Washington, Oct 13 (efe-epa).- The coronavirus-triggered global economic crisis will not be ending anytime soon, according to the International Monetary Fund, which said Tuesday that only China’s surprising resilience and massive worldwide fiscal and monetary stimulus have managed to avert an even more devastating blow.
“This crisis is far from over,” Gita Gopinath, the IMF’s economic counsellor and director of research, said at a press conference during the presentation of the Fund’s latest World Economic Outlook report.
“The ascent out of this calamitous great lockdown is likely to be long, uneven and highly uncertain. It is therefore essential that fiscal and monetary policy support are not prematurely withdrawn as best possible.”
At the start of the 2020 Annual Meetings of the Boards of Governors of the World Bank Group and the IMF, which are being conducted virtually due to the pandemic and will run through Sunday, the Fund projected a 4.4 percent drop in global gross domestic product this year.
That was slightly more optimistic than the 5.2 percent plunge in GDP it forecast in June.
The rosier outlook is due to the massive fiscal and monetary response by the world’s biggest economies and improved projections for China, which in June had been expected to grow 1 percent this year but now is forecast to grow at a 1.9 percent clip.
The Asian giant is the only major country forecast to grow in an otherwise disastrous 2020 for the global economy.
China’s relatively robust performance has been due to strong public investment after coronavirus-triggered lockdowns were eased in early April, according to the report, which said that country is expected to rebound quickly in 2021 and grow by 8.2 percent (compared to 6 percent growth for emerging market and developing economies as a whole).
By contrast, India’s GDP will plunge by 10.3 percent this year (compared to a projected 4.5 percent drop in June) before bouncing back and posting 8.8 percent growth in 2021 (up by 2.8 percentage points from the previous report), the IMF said.
The United States’ GDP, meanwhile, is now expected to fall by 4.3 percent (compared to the IMF’s June projection for an 8 percent plunge).
But after projecting in June that the world’s largest economy would grow by 4.5 percent in 2021, the Fund now is forecasting a rise in US GDP of just 3.1 percent next year.
The US economic crisis has been contained thanks to a $2.2 trillion fiscal stimulus package approved by Congress in the spring and unprecedented monetary support from the Federal Reserve, Gopinath said.
The IMF, however, warned that consumer spending and job creation in the US appear to have leveled off in recent weeks and is forecasting that the country’s unemployment rate will stand at 8.9 percent at the end of 2020 and at 7.3 percent at the close of 2021.
In reference to the broader global economy, the Fund praised the fiscal actions taken by countries to mitigate the impact of the crisis but warned about the risk of prematurely withdrawing that support.
“To the extent possible, policies must aggressively focus on limiting persistent economic damage from this crisis. Governments should continue to provide income support through well-targeted cash transfers, wage subsidies and unemployment insurance,” Gopinath said.
“To prevent large scale bankruptcies and ensure workers can return to productive jobs, vulnerable but viable firms should continue to receive support -wherever possible- through tax deferrals, moratoria on debt service and equity-like injections.”
The IMF sees the global economy as a whole getting back to pre-crisis levels with a lift from China but does not expect that to occur before the end of 2021.
Europe and the US are not projected to return to pre-pandemic levels until 2022, while Latin America – the region hardest hit economically – is not expected to do so until 2023. EFE-EPA