In its bi-monthly World Economic Outlook Update, the IMF said that the negative impact of the Covid-19 pandemic has been worse than anticipated, with recovery to be more gradual than previously forecast.
In 2021, global growth is projected at 5.4%. Overall, this would leave 2021 GDP 6.25 percentage points lower than in the pre-coronavirus projections of January 2020, the report said.
In more advanced economies, growth is predicted to fall by 8%, before recovering by 4.8% next year, with the IMF saying this down to larger than anticipated scarring of activity during lockdown.
“In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020; greater scarring from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020; and a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices,” the report said.
The report forecast global public debt to reach an all-time high, exceeding 101% of GDP in 2020-21- a surge of 19 percentage points from a year ago.
The IMF said the adverse impact on low-income households is particularly acute, and could lead to a reversal of progress made in reducing extreme poverty, which has decline considerably since the 1990s.
The report suggests that emerging markets are expected to be less negatively affected by the pandemic, with growth to drop by 3% this year, followed by a 5.9% increase in 2021.
The IMF stressed cooperation remains essential on multiple fronts. It said that financial assistance is urgently needed for countries confronting health crises and external funding shortfalls, including through debt relief and financing through the global financial safety net.
It said that policymakers must cooperate to resolve trade and technology tensions that endanger an eventual recovery from the crisis.
“The global community must act now to avoid a repeat of this catastrophe by building global stockpiles of essential supplies and protective equipment, funding research and supporting public health systems, and putting in place effective modalities for delivering relief to the neediest,” the report added.
