Global economy to contract by 4.9% in 2020

THE INTERNATIONAL Monetary Fund (IMF) on Thursday once again slashed its economic forecasts, estimating a contraction of 4.9 percent in global gross domestic product (GDP), lower than the 3 percent it predicted previously.   

"The (coronavirus disease 2019) Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated," the IMF's World Economic Output report said.

In 2020, while the global economy is expected to narrow by 4.9 percent, it will rebound by 5.4 percent in 2021, according to the report.

"For the first time, all regions are projected to experience negative growth in 2020," the report highlighted.

It said advanced economies would contract by 8 percent in 2020 and increase by 4.8 percent next year.

While the US GDP is expected to drop by 8 percent in 2020, the eurozone economy will narrow by 10.2 percent, and Emerging Market and Developing Economies' (EMDE) GDP will see a decline of 3 percent.

Major economies in the European Union – Germany, France, Italy, and Spain – will post declines of 7.8 percent, 12.5 percent, 12.8 percent, and 12.8 percent, respectively.

Among EMDE countries, Mexico (-10.5 percent) and Brazil (-9.1 percent) will see the worst declines, while China is the only country that is expected to register an increase in GDP by 1 percent in 2020.

Russia’s economy, which was deeply affected by the decreasing oil prices, is forecast to narrow by 6.6 percent in 2020 and rebound by 4.1 percent in 2021.

The report also forecast that oil prices would drop 41.1 percent in 2020 and increase by 3.8 percent in 2021.

Turkey's GDP is also forecast to drop by 5 percent in 2020 and rebound by 5 percent in 2021, it noted.

Global trade to narrow by 11.9 percent

The fund stressed that beyond pandemic-related downside risks, trade tensions between the US and China, problems among the Organization of the Petroleum Exporting Countries, and widespread social unrest caused challenges to the world economy.

Saying that countries must collaborate to tackle challenges, the IMF added, "Beyond the pandemic, policymakers must cooperate to address the economic issues underlying trade and technology tensions, as well as gaps in the rules-based multilateral trading system."

The report added that global trade would also see a deep contraction this year by 11.9 percent due to 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," it said.