Pandemic Will Hit Global Economy Hard, IMF Alerts

The global economy will suffer a 4.9-percent contraction in 2020, the International Monetary Fund (IMF) forecast on Wednesday.

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The analysis shows that the Covid-19 global outbreak modified April's World Economic Outlook (WEO) forecast, which was 1.9 percent above the current appraisal.

IMF Chief Economist Gita Gopinath stressed in a virtual press conference that the "April analysis reflects worse than anticipated outcomes in the first half of this year, an expectation of more persistent social distancing into the second half of this year, and damage to supply potential."

Also, most of the world's strongest economies are expected to shrink by up to 8 percent. Only China would grow by 1 percent, contrary to what is likely to happen in the U.S. where contraction will reach 8%, or in the European Union, with a 10.2% reduction. Besides, the Japanese economy could also be affected by contracting by 5.8%.

"Compared to our April World Economic Outlook forecast, we are now projecting a deeper recession in 2020 and a slower recovery in 2021," Gopinath explained, adding that global growth is projected at 5.4 percent in 2021, something that would not be enough to meet next year world's Gross Domestic Product(GDP) growth which, according to projections made in January 2020, was estimated at around 6.5 percentage points above.

"Countries will need sound fiscal frameworks for medium-term consolidation, through cutting back on wasteful spending, widening the tax base, minimizing tax avoidance, and greater progressivity in taxation in some countries," she warned.