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World Economy in 2020 to Weaken More Sharply Than Forecasted: IMF

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chart of economic estimates for 2020 from IMF via Bloomberg (Credit: Bloomberg)

In its latest analysis, the International Monetary Fund said Tuesday that the global economy should shrink 4.9% this year, a greater drop than its earlier prediction of a 3% contraction.  

For 2021, the IMF is anticipating growth of 5.4%, down from 5.8%. The world economy’s cumulative loss for this year and next could hit $12.5 trillion, according to a Bloomberg report.

The United States’ economy is expected to contract by 8% this year, up from the IMF’s prior estimate of 5.9%.

The Dow and S&P 500 closed down more than 2.5%, with the NASDAQ off 2.2%.

“The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,” the report explained.

Overall, the advanced economies should shrink 8% vs. a contraction of emerging and developing economies of 3%; Brazil and Mexico, however, could see their economies shrink by 9.1% and 10.5%, respectively.

According to IMF Chief Economist Gita Gopinath the present economic downturn resembles a roughly 10% drop of global economic output in the 1930s.

Fiscal measures worldwide have totaled some $11 trillion. 

“The steep contraction in economic activity and fiscal revenues, along with the sizable fiscal support, has further stretched public finances, with global public debt projected to reach more than 100% of GDP this year,” the IMF said.