts were given to member states. Now, however, it’s not worth comparing the numbers with the previous forecast last fall, as the coronavirus has rewritten everything in the past few weeks,
In most countries, the question is not whether the economy is declining, but how much.
In Hungary, the IMF expects an economic slowdown of 3.1% in 2020, followed by a 4.2% rebound next year. With a minor drop, only Serbia can swim the current crisis, according to IMF experts, and the boom could be much bigger next year. The Croatian and Slovenian economies are in the most difficult position, with a recession of 8-9 percent this year.
In other words, this year’s decline may be followed by a rapid boom in 2021, and it may surprise us that IMF experts consider the Hungarian economy to be the most resilient in the region. The forecast did not provide a justification for the recent figures, so it is not known on what the IMF bases its opinion. International analyzes published in recent weeks have mainly highlighted that the deterioration of the international economy may lead to a deterioration in our export performance, as well as a slowdown in investment, but household consumption may cushion the slowdown.
The IMF forecast may seem a bit surprising because analysts so far have rated Hungary as the loser. In last week’s analysis, for example, Morgan Stanley predicted that the economy could fall further in Hungary, and the Hungarian recession of 5% could be outstanding in the region.
Despite the drop in oil prices, experts expect only a minimal decrease in inflation, the average price increase of 3.4% last year can be followed by a price increase of 3.3% this year and 3.2% next year. All this also means that, according to the IMG, there is no reason to worry about the MNB, the central bank inflation target band (3 plus or minus 1 percent) will not be threatened by rising prices.
Professionals also do not expect a significant change in our balance of payments, since last year there may be a minimum deficit as part of GDP. Unemployment, on the other hand, could jump temporarily in the current crisis, from 3.4% last year to 5.4% this year, but is projected to drop again to 4% in 2021.
The entire world is being redesigned by the coronavirus
Of course, not only were the Hungarian predictions rewritten by the current epidemic, but the entire world economy may perform worse than we had expected so far.
The world has changed dramatically in the past three months as a result of the coronavirus epidemic. Due to quarantines and restrictions, we are currently in a period of Great Closing, a collapse in activity at a rate never before seen in our lives.
– Gita Gopinath, the IMF’s chief economist, wrote about the recent forecast.
According to the organization’s expert, there is still a lot of uncertainty, the main problem is the success of the closures, the development of an antiviral drug that is difficult to predict. In addition, some countries face several crises at once, in addition to the health crisis, we can talk about a financial crisis and the collapse of the prices of basic products, which are affecting the economy through various channels.
According to the Monetary Fund the world economy could fall 3 percent this year, making it the worst year in the world since the Great Depression of 1929-32, much worse than the 2009 recession, when there was only a 0.1 percent drop in activity. After that, there may be a 5.8 percent rebound in 2021, but still in two years.
$ 9 trillion in GDP could fall from the world economy, which is larger than the combined gross national product of Japan and Germany combined. Furthermore, since the crisis of the 1930s, there have been no examples of developed and emerging economies sinking into recession, and this could also happen this year.
Gopinath points out that we can speak of a true global crisis at this time, and no country can withdraw from it. Economies highly exposed to tourism, hospitality and the entertainment industry, in particular, may be in a difficult position, but in many countries the moderate fiscal margin for maneuver, stagnant capital flows and weaker currencies are problems.
The global economic recession above 3 percent is the baseline scenario for the IMF, which is expected to ease the economy in the second half of the year. However, due to unpredictability, alternative forecasts have also been made,
If the epidemic continues better than expected, the recession could be even 3 percentage points higher this year, and if the impact continues for 2021, there could be an additional economic recession of 8 percent.
Quantitatively, the IMF estimates that the US economy. USA It will contract 5.9% in 2020 and the euro zone could shrink 7.5%. Next year, if all goes well, there may be a 4.7 percent rebound in both economies. In Europe, the German economy could shrink by 7 percent and the French by 7.2 percent, while the average for the monetary area could shrink with the recession of 9.1 percent in Italy and 8 percent in Spain.
Of developing countries, China and India may even grow in the current situation, but the expansion of around 1 percent will mean a significant slowdown after a 4-6 percent increase in previous years.
Cover image: Getty Images
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