The global economy will shrink by 4.9 percent, the worst annual contraction since World War 2, the International Monetary Fund predicted Wednesday in its World Economic Outlook report.
In its update to the WEO report released in April, the IMF lowered its global growth forecast due to underestimating the economic damage the coronavirus has had on economies. For the first time ever, the IMF projects that all regions will experience negative growth in 2020.
The report predicts the gross domestic product in the United States will drop by 8 percent, worse than its April estimate of a 5.9 percent drop. For the 19 European nations that use the euro, the report says they will experience a 10.7 percent decrease in growth.
Russia and Saudi Arabia, two of the world’s largest oil-producing countries, will contract by 6.6 percent and 6.8 percent, respectively, the IMF reports.
India is projected to contract by 4.5 percent, due to a slower recovery than previously anticipated. Brazil and Mexico, the two largest economies in Latin America, are predicted to contract by 9.1 percent and 10.5 percent, respectively.
Notably, despite the IMF’s outlook that all regions worldwide will experience a negative growth, it foresees China growing by 1 percent in 2020.
The global economy will have a rebound in growth of 5.4 perent in 2021, the IMF projects, assuming there will not be a second major wave of the pandemic and that countries where infections have declined will not reinstate strict lockdowns, instead relying on alternative methods of containment.
The IMF said “the international community must vastly step up its support of national initiatives,” and pointed to multilateral cooperation, encouraging financial assistance to countries with limited health care capacities.
The report also stressed allocating funding for vaccine production to ensure that “affordable doses are quickly available to all countries.” It also called for an increase in efforts to remove trade restrictions on medical supplies and to share information on the pandemic “widely and transparently.”
Looking beyond the immediate pandemic, the report said, “Policymakers must cooperate to resolve trade and technology tensions that endanger an eventual recovery from the COVID-19 crisis.”
It specified the “escalating tensions between the United States and China on multiple fronts” and the deteriorating relationship among the Organization of the Petroleum Exporting Countries (OPEC) as posing “additional challenges to the global economy.”
The IMF highlighted the effects the pandemic has had on global greenhouse gas emissions.
.@GitaGopinath: Geopolitical and trade tensions could damage fragile global relationships at a time when trade is projected to collapse by around 12%. #WEO https://t.co/CH2pXUFFsu pic.twitter.com/R9Ov9mWBTY— IMFLive (@IMFLive) June 24, 2020
“Furthermore, building on the record drop in greenhouse gas emissions during the pandemic, policymakers should both implement their climate change mitigation commitment and work together to scale up equitably designed carbon taxation or equivalent schemes,” the report said.