The International Monetary Fund announced that the damage caused by the Corona Virus pandemic to economic activity is broader and deeper than previous speculations, prompting the institution to cut its forecast for global output in 2020 again.
The International Monetary Fund said it expected global output to contract by 4.9 percent, compared to 3 percent in the April forecast, when it used available data at a time when large-scale economic shutdown was still in its infancy.
The expected recovery in 2021 will also be weaker, as global growth for that year is expected to reach 5.4 percent, not 5.8 percent, according to April estimates.
However, the fund warned that a new major disease outbreak in 2021 could reduce growth to as little as 0.5 percent.
The International Monetary Fund said that developed economies have received particularly violent strikes, with US output expected to shrink 8 percent, and output in the euro zone is 10.2 percent in 2021, more than two percentage points higher than expected in April. Latin America, where losses are still increasing, has witnessed some of the largest cuts, with the Brazilian economy expected to contract by 9.1%, Mexico by 10.5% and Argentina by 9.9% in 2020.
As for China, where companies started resuming business in April and new infections are limited, it is the only major economy expected to achieve growth in 2020, at 1 percent compared to 1.2 percent in the April forecast.
Although many economies set out to resume activity, the fund said the unique features of closings and social differences came to combine investment and consumption.
The International Monetary Fund says the current recession is the worst since the Great Depression of the 1930s, when global output shrank by ten percent, but Gopinath said that $ 10 trillion in financial support and massive monetary easing by central banks have prevented widespread bankruptcy so far . She added that more support is needed.