WASHINGTON • The International Monetary Fund (IMF) said yesterday that forecasts for the global economy were "somewhat less dire" as wealthy countries and China rebounded more quickly than expected from coronavirus lockdowns, but warned that the outlook was worsening for many emerging markets.
The IMF forecast a 2020 global contraction of 4.4 per cent in its latest World Economic Outlook, an improvement from a 5.2 per cent contraction predicted in June, when business closures reached their peak. It is still the worst economic crisis since the 1930s Great Depression, it said.
The global economy will return to growth of 5.2 per cent next year, the IMF said, but the rebound will be slightly weaker than forecast in June, partly due to the extreme difficulties for many emerging markets and slowing reopening momentum as the virus continues to spread.
The forecasts reflect revised foreign exchange weightings for purchasing power parity that slightly increase the influence of advanced economies on global output.
IMF chief economist Gita Gopinath said in a blog posting that some US$12 trillion (S$16.3 trillion) in fiscal support and unprecedented monetary easing from governments and central banks helped to limit the damage, but employment is well below pre-pandemic levels, with low-income workers, youth and women hardest hit.
"The poor are getting poorer with close to 90 million people expected to fall into extreme deprivation this year," Dr Gopinath said. "The ascent out of this calamity is likely to be long, uneven and highly uncertain. It is essential that fiscal and monetary policy support are not prematurely withdrawn."
The IMF said the United States will see a 4.3 per cent contraction in gross domestic product this year, far less severe than the 8 per cent contraction forecast in June. But next year's US rebound will be somewhat smaller at 3.1 per cent, assuming no new federal aid beyond US$3 trillion approved in March.
The euro zone's economy will shrink by 8.3 per cent this year, an improvement from a 10.2 per cent contraction predicted in June, but there is wide divergence within the group. Export powerhouse Germany will see a 6 per cent contraction this year, while Spain's economy, more dependent on tourism, will shrink by 12.8 per cent. The euro zone will resume growth of 5.2 per cent next year, the IMF said.
China, which saw a strong early reopening and rebound from the pandemic, will be the only economy to show positive growth this year, of 1.9 per cent - nearly double the rate predicted in June - and reach 8.2 per cent growth next year, its highest rate in nearly a decade, the IMF said.
China had reopened most of its economy by April and has seen strong demand for exports of its medical supplies and technology products needed to aid remote working, the IMF said.
But emerging markets other than China will see a 2020 contraction of 5.7 per cent, worse than the 5 per cent predicted in June. The IMF said the virus was continuing to spread in large countries, including India and Indonesia, and these economies are far more dependent on hard-hit sectors such as tourism and commodities as well as on remittances and other sources of external finance.
REUTERS
