World is facing deep recession: IMF

The International Monetary Fund's (IMF) forecast for the world economy fluctuated from expansion to reduction, making the loudest downgrade in projections for the world's leading economies.

The IMF has projected the global growth to shrink by 4.9 percent in 2020, which is 1.9 percentage points below the April 2020 World Economic Outlook forecast. For 2021, IMF forecasts a growth of 5.4 percent, down from April projection of 5.8 percent.

Overall, this would leave 2021 GDP some 6.5 percentage points lower than in the pre-Covid-19 projections of January 2020.

Two months after its dire predictions of the steepest recession in almost a century, the IMF released this new global economic forecaston Wednesday.

Few days back in this June, the World Bank forecast a 5.2 percent contraction in global GDP in 2020 – the deepest global recession in decades. It also said that per capita incomes in most emerging and developing economies will shrink this year.

Now, the IMF comes up with this bad news for the world. 

IMF predicts deeper global recession due to coronavirus pandemic

IMF in its latest outlook said consumption growth, in particular, has been downgraded for most economies, reflecting the larger-than-anticipated disruption to domestic activity.

In 2021, the growth rate for emerging market and developing economies is projected to strengthen to 5.9 percent, largely reflecting the rebound forecast for China (8.2 percent). 

The growth rate for the group, excluding China, is expected to be –5.0 percent in 2020 and 4.7 percent in 2021, leaving 2021 GDP for this subset of emerging markets and developing economies slightly below its 2019 level.

Global trade will suffer a deep contraction this year of –11.9 percent, reflecting considerably weaker demand for goods and services, including tourism. Consistent with the gradual pickup in domestic demand next year, trade growth is expected to increase to 8 percent.

Inflation outlook

Inflation projections have generally been revised downward, with larger cuts typically in 2020 for advanced economies and expected to rise gradually in 2021, consistent with the projected pickup in activity.

The IMF emphasises on balancing the need to protect people, stabilise demand, and facilitate recovery at this great lockdown.

It further added that where pandemic remains acute and stringent, lockdowns continue.Fiscal policies should accommodate health care services to save lives and provide emergency lifelines to protect people. 

Fiscal policies should also gradually transition away from firm support to better-targeted household support, taking into account the extent of informality in the economy, where lockdown are easing.

IMF also states that, employment support measures will need to encourage safe return to jobs and facilitate structural shifts in labor markets for a more resilient post-Covid-19 economy.