IMF says deeper-than-expected contraction in U.S. economy likely in Q2

A defacto lockdown in the U.S. has lasted longer than expected despite a rollback in some restrictions on mobility, pointing to a deeper-than-expected contraction in gross domestic product in the second quarter, the International Monetary Fund (IMF) said on Thursday.

Details will be available when the IMF releases its updated World Economic Outlook next Wednesday, spokesman Gerry Rice told a regular briefing held online.

Given the continuing lockdowns, the pace of recovery in the world's largest economy could be slower, he said, without giving an exact forecast.

Rice said the Chinese economy was gaining momentum, with high frequency data showing a stronger-than-expected recovery in investment and services through May. Overall, the balance of risks remained on the downside, he said.

The One World Trade Center and the Financial District in New York are seen from a local park in Weehawken, New Jersey as the COVID-19 outbreak continues in New York, U.S., March 22, 2020. /Reuters

IMF Managing Director Kristalina Georgieva and other top IMF officials have said the IMF is likely to revise downward its already pessimistic forecast for a three-percent contraction in global gross domestic output in 2020.

The best-case scenario released by the IMF in April had called for the U.S. economy to contract 5.9 percent in 2020, with a rebound to 4.7 percent growth in 2021.

At the time, it forecast China would maintain positive growth of 1.2 percent in 2020, with growth expanding to 9.2 percent in 2021.

Rice said the IMF was continuing to provide financing to members through its emergency financing and other facilities. A total of 250 billion U.S. dollars of its one trillion U.S. dollars in lending capacity had been disbursed so far, he said.

As of Friday, 70 countries will have received some 25 billion U.S. dollars in rapid emergency funding that comes largely without the usual IMF conditions, Rice said.

Of the total, about 10 billion U.S. dollars went to 28 countries in sub-Saharan Africa, he said, noting that marked a huge increase from the IMF's average annual lending of one billion U.S. dollars in the region.

Source(s): Reuters