IMF is lowering the outlook for the global economy due to viruses

IMF is lowering the outlook for the global economy due to viruses

WASHINGTON (AP) – The International Monetary Fund has slashed its forecast for global growth this year as it envisions much more serious economic damage from the corona virus than it was just two months ago.

The IMF predicts that the global economy will contract 4.9% this year, significantly worse than the 3% decline it estimated in its previous April report. It would be the worst annual contraction since immediately after World War II.

For the United States, the IMF forecasts that the country’s gross domestic product – the value of all goods and services produced in the United States – will fall 8% this year, even more than April’s estimate of a decline of 5 , 9%. This would also be the worst annual decline since the US economy was demobilized in the aftermath of World War II.

The IMF released its dismal forecasts Wednesday in an update to the World Economic Outlook released in April. The update is generally in line with other recent major projections. For example, earlier this month, the World Bank predicted that the world economy would shrink by 5.2% this year.

The IMF noted that the pandemic was disproportionately damaging to low-income households, “jeopardizing the significant progress made in reducing extreme poverty in the world since 1990”.

In recent years, the proportion of the world’s population living in extreme poverty – equivalent to less than $ 1.90 a day – had fallen below 10% from more than 35% in 1990. But the IMF said that COVID-19- crisis threatens to reverse this progress. . It predicts that more than 90% of emerging and emerging market economies will experience a decline in per capita income growth this year.

For 2021, the IMF foresees a resurgence in growth, as long as the viral pandemic does not erupt in a second big wave. The global economy is expected to grow by 5.4% next year, 0.4 percentage points less than in April.

For the United States, the IMF forecasts next year growth of 4.5%, 0.2 percentage point weaker than in April’s forecast. But that profit would not be enough to bring the US economy back to normal before the pandemic hit. The Association of Economists Officially Dating Recessions in the United States has determined that the economy entered a recession in February, sending tens of millions of people out of work due to shutdowns imposed to contain the virus.

The U.S. government has estimated that the nation’s GDP declined by 5% annually in the January to March quarter, and is expected to fall by 30% or worse in the current period from April to June. will descend.

In its updated forecast, the IMF cut growth for all major countries. For the 19 European countries using the euro, it projects growth of 10.7% this year – more than the 8% decline it predicted in April – followed by a 6% recovery in 2021.

In China, the second largest economy in the world, growth is estimated at 1% this year. The Indian economy is expected to contract by 4.5% after a longer period of standstill and a slower recovery than forecast in April.

In Latin America, where most countries continue to struggle with infection control, the two largest economies, Brazil and Mexico, are expected to contract 9.1% and 10.5%, respectively.

A sharp drop in oil prices has led to deep recessions in oil producing countries: the Russian economy is expected to contract by 6.6% this year and the Saudi Arabia by 6.8%.

The IMF warned that downside risks to the forecast remain significant. It said the virus could bounce back, causing renewed shutdowns and possibly renewed financial market turmoil, similar to what happened in January through March. The IMF warned that such financial turbulence could put vulnerable countries in a debt crisis, further hampering recovery efforts.

The updated forecast included a downward scenario that foresees a second major outbreak in early 2021. In this scenario, the global economy would shrink again by 4.9% next year, she estimates.

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