It’s been about two weeks since we told you about a depressing economic forecast, so clearly we’re overdue for another one. On Wednesday, the International Monetary Fund updated its World Economic Outlook from April. The report was pessimistic two months ago, predicting that the global economy would shrink by 3.0% annually in 2020, before recovering by 5.8% in 2021.
Now, the IMF says the world economy will see its worst annual decline since just after World War II. Economic growth will take a 4.9% hit annually in 2020. A global recovery could reach 5.4% in 2021 (down from 5.8% forecast in April), but the economy will still be 6.5% smaller at the end of 2021 than it was at the beginning of 2020.
The International Monetary Fund forecasts that United States GDP will contract by 8.0% this year, a downgrade from 5.9% predicted two months ago. The group hopes that the economy recovers by 4.5% in 2021, but does not expect to see the United States reach pre-pandemic output levels. India’s economy will shrink by 4.5%, Mexico will see a 10.5% contraction, and Eurozone countries are expected to wither by 10.7% in 2020.
The United States and Europe may see some of the larger GDP contractions, but things could get even worse for the poorest of the poor. The IMF report notes that Covid is ‘imperiling the significant progress made in reducing extreme poverty in the world since 1990.’ Thirty years ago, more than one third of the world’s population lived in extreme poverty, classified as living on less than $1.90 per day. Since then, that number has fallen to less than 10%. Now, the IMF says that 90% of developing economies will take a hit, pushing people back into poverty (economics isn’t called the dismal science for nothing).
Two other reports came out in June – the World Bank forecasted that the global economy would shrink by 5.2%, and the Organization for Economic Cooperation and Development predicted that world economic output will fall by 6.0% in 2020.
Oh, and did I forget to mention that this was the IMF’s optimistic report? The organization also created a downside prediction, in which a second wave of coronavirus emerges. In that situation, the IMF forecasts that, instead of recovering, world GDP will decline by 4.9% in 2021