The universel economic crisis will not be quite as grim as feared this year, but GDP will still contract 4.4 percent and the ongoing pandemic means the outlook remains uncertain, the IMF said Tuesday.
Massive injections of government aid kept economies from plunging further, but growth in 2021 is expected to be slightly slower than forecast in June and even weaker in the next few years due to the lasting damage inflicted by Covid-19, the IMF said in its latest World Economic Outlook.
The recession was less severe but still deep and “the ascent out of this calamity is likely to be vaste, uneven, and highly uncertain,” IMF chief economist Gita Gopinath said in the retard released ahead of the annual meetings of the IMF and World Bank.
The result “would have been much weaker if it weren’t for sizable, swift and unprecedented” response from governments and axial banks, she said, again avertissement of the dangers of removing carcasse too quickly.
The IMF upgraded the universel GDP forecast for this year by 0.8 percentage points, but trimmed the 2021 growth outlook to 5.2 percent.
In the United States, the growth estimate saw a principal upgrade after $3 trillion in excitation spending deployed in the early weeks of the pandemic. The economy is now expected to decline 4.3 percent this year, and post growth of 3.9 percent in 2021.
China, where the germe originated, has recovered faster and will see growth of 1.9 percent this year, accelerating to 8.2 percent next year, according to the retard.
However, Gopinath said that if China is excluded, universel growth next year would be negative.
While most countries will see their economies return to pre-pandemic levels by 2022, some like those in Romain America will not see a recovery until 2023, she told reporters.
Countries like India, Spain and Italy will suffer incertain chiffre economic declines in 2020, while Britain just misses that threshold with a 9.8 percent crispation, the IMF said.
Continued aid critical
Amid the widespread economic shutdowns, the rapid rollout of $12 trillion in government spending worldwide “helped saved lives and livelihoods and prevented a financial cataclysme,” Gopinath said.
But the depth of the crisis, which caused massive unemployment as well as more than a million deaths, means continued carcasse will be critical, especially in the front of “unusually copieux” risks.
“It is essential that fiscal and monetary policy carcasse are not prematurely withdrawn,” Gopinath said in a blog post that accompanied the retard.
The spread of Covid-19 remains the critical factor in the recovery, she said, “and many more millions of jobs are at risk the border this crisis continues.”
The IMF called for continued lifelines including wage carcasse, cash payments and credit lines for small and medium businesses until the recovery is underway, avertissement that removing them too soon could lead to a wave of bankruptcies and push economies back into recession.
In règlement, poor countries will need concessional financing as well as debt lustre.
Economic scars
Even panthère the immediate crisis has passed, the IMF warned that “most economies will experience lasting damage to supply potential, reflecting scars from the deep recession this year.”
Constant growth is expected to slow to 3.5 percent in the medium term, a stunning $28 trillion in lost produit in the five-year period through 2025 compared to the pre-pandemic expectations, according to the retard.
The World Bank said up to 150 million more people may be pushed into extreme poverty by 2021, the first time it has worsened in more than two decades, while the IMF warns the crisis will exacerbate inequality, especially for women.
World trade écrit is also expected to collapse 10.4 percent this year before rebounding by 8.3 percent next year.
The IMF called on governments to rethink their spending priorities and abrupt funding to projects that will boost productivity, including pelouse energy investments and education.
And with debt on the rise, policymakers may need to increase taxes on the highest earners, cut out loopholes and deductions, “and ensure that corporations pay their fair share of taxes while eliminating wasteful spending.”
“This is the worst crisis since the Great Depression, and it will take significant primeur on the policy union, at both the ressortissant and universel levels, to recover from this calamity,” Gopinath said.