4.4 per cent drop in global growth for 2020 — Grim IMF forecast

Marco Green
October 17, 2020

Strong worldwide cooperation on coronavirus vaccines could speed up the world economic recovery and add $9 trillion to global income by 2025, said worldwide Monetary Fund Managing Director Kristalina Georgieva.

The IMF chief economist also noted that emerging market and developing economies - many constrained by elevated debt and higher borrowing costs - will need to prioritize critical spending for health and transfers to the poor and ensure maximum efficiency.

The COVID-19 pandemic and its related lockdowns have prompted unprecedented fiscal actions to contain its impacts, which amounted to $11.7 trillion, close to 12 percent of global GDP, as of 11 September 2020, the report unveiled. The IMF attributed the slightly less dire forecast to faster-than-expected rebounds in some countries, notably China, and to government rescue aid that was enacted by the United States and other major industrial countries.

She said that the IMF's new research showed that public investment, especially in green projects and digital infrastructure could be a game changer.

"The virus is resurging with localised lockdowns being reinstituted", Gopinath said.

First, greater global collaboration is needed to end this health crisis, she said. "Recovery is not assured while the pandemic continues to spread".

Maait clarified that this came as a result of the fruitful economic reforms that the government undertook with strong political will, and the support of the Egyptian people.

But the U.S. rebound next year will be somewhat weaker at 3.1% growth - a forecast that assumes no additional federal government aid beyond around $ 3 trillion approved by Congress in March. The economy is now expected to decline 4.3 percent this year, and post growth of 3.9 percent in 2021. Under UPA 2, it had increased by 19.8 per cent, the sources said.

China, which saw a strong early reopening and rebound from the pandemic, will be the only economy to show positive growth in 2020, of 1.9% - almost double the rate predicted in June - and reach 8.2% growth in 2021, its highest rate in almost a decade, the International Monetary Fund said.

Global GDP growth forecasts were trimmed for 2021.

Given ongoing uncertainty over how quickly the COVID-19 pandemic can be brought under control, the International Monetary Fund warned that policymakers need to be prepared to continue to provide broad support, and gradually withdraw it only once the pandemic is fully under control. "It is essential that fiscal and monetary policy support are not prematurely withdrawn, as best possible", she said.

The US economy has been hit hard by coronavirus.

The outlook for Japan has been revised upward by 0.5 points to minus 5.3 percent.

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.

Some economists have forecast that China's GDP growth rate is likely to pick up to above 5 percent following a strong rebound of 3.2 percent in the second quarter.

The G20 on Wednesday approved a six-month extension to mid-2021 of the Debt Service Suspension Initiative (DSSI) that freezes official bilateral debt payments and said they would consider a further six-month extension in April.

Poor countries have been hurt the most by the pandemic.

The World Bank has warned that up to 150 million more people may be pushed into extreme poverty by 2021.

Other reports by Click Lancashire

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