“There is a higher-than-usual degree of uncertainty around this (IMF) forecast. The baseline projection rests on key assumptions about the fallout from the pandemic. In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020; greater scarring (damage to supply potential) from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020; and a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices. For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity. Moreover, the forecast assumes that financial conditions—which have eased following the release of the April 2020 WEO—will remain broadly at current levels. Alternative outcomes to those in the baseline are clearly possible, and not just because of how the pandemic is evolving. The extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects—as the June 2020 Global Financial Stability Report (GFSR) Update discusses—raising the possibility that financial conditions may tighten more than assumed in the baseline.” - (The IMF World Economic Outlook, June 2020)

The IMF has sharply downgraded its 2020 forecast for all major economies, citing even grimmer data on the pandemic and the economy than existed in April when it last provided a set of projections.

The economic downgrading was severe across the board, though it was far worse for the developed countries than the emerging market economies.

Currently, the IMF is estimating that the global economy will contract by 4.9% this year and recover by 5.4% in 2021.

But in its latest projection, the advanced economies contract by 8% this year and rebound by 4.8% in 2021. The emerging market economies shrink by a smaller 3% in 2020 but rebound at a much stronger 5.9% pace in 2021.

In its latest iteration, the US economy is projected to contract by 8% this year and then partially recover by 4.8% in 2021.

As widely expected, the Canadian economy underperforms the US in this crisis, contracting faster this year and recovering slower in 2021.

The Euro area economies are projected to experience an extremely deep 10.2% decline in 2020 and then rebound by 6% next year.

France, Italy, and Spain are all expected to post GDP declines in excess of 12% this year, while Germany is forecast to experience a 7.8% decline this year.

Britain’s economy, which faces the added problem of a potential hard Brexit, is forecast to decline by 10.2% in 2020 and recover by 6.3% in 2021.

China has been able to better manage the economic fallout from the pandemic than other countries and should post a slim 1% gain in GDP this year, though its rebound in 2021 is expected to be 8.2%. Recall that just prior to the pandemic, China’s economy was growing in a 6% range, so 1% growth is a very weak performance for that economy.

India will have a far worse experience than China, with this year’s GDP decline amounting to 4.5%.

In conclusion, we are navigating very uncharted economic waters because of the pandemic and its uncertain economic implications.

Nonetheless, the current global economic outlook represents the direst economic projections since the Great Depression.

The widely accepted assumption used here is that the global downturn peaks in the second quarter of 2020 and then recovers.

Even if the global pandemic is under better control by the end of this year, the latest forecast only projects a partial recovery in the advanced economies in 2021.

(Click on image to enlarge)

(Click on image to enlarge)