IMF downgrades global economy outlook, predicts severe financial damage due to coronavirus
The IMF predicts that the global economy will shrink 4.9% this year.
The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damage from the coronavirus than it did just two months ago.
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The global organization predicts that the global economy will shrink 4.9 percent this year, significantly worse than the 3 percent drop it had estimated in its previous report in April. The IMF has forecast that the global economic damage from the recession will be worse than from any other downturn since the Great Depression.
FILE - In this April 30, 2020, file photo, a store with a "Going out of Business," sign is shown n North Miami Beach, Fla. The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more seve
The IMF also cautioned that downside risks to the forecast remain significant. It said the virus could surge back, forcing renewed shutdowns and possibly more turmoil in financial markets similar to what occurred in January through March. The IMF warned that such financial turbulence could tip vulnerable countries into debt crises that would further hamper any recovery.
For the United States, the IMF predicts that the nation’s gross domestic product — the value of all goods and services produced in the United States — will plummet 8 percent this year, even more than its April estimate of a 5.9 percent drop. That would be the worst such annual decline since the U.S. economy demobilized in the aftermath of World War II.
“This is the worst recession since the Great Depression,” Gita Gopinath, the IMF’s chief economist, told reporters at a briefing. “No country has been spared.”
The IMF noted that the pandemic was disproportionately hurting low-income households, “imperiling the significant progress made in reducing extreme poverty in the world since 1990.”
In recent years, the proportion of the world’s population living in extreme poverty — equivalent to less than $1.90 a day — had fallen below 10 percent from more than 35 percent in 1990. But the IMF said the COVID-19 crisis threatens to reverse this progress. It forecast that more than 90 percent of developing and emerging market economies will suffer declines in per-capita income growth this year.
Looking ahead, for 2021, the IMF envisions a rebound in growth, so long as the viral pandemic doesn’t erupt in a second major wave. It expects the global economy to expand 5.4 percent next year, 0.4 percentage point less than it did in April.
For the United States, the IMF predicts growth of 4.5 percent next year, 0.2 percentage point weaker than in its April forecast. But that gain wouldn’t be enough to restore the U.S. economy to its level before the pandemic struck. The association of economists who officially date recessions in the United States determined that the economy entered a recession in February, with tens of millions of people thrown out of work from the shutdowns that were imposed to contain the virus.
FILE - In this March 24, 2020, file photo, a man sits outside a closed wholesale market in Mumbai, India. The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damag
The U.S. government has estimated that the nation’s GDP shrank at a 5 percent annual rate in the January-March quarter, and it is widely expected to plunge over 45 percent in the April-June period, according to the Federal Reserve Bank of Atlanta's GDPNow Forecast.
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In its updated forecast, the IMF downgraded growth for all major countries.
The Associated Press contributed to this report.