In June 2020 forecast, International Monetary Fund gloomier about global economy

Daniel Fowler
June 25, 2020

The fund said Wednesday it now expected global gross domestic product to shrink 4.9 per cent this year, more than the 3 per cent predicted in April.

The IMF warned that their latest edition of the World Economic Outlook is based on key assumptions including lengthier lockdowns in economies struggling to control COVID-19 infection rates.

The IMF views the current recession as the worst since the 1930s Great Depression, which saw global GDP shrink 10 per cent, but Ms Gopinath has said that the $10 trillion in fiscal support and massive easing by central banks had so far prevented large-scale bankruptcies.

The figure is down 1.9 percentage point from the earlier estimate in April.

Led by the Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, officials of the global financial institution visited Lagos and Abuja between January 29 and February 12, for discussions on Nigeria's economy. It said the pandemic rapidly intensified in a number of emerging markets and developing economies, necessitating stringent lockdowns and resulting in even larger disruptions to activity than forecast.

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"If you look at the growth projection for 2020 and add 2021, over two years, growth in India will be slightly over 1 per cent". The pandemic has worsened in many countries and leveled off in others. This is worse than the decline of 3% it had projected back in April.

The worldwide body's chief economist Gita Gopinath also warned that economic scarring from failed businesses and health fears would drag on recovery in the second half of the year.

"The extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects-as the June 2020 Global Financial Stability Report (GFSR) Update discusses-raising the possibility that financial conditions may tighten more than assumed in the baseline".

The coronavirus pandemic had been more negative for activity in the first half of 2020 than expected, and recovery was also projected to be slower, the International Monetary Fund said, noting that global growth is forecast to be 5.4 percent in 2021, down from 5.8 percent in April, but would plummet to zero in the event of a second wave of the pandemic early next year.

The IMF sees advanced economies shrinking the most, contracting 8 per cent, compared with 6.1 per cent previously.

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