The International Monetary Fund announced on Tuesday new economic projections that mix both slightly better news for the short term and not-so-good news for the long term, as the coronavirus pandemic continues to hinder global growth.
The organization’s latest World Economic Outlook projects a global decline of 4.4% in 2020 – painting a rosier picture compared to its last update in June, when a 4.9% contraction was projected. The improved forecast reflects both better-than-expected second quarters – mostly for advanced economies – and indicators of strong recovery in the third quarter, according to the report.
A return to growth among advanced economies and China helped drive the revisions, the report notes. Chinese officials said on Tuesday that the country’s growth in exports accelerated in September, buoyed by a global demand for masks and medical supplies.
But the IMF also again downgraded its global outlook for 2021, projecting growth of just 5.2%. The organization in June projected growth of 5.4%, which represented a decline of 0.4% from its previous update in April. The continued downgrades represent the expectation that social distancing will continue into next year, according to the report. The current projections would leave gross domestic product in 2021 about 6.7 percentage points lower than the IMF’s pre-pandemic projections from January, and the level of global GDP next year is now expected to be a “modest” 0.6% above that of 2019.
The IMF also cautions that because of the nature of the pandemic, the outlook of the global economy is hard to put a finger on. The possibility of worse outcomes than expected “remains sizable.”
“The uncertainty surrounding the baseline projection is unusually large,” the report reads. “The forecast rests on public health and economic factors that are inherently difficult to predict.” That uncertainty also comes as the U.S. and countries across Europe are experiencing new waves of new COVID-19 cases being reported.
The report’s outlook includes a projected decline of nearly 6% for advanced economies in 2020, and a contraction of 3.3% for emerging markets and developing economies. India, Italy and Spain – some of the countries that have been hit hardest by the COVID-19 crisis – could have the worst contractions this year, with each projected to see GDP declines of over 10%, according to the IMF.
Regardless of the recovery, the organization notes that the pandemic “will reverse the progress made since the 1990s in reducing global poverty and will increase inequality.” Nearly 90 million people could now fall below the $1.90-per-day income threshold of “extreme deprivation” this year, according to the report.
Indeed, the road to recovery will be difficult across the world, writes IMF chief economist Gita Gopinath in a foreword for the report
“While the global economy is coming back,” she writes, “the ascent will likely be long, uneven and uncertain.”