Wednesday 10/28/20
PANDEMIC

IMF: Global economy to shrink less than expected this year

The fund warned that recovery is not assured while the coronavirus continues to spread, forcing shutdowns and preventing economic activity from returning to normal.

01 October 2020, Belgium, Gent: An employee works on the first Volvo full-electric car at the Volvo Car plant of the electric vehicles. Photo: Kurt Desplenter/dpa.
An employee works on the first Volvo full-electric car at a car plant in Belgium. Photo: Kurt Desplenter/dpa.

The global economy will contract by 4.4% this year, a more moderate downturn than initially anticipated, the International Monetary Fund (IMF) said on Tuesday.

"We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast," IMF economic counsellor Gita Gopinath said in the fund's "World Economic Outlook" report.

In June, the IMF had forecast a contraction of 4.9% in global gross domestic product this year.

The revision was driven by "unprecedented fiscal, monetary, and regulatory responses" that helped soften the blow from the coronavirus crisis in large advanced economies, Gopinath said.

"While the global economy is coming back, the ascent will likely be long, uneven, and uncertain," she warned.

In some emerging and developing economies where coronavirus cases are surging, prospects "have worsened significantly" compared to the June forecasts.

Pandemic continues

The IMF also lowered its projection for global growth next year from 5.4 to 5.2%, as the pandemic continues to weigh on the economy.

The fund warned that recovery is not assured while the coronavirus continues to spread, forcing shutdowns and preventing economic activity from returning to normal.

Governments should not withdraw policy support prematurely, the IMF urged.

The pandemic will inflict lasting damage on many economies, exacerbate extreme poverty and increase inequality, according to the fund.

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