E IMF's Gloomy Global Economic Projections

“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.

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Arthur Donner 2 months ago Author's comment

I agree the outlook is very risky.

thanks for your comment

William K. 2 months ago Member's comment

It certainly seems that these projections are a bit optomistic, since presently there is no vaccine available and none truly in sight. Thus all guesses that there will be a recovery look to be based on "Happy Thoughts" instead of reality. So far the weapons against this plague only slow the progress, they do not stop or reverse the advance of it.

Thus the future does not look like recovery yet.

That will change if a vaccine is found, and the creators do not act like hungry vultures as they set pricing. So far it looks like the one supplier of some useful medication is doing exactly that! $520 per dose seems a bit much.