IMF sees less severe global contraction

Forecasts worsening outlook for many emerging markets

WASHINGTON:

The International Monetary Fund (IMF) on Tuesday said forecasts for the global economy were “somewhat less dire” as wealthy countries and China rebounded more quickly than expected from coronavirus lockdowns but warned that the outlook was worsening for many emerging markets.

The IMF forecast a 2020 global contraction of 4.4% in its latest World Economic Outlook, an improvement over a 5.2% contraction predicted in June, when business closures reached their peak.

It is still the worst economic crisis since the 1930s Great Depression, the Fund said.

The global economy will return to growth of 5.2% in 2021, the IMF said, but the rebound will be slightly weaker than forecast in June, partly due to the extreme difficulties for many emerging markets and slowing reopening momentum as the virus continues to spread. The forecasts reflect revised foreign exchange weightings for purchasing power parity that slightly increase the influence of advanced economies on global output.

The IMF said that the United States will see a 4.3% contraction in gross domestic product (GDP) during 2020, considerably less severe than the 8% contraction forecast in June. But the US rebound in 2021 will be somewhat smaller at 3.1% - a forecast that assumes no additional federal aid beyond around $3 trillion approved by Congress in March.

China, which saw a strong early reopening and rebound from the pandemic, will be the only economy to show positive growth in 2020 of 1.9% - nearly double the rate predicted in June - and reach 8.2% growth in 2021, its highest rate in nearly a decade, the IMF said.

Published in The Express Tribune, October 14^th, 2020.

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