June 24, 2020, 10:50 a.m. EDT

IMF slashes world growth outlook for 2020 and sees sluggish turnaround next year

Global economy now seen contracting 4.9% in 2020, almost 2 percentage points below April forecast

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By Greg Robb, MarketWatch

Getty Images
An Istanbul restaurant awaits diners after its June 1 reopening. The pandemic-sparked global economic downturn is expected to hit bottom in the April-June quarter and then start to recover gradually.

The International Monetary Fund again cut its global economic forecast for 2020 on Wednesday, saying that the coronavirus pandemic has caused an unprecedented decline in global activity.

The IMF sees a global economic contraction of 4.9%, almost two percentage points lower than three months ago.

If realized, that would be the worst downturn since the Great Depression of the 1930s, far worse than the financial crisis of 2008-2010. In January, before COVID-19 had spread, the IMF had projected 3.3% global economic growth this year.

“We are definitely not out of the woods. We have not escaped the great lockdown,” said Gita Gopinath, the IMF’s chief economist, at a press briefing.

Read: Coronavirus tally: Global cases of COVID-19 at 9.3 million, 477,807 deaths

“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 2021, global growth is expected to rebound to a 5.4% growth rate, down 0.4 percentage points from the April forecast. The recovery is expected to be “sluggish” with the level of gross domestic product still about 6.5 percentage points lower than the pre-COVID-19 projections of January.

The downturn is expected to hit bottom in the April-June quarter this year and then start to recover gradually.

The IMF’s projected recovery looks like the Nike swoosh.

This pandemic has led to a demand shock as businesses and households cut back spending. Globally, business lockdowns were at their most intense through mid-May but activity remains low compared to pre-coronavirus pandemic levels.

For the U.S., the IMF cut its forecast for 2020 to negative 8%, which is 2.1% lower than in April. Growth is expected to rise to 4.5% in 2021. China is the only major economy still expected to experience economic growth this year.

The IMF cut growth forecasts for all regions and types of economies in 2020.

Area 2020 growth projection (%) Difference from April WEO (%) 2021 growth projection (%) Difference from April WEO (%)
World output -4.9 -1.9 5.4 -0.4
U.S. -8 -2.1 4.5 -0.2
Euro Area -10.2 -2.7 6 1.3
China 1 -0.2 8.2 -1
U.K. -10.2 -3.7 6.3 2.3
Japan -5.8 -0.6 2.4 -0.6
Canada -8.4 -2.2 4.9 0.7
Germany -7.8 -0.8 5.4 0.2
Brazil -9.1 -3.8 3.6 0.7
Russia -6.6 -1.1 4.1 0.6
India -4.5 -6.4 6 -1.4

The IMF said uncertainty is high and there are several important downside risks. It called for global efforts to help countries facing a health crisis and external funding shortfalls.

Read: Brazilian doctors fume as President Bolsonaro gets rap for eating hot dogs while COVID-19 cases are on track to pass U.S.

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