International Monetary Fund expects Malaysia's GDP to increase 7.8 percent next year

Daniel Fowler
October 14, 2020

It is still the worst economic crisis since the 1930s Great Depression, it said. By comparison, the global economy contracted by a far smaller 0.1% after the devastating 2008 financial crisis.

Addressing a press conference on its biannual World Economic Outlook, IMF's Chief Economist Gita Gopinath said to the press that all the developing economy regions and emerging markets are expected to contract this year. The US economy is expected to shrink by 4.3% in 2020 versus an 8% forecast in June and China's economy is forecast to grow by 1.9%.

The forecasts reflect revised foreign exchange weightings for purchasing power parity that slightly increase the influence of advanced economies on global output. "Global growth is projected to be -4.4 per cent, an upward revision of 0.8 percentage points compared to our June update", Gita Gopinath, the chief economist of the International Monetary Fund, said. "Recovery is not assured while the pandemic continues to spread".

"This crisis will leave scars", she told reporters, stemming from damage to labor markets that will take time to regain lost jobs, lost business investment and diminished schooling that will reduce the development of human capital around the world.

The United States, which has the largest number of coronavirus cases in the world, is expected to post negative growth of 4.3 percent.

Officials essentially shut down the economy soon after the disease began spreading at the start of the year - forcing millions to stay at home and closing businesses. India saw the steepest forecast reduction, with a 10.3 per cent contraction seen for this year, compared with just 4.5 per cent previously, after a larger-than expected second-quarter contraction.

The IMF's projection anticipates that social distancing due to the COVID-19 pandemic will continue into 2021, but the transmission of the virus will plunge globally by the end of 2022.

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"It is essential that fiscal and monetary policy support are not prematurely withdrawn", Gopinath said in a blog post that accompanied the report.

Gopinath said that except for China, where output is expected to exceed 2019 levels this year, output in both advanced economies and emerging market and developing economies is projected to remain below 2019 levels even next year.

"As a result, the economy is projected to contract by 10.3 per cent in 2020, before rebounding by 8.8 per cent in 2021", it said.

The IMF's outlook for India is worse than the RBI's prediction of a 9.5% decline in GDP in the current fiscal year.

The IMF produced the updated outlook for this week's virtual meetings of the 189-nation lending institution and its sister institution, the World Bank.

The gloomy prognosis came even after the International Monetary Fund revised its growth forecasts for this year upwards, reflecting the fact that the second quarter's recession proved shallower than feared, and countries experienced faster recoveries as they relaxed lockdowns.

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