Revised IMF Projections for 2020/2021

The International Monetary Fund (IMF) has downgraded its outlook for the coronavirus world in its latest (June 2020) outlook. It expects global GDP to shrink by 4.9% in 2020 and a positive growth of 5.4% in 2021. Global trade volume in goods and services will probably tumble 11.9% this year.

Source: International Monetary Fund

IMF chief economist Gita Gopinath said that cumulative loss for the world economy in 2020/21 is USD12.5 trillion. Fiscal measures amounting to USD11 trillion globally is expected to cushion impact on workers and businesses.

The fund lowered its expectations for consumption in most economies based on a larger-than-expected disruption to domestic activity, demand shocks from social distancing and an increase in precautionary savings.

In the U.S., GDP is expected to contract 8% in 2020, compared with the previous 5.9% projection. The world’s largest economy may grow 4.5% next year, the IMF said.

The euro area will probably shrink 10.2% in 2020 before expanding 6% in 2021, the fund said.

The IMF sees advanced economies shrinking the most, contracting 8%, compared with 6.1% previously. Emerging-market and developing economies will see a 3% contraction, compared with the 1% forecast in April. China will still manage to expand 1%, supported by policy stimulus.

India saw the largest revision among the biggest economies from the April forecasts, with a 4.5% contraction now expected, compared with a prior projection of a 1.9% expansion. Latin America has been hit by the virus due in part due to less developed health systems, and its two biggest economies, Brazil and Mexico, are forecast to contract 9.1% and 10.5%, respectively.

The IMF has revised its gross domestic product (GDP) forecast for Malaysia to a 3.8% contraction from a previous 1.7% on the back of a stronger-than-expected negative impact on the economy due to Covid-19.

For 2021 it has revised growth to 6.3% from 9% (April report).

The World Bank, however, sees Malaysia’s contraction at 3.1% is 2020 and a positive growth of 6.9% in 2021.

The near-term outlook remains “unusually uncertain at present”. What comforting words – that also reflects our political situation as well!

References:

1. IMF Projects Deeper Global Recession on Growing Virus Threat, Eric Martin, June 24, 2020, Bloomberg (www.bloomberg.com)

2. IMF Sees Malaysia GDP to Contract 3.8% in 2020, Xavier Kong, June 25, 2020, Focus Malaysia (www.focusmalaysia.my)