The global economy copes better with the corona shock

The global economy copes better with the corona shock

According to the International Monetary Fund (IMF), the global economy is likely to cope with the corona shock somewhat better than initially feared. A slump in economic output of around 4.4 percent is expected this year, according to a new IMF forecast.

Containers in the port of Hamburg.

© Daniel Reinhardt / dpa
Containers in the port of Hamburg.

The Monetary Fund thus raised its June forecast by 0.8 percentage points. “We are assuming a slightly less severe, but still deep recession,” said IMF chief economist Gita Gopinath.

Thanks to unprecedented economic aid and monetary policy support, the major economies coped with the consequences of the corona crisis in the second quarter better than expected, said Gopinath. A repetition of a “financial catastrophe” such as that during the last great global economic crisis in 2008 and 2009 has been prevented so far. However, the outlook remains uncertain. The recovery from next year will be “slow, uneven, uncertain and prone to relapses,” stressed the Monetary Fund.

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The IMF lowered the growth forecast for 2021 by 0.2 percentage points to 5.2 percent, mainly due to the ongoing burdens from the Corona crisis. A recovery of the global economy is also not certain as long as the pandemic continues to spread and prevent a return to normal everyday economic life. In order to prevent further setbacks, governments should on no account withdraw their economic stimulus too quickly. However, there is cause for hope that progress will be made in corona tests as well as in the treatment of the disease and in vaccine development.

All in all, the IMF paints a grim picture: the pandemic will cause long-term economic damage to many countries, reverse all progress made in combating poverty since the 1990s and increase social inequality. For the euro zone, the IMF is predicting an economic slump of 8.3 percent this year, and next year it should go up by 5.2 percent. For Germany, a decrease of 6.0 percent and then an increase of 4.2 percent is expected. This increased the June forecast for 2020 by a strong 1.8 percentage points, but lowered it by 1.2 points for the coming year.

The IMF is now clearly more optimistic, especially for the USA. According to the updated forecast, the economy here is expected to shrink by 4.3 percent in 2020; in June an 8 percent slump was assumed. For 2021, the IMF is now expecting 3.1 percent growth. The recovery in China, the world’s second largest economy after the USA, is progressing much faster. The return to growth has already taken place here and has been stronger than expected. The IMF is already forecasting an increase in economic output of 1.9 percent this year, 0.9 percentage points more than in June. For 2021, the monetary fund continues to expect growth of 8.2 percent.


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