The recession caused by the pandemic will be less severe than expected in 2020 thanks to the opening in some advanced economies, although the reactivation is losing steam, the International Monetary Fund (IMF) warned on Tuesday.
The IMF expects a contraction in world GDP of 4.4% this year, compared to 5.2% estimated in June.
The new coronavirus leaves more than 1.08 million deaths in the world. In Europe, faced with a new wave of infections, specific measures are multiplying to avoid a generalized confinement that could be devastating for the economy.
“Living with the new coronavirus is a different challenge, but the world is adapting,” said IMF chief economist Gita Gopinath, updating the report “World Economic Outlook” (WEO, for its acronym in English).
The upward revision reflects better-than-anticipated economic data in the second quarter, particularly in developed economies in Europe, the United States, and China, where the virus appeared late last year.
All regions of the world are affected by this improvement, except for emerging and developing economies whose forecast worsened to a collective decline of 3.3% in 2020.
The GDP of the United States, the world’s largest economy, will fall 4.3% against the 8% estimated in June, while the Euro Zone economy will fall 8.3% against the 10.2% anticipated earlier.
“However, this crisis is far from over,” Gopinath warned.
Given the immense uncertainty, the IMF has once again revised down the pace of recovery expected for next year (+ 5.2%, a decrease of 0.2 points).
Excluding China, the second largest economy in the world, the accumulated global GDP between 2020 and 2021 falls, the economist said at a press conference.
– Long and uneven recovery –
“The recovery will likely be long, uneven and uncertain,” Gopinath summarized, noting that since the June forecast, “the outlook has deteriorated considerably in some emerging and developing countries where infections are increasing rapidly.”
After the historical contraction of 2020 and the expected reactivation in 2021, the level of world GDP should be slightly higher than that of 2019, the Fund detailed.
The agency estimates that in the medium term, the outlook will be mediocre since social distancing will probably persist until the end of 2022, which prevents a true recovery.
Gopinath stressed that “for a large number of countries”, the return of GDP to pre-pandemic levels will come “very gradually”, not before 2022 for some and not even before 2023 for Latin America.
In addition, the IMF does not rule out a worse scenario with an intensification of infections combined with a slowdown in progress in the search for treatments and vaccines, which forces the authorities to take tougher measures.
In this context, it is difficult for the world economy to return to the path expected before the pandemic. The IMF estimates that the cumulative loss of GDP for 2020-2025 will be about $ 28 trillion, 11 trillion in 2020-2021 alone.
“It is a serious setback for the improvement of the standard of living” of the population, Gopinath said.
– Schools closed, “a sacrifice” –
Like the World Bank, the IMF fears that this crisis has wiped out the progress made since the 1990s in reducing world poverty, and that inequality is growing.
Closing schools, “a sacrifice” for entire generations, adds “one more challenge,” he said.
The volume of trade in goods and services in the world will fall, and although the decline will be less than expected in 2020 and there will be a rebound in 2021, the figure is also important for this growth engine: -10.4% for this year in exchanges.
“These are difficult times but there are spaces for hope,” said the IMF chief economist. “Testing has intensified, treatments are improving, and vaccine trials are developing at an unprecedented rate, some already in the final stage.”
IMF Director General Kristalina Georgieva has been insisting for several weeks that it is key that all innovations are produced on a large scale for the benefit of all countries.
“This effort should include multilateral aid to distribute doses (of vaccines) to all countries at affordable prices,” added Gopinath.
While awaiting a vaccine, the IMF once again recommends that governments maintain aid for the poorest and increase public spending by focusing on “green” projects that generate more jobs.
The annual meetings of the IMF and the WB are held in virtual format from October 12 to 18, 2020.