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Signage hangs at the International Monetary Fund (IMF) headquarters in Washington, D.C., U.S., on April 14, 2020./VCG Photo
The International Monetary Fund (IMF) on Tuesday said forecasts for the global economy were "somewhat less dire" as wealthy countries and China rebounded more quickly than expected from coronavirus lockdowns but warned that the outlook was worsening for many emerging markets.
The IMF forecast a 2020 global contraction of 4.4 percent in its latest World Economic Outlook, an improvement over a 5.2 percent contraction predicted in June, when business closures reached their peak. But it is still the worst economic crisis since the 1930s Great Depression, the IMF said.
Many economies have started to recover faster than anticipated after reopening from their lockdowns but with the COVID-19 pandemic continuing to spread, the global economy's ascent back to pre-pandemic levels remains prone to setbacks, the outlook said.
Screenshot of IMF World Economic Outlook
"These are difficult times, yet there are some reasons to be hopeful," Gita Gopinath, IMF's economic counsellor and director of research, was quoted as saying in the outlook report, referring to progress made in treatments and vaccine trials.
Compared with the previous outlook IMF made in June, the second quarter GDP growth in large advanced economies were slight better and China's return to growth was stronger than expected, the report said, noting there are signs of a more rapid recovery in the third quarter.
"The story is less dire than we thought three months ago, but dire nonetheless," IMF Managing Director Kristalina Georgieva said during a panel discussion that was held virtually.
Georgieva said governments needed to stay focused on their healthcare responses to the coronavirus and must not withdraw stimulus measures prematurely.
"If we cut these lifelines that have been extended to families and businesses before we are out of the health crisis, this could be catastrophic in terms of bankruptcies, unemployment and undoing all that has been done so far," she added.
Screenshot of IMF World Economic Outlook
Actions including sizeable and timely fiscal, monetary and regulatory responses have so far prevented a recurrence of the financial catastrophe of 2008-09, the report said, but pointed out the negative impacts of the pandemic will last.
After the rebound in 2021, IMF said global growth is expected to slow to about 3.5 percent in the medium term, implying the growth till 2025 would be less than expected.
"The pandemic will reverse the progress made since the 1990s in reducing global poverty and will increase inequality," the report said.
(With inputs from Reuters)
