The International Monetary Fund is projecting a deep recession in 2020. Global growth for the rest of the year is projected to hit -4.4%, an upward revision of 0.8% compared to its June update.
The international lender said the reason for this upgrade is less dire outcomes in the second quarter, as well as signs of a stronger recovery in the third quarter, offset partly by downgrades in some emerging and developing economies. In 2021 growth is projected to rebound to 5.2%, -0.2% below the June projection.
Except for China, where output is expected to exceed 2019 levels this year, output in both advanced economies and emerging market and developing economies is projected to remain below the level it was before the pandemic struck. The fund said countries that rely more on contact-intensive services and oil exporters face weaker recoveries compared to manufacturing-led economies.
The divergence in income prospects between advanced economies and emerging and developing economies (excluding China) triggered by this pandemic is projected to worsen. IMF is now upgrading the forecast for advanced economies for 2020 to -5.8%, followed by a rebound in growth to 3.9% in 2021.
For emerging market and developing countries (excluding China) the international lender expects GDP to be -5.7% in 2020 and then a recovery to 5% in 2021.
Nigeria’s economy is expected to contract -4.3% this year and grow by 1.7% in 2021.
IMF Chief Economist Gita Gopinath said although nations have stepped in to save their economies, a lot of work still needs to be done. She said the considerable global fiscal support of close to $12 trillion and the extensive rate cuts, liquidity injections, and asset purchases by central banks helped saved livelihoods and prevented a global financial catastrophe.
She called for international collaboration to end the health crisis and asked that once vaccines are available, it should be produced in sufficient scale to make it available for all countries.
And lastly, the chief economist called on nations to make policies that drive sustainable, inclusive and prosperous growth.