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!
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)