IMF downgrades outlook for global economy due to coronavirus

The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damage from the coronavirus than it did just two months ago.

The IMF predicts that the global economy will shrink 4.9 percent this year, significantly worse than the three percent drop it had estimated in its previous report in April. It would be the worst annual contraction since immediately after World War II.

For the United States, the IMF predicts that the nation's gross domestic product — the value of all goods and services produced in the United States — will plummet eight percent this year, even more than its April estimate of a 5.9 percent drop. This, too, would be the worst such annual decline since the US economy demobilised in the aftermath of World War II.

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The IMF issued its bleaker forecasts on Wednesday in an update to the World Economic Outlook it released in April.

The update is generally in line with other recent major forecasts. Earlier this month, for example, the World Bank projected that the global economy would shrink 5.2 percent this year.

The IMF noted that the pandemic was disproportionately hurting low-income households, imperiling the significant progress made in reducing extreme poverty in the world since 1990.

The IMF projected a sharp contraction of 4.5 percent for the Indian economy in 2020, a "historic low," citing the unprecedented coronavirus pandemic that has nearly stalled all economic activities, but said the country is expected to bounce back in 2021 with a robust six percent growth rate.

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. In 2021, global growth is projected at 5.4 percent, the report said.

For the first time, all regions are projected to experience negative growth in 2020. In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1.0 percent in 2020, supported in part by policy stimulus.

India's economy is projected to contract by 4.5 percent following a longer period of lockdown and slower recovery than anticipated in April, the IMF said.

The IMF's historical records reveal that this is the lowest ever growth for India since 1961. However, India's economy is expected to bounce back in 2021 with a robust six percent growth, it said.