Economy

IMF new forecast for the world economy: a sharp contraction of -3%; for Latin America the fall is even bigger

This is a downgrade of 6.3 percentage points from January 2020

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This Tuesday morning, during its Spring Meetings, the International Monetary Fund (IMF) disclosed its forecasts for the world economy amid the Covid-19 pandemic. Since January, when the first numbers were revealed, a lot has changed. “We project global growth in 2020 to fall to -3 percent. This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis”, said the institution in its newsletter.

When it comes to Latin America, the GDP’s fall due to the new coronavirus is bigger: -5.2 percent this year. Some recovery would come only in 2021, with a lot of financial and political support by the local governments and the international institutions.

READ ALSO: The three main measures taken (so far) by the two largest Latin American economies against Covid-19

For Brazil and Mexico, the largest Latin American economies, the decline could reach -5.5% and -6.6% this year.

It’s important to point ou that this forecast is based in some conditions that it may still change: “assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent”, said the IMF.

READ ALSO: World Bank expects Latin America’s GDP to fall 4.6% in 2020; and offers $160 billion in financial support

The possible second wave of infections in China will be decisive for planning the next steps worldwide. This is the sixth week of a rise in new cases in the country. On Monday China registered 108 new cases of coronavirus, the highest number since March 6th in the country, which tries to prevent a second wave of infections from Covid-19.

According to IMF, even within this current scenario, the cumulative loss to global GDP till 2021 “could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined”.