Business & Economy

World economy to shrink 4.9% in 2020 due to Covid crisis, IMF warns

Washington, Jun 24 (efe-epa).- The International Monetary Fund has downgraded its economic outlook for this year and warned in a report on Wednesday that the coronavirus pandemic has had a more negative impact than expected on financial markets.

A global contraction of 4.9 percent is now expected in 2020, a decrease compared to three percent calculated by the IMF in April.

Of the leading economies, only China will maintain a positive rate with predicted growth of one percent, which is still less than forecast in April, according to the fund’s June 2020 world economic outlook.

The United States is expected to fall eight percent this year, almost two points more than 6,1 percent expected three months ago.

For Japan the forecast rate is now a drop of 5.8 percent, slightly lower than 5.2 percent in April, and in the United Kingdom a decrease of 10.2 percent, compared to 6.5 percent previously estimated.

“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 IMF said in its report.

It added: “The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.”

The IMF highlighted a weakness in private consumption as a result of a combination of a large drop in demand and a rise in savings, as well as falling business investment due to the postponement of capital spending caused by the high amount of uncertainty.

In 2021 global growth is projected at 5.4 percent, down from 5.8 percent calculated in April.

“With the relentless spread of the pandemic, prospects of long-lasting negative consequences for livelihoods, job security, and inequality have grown more daunting,” the report stated.

“Further effective policy actions can help slow the deterioration of those prospects and set the stage for a speedier recovery that benefits all in society across the income spectrum and skills distribution.”

The US will see an increase of 4.8 percent next year, China of 8.2 percent, Japan will increase by 2.4 percent and the UK by 6.3 percent, according to the latest projections.

Global trade will be one of the most affected sectors and is expected to end 2020 with a contraction of 11.9 percent due to considerably lower demand for goods and services, including tourism.

Next year trade is predicted to see a gradual rebound of up to eight percent, according to the IMF. EFE-EPA

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