WASHINGTON (Reuters) – The coronavirus pandemic has caused more extensive and profound damage to economic activity than previously thought, the International Monetary Fund said Wednesday, prompting the institution to further cut its global output forecasts by 2020.
The IMF said it now expects 2020 global output to shrink by 4.9%, compared with a 3.0% contraction forecast in April when it used the available data as widespread trade blockades were reaching their peak.
The recovery in 2021 will also be weaker, with a global growth forecast of 5.4% for the year compared to 5.8% in the forecast for April. However, the Fund said that a major new outbreak in 2021 could reduce growth for the year to barely noticeable 0.5%.
Although many economies have begun to reopen, the Fund said that the unique characteristics of blockages and social distancing have conspired to affect both investment and consumption.
“We are definitely not out of the woods. We have not escaped the Great Blockade, ”said IMF chief economist Gita Gopinath at a press conference. “Given this tremendous uncertainty, policymakers must remain vigilant.”
The IMF considers the current recession to be the worst since the Great Depression of the 1930s, in which world GDP fell by 10%, but Gopinath said that the $ 10 trillion in fiscal support and the massive easing of central banks have so far avoided large-scale bankruptcies. More support will be needed, he added.
Advanced economies have been particularly affected, and US output is now expected. USA It shrinks 8.0% and the eurozone 10.2% in 2020, both more than 2 percentage points worse than the April forecast, the IMF said.
Latin American economies, where infections are still on the rise, experienced some of the biggest declines, and Brazil’s economy is now expected to shrink 9.1%, Mexico’s 10.5%, and Argentina’s 9.9% in 2020.
China, where businesses started reopening in April and new infections have been minimal, is the only major economy expected to show positive growth in 2020, which is now forecast at 1.0% compared to 1.2% in the forecast for April.
Report by David Lawder; Edition of Paul Simao and Andrea Ricci