The International Monetary Fund (IMF) on Wednesday published a review of its predictions amid the coronavirus pandemic, where it aggravated the forecast of the global recession and anticipated that Argentina’s economy will collapse much more than expected this year: a 9.9% drop, while in April it had predicted to fall by 5.7% in 2020.
This morning, the international body released an update to the World Economic Outlook (WEO), its report of predictions on the evolution of the global economy, which has undergone a strong downward readjustment since its last presentation in April, during its Assembly of Primavera.La presentation of the report was made virtually in Washington by the agency’s chief economist, Gita Gospinah , entitled “Reopening the Great Confinement: a uneven and uncertain recovery” and projecting a deeper global recession in 2020, with a slower recovery in 2021. Global growth is expected to decline by -4.9% by 2020 — a 1.9 percentage point drop higher than the April forecast–, followed by a partial recovery, with growth of 5.4 percent in 2021. These projections imply a cumulative loss to the world economy over two years (2020-21) of more than $12 trillion for this crisis, Gospinah said.
“The COVID-19 pandemic pushed economies into a Great Confinement, which helped contain the virus and save lives, but also triggered the worst recession since the Great Depression. More than 75 percent of countries are reopening, while the pandemic is intensifying in many emerging market and developing economies. Several countries have begun to recover. However, in the absence of a medical solution, the strength of recovery is very uncertain and the impact on sectors and countries,” the economist said.
For argentina, the agency now projects a 9.9% drop in Gross Domestic Product with a recovery of 3.9% in 2021. The numbers were exacerbated since the April predictions, where it had forecast a 5.7% drop and a recovery of 4.4% by 2021. At the time, due to the uncertainty landscape not only because of the coronavirus but also because of the debt negotiation process, the agency did not risk predictions about inflation or fiscal deficit. Yes, I had predicted 10.9% unemployment this year, but this Wednesday there were no updates in this area. Thus, Argentina’s economy will fall even slightly more than Brazil’s, where the IMF estimates to collapse by 9.1% this year, and the US economy, with GDP falling by 8% this year, two percentage points lower than estimated in April. Mexico to fall back 10.5%. The eurozone will fall by 10.2%, two points more than estimated. The Europeans who would have the steepest casualties this year are Italy (12.8%), France (12.5%), Spain (12.8%) United Kingdom (10.2%). China is one of the few countries in the world to grow, just 1%.
However, Gospinah clarified that the report still presents “a high degree of uncertainty”, and that the outlook may worsen or improve. On the plus side, it points out that better news on vaccines and treatments could come in, and support for certain policies can lead to a faster resumption of economic activity. However, it notes that, on the negative side, new outbreaks of infections may ensues that again restrict expenditures on consumption and mobility, with tightening financial conditions and triggering debt problems.
The Fund recommends that “given the enormous uncertainty, policymakers in each country must remain vigilant and policies will need to adapt as the situation evolves.”
Finally, it states that “for now, substantial fiscal and monetary policy support must continue, especially in countries where inflation is expected to remain moderate. At the same time, countries must ensure adequate fiscal accounting and transparency, and that monetary policy independence is not compromised.”
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