International Monetary Fund envisions a sharp 4.4% drop in global growth for 2020

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The IMF forecast a 2020 global contraction of 4.4 percent in its latest World Economic Outlook, an improvement over a 5.2 percent contraction predicted in June, when business closures reached their peak.

The subdued outlook for medium-term growth will be accompanied by a significant increase in sovereign debt - by about 20 percentage points in advanced economies to 125 per cent of GDP by the end of 2021, and by more than 10 percentage points in emerging and developing economies to 65 per cent of GDP, according to International Monetary Fund estimates. International Monetary Fund resident to the Philippines Yongzheng Yang said the downward revision of the 2020 growth forecast for the Philippines mostly reflected a larger-than-expected downturn in the second quarter and a more gradual resolution of the pandemic as witnessed over the past months, with prolonged social distancing.

"Recent data suggest that many economies have started to recover at a faster pace than anticipated after reopening from the Great Lockdown", Gopinath wrote.

Global growth is expected to slow to 3.5 percent in the medium term, a stunning $28 trillion in lost output in the five-year period through 2025 compared to the pre-pandemic expectations, according to the report.

The IMF said that the United States will likely record a 4.3 per cent contraction in GDP during 2020, considerably less severe than the 8.0 per cent contraction forecast in June. "Including those in reduced-hours work programs and those counted in involuntary part-time employment, the share of workers underemployed in some advanced economies is significantly higher than the fraction of headline unemployed", the institution said in its latest WEO report. It said recovery had taken root in the third quarter and was expected to strengthen gradually in 2021.

This prompted economic managers to revise their GDP estimate this year to a contraction of 5.5 percent, worse than their earlier projection of a 2 percent to 3.4-percent decline.

"Preventing further setbacks will require that policy support is not prematurely withdrawn".

According to the report, in 2021, growth is projected to rebound to 5.2 per cent, -0.2 percentage points below its June projection. Last year, the US economy grew 2.2%.

In addition, poor countries will need concessional financing as well as debt relief.

The IMF estimated Tuesday that the global economy will shrink 4.4% for 2020. They will also need continued support in the form of worldwide grants and concessional financing, as well as debt relief.

"This is the worst crisis since the Great Depression, and it will take significant innovation on the policy front, at both the national and global levels, to recover from this calamity", Gopinath said.