Infotech A recession less severe than expected in 2020, but a smaller rebound in 2021

A recession less severe than expected in 2020, but a smaller rebound in 2021

Economic forecasts remain more than ever determined by developments on the health front. The International Monetary Fund (IMF) updated Tuesday, October 13 its growth outlook for 2020 and 2021. The recession should be slightly less severe than expected this year, especially thanks to recklessness in advanced countries. The IMF is now counting on a contraction of the global gross domestic product (GDP) of 4.4% this year, against 5.2% estimated in June.

The new coronavirus has killed more than 1.07 million people worldwide. In Europe, France, Spain and England, which are facing a new wave of infections, are stepping up targeted measures to avoid widespread containment devastating for the economy. “Living with the new coronavirus is a challenge like no other, but the world is adapting”, estimates its chief economist Gita Gopinath, in a blog accompanying the last report of the institution on the world forecasts.

The revision for this year reflects better than expected economic data recorded in the second quarter, mainly in advanced countries – Europe and the United States – but also in China.

All regions of the world are affected by this improvement, with the exception of emerging and developing economies, whose forecast was lowered by 0.2 points to -3.3%.

The GDP of the United States, the world’s largest economy, will plunge 4.3% against 8% previously estimated, that of the euro zone will fall by 8.3%, that of France by 9.8%.

No miracle in 2021

“However, this crisis is far from over”, pointed out Gita Gopinath.

Faced with the immense uncertainty, the institution in Washington has once again revised down the pace of the recovery expected next year (+ 5.2%, -0.2 point). “The ascent will probably be long, uneven and uncertain”, summarized the economist.

“The outlook has deteriorated significantly in some emerging and developing countries where infections are increasing rapidly. “

After the historic contraction in 2020 and the recovery in 2021, the level of global GDP should ultimately be only slightly higher than that of 2019, details the IMF.

In the medium term, the outlook is also gloomy since social distancing will probably persist until the end of 2022, preventing a real economic rebound.

A worst-case scenario

In addition, we cannot rule out a worst-case scenario with an intensification of the waves of infections combined with a slowdown in progress on treatments and vaccines, forcing the authorities to take more drastic measures.

If the virus remains difficult to control, activity could deteriorate in sectors such as restaurants, with possible repercussions on other parts of the economy.

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The global recession would then be worsened compared to the baseline scenario. In 2021, growth would only be around 2.2% against 5.2% estimated in the main scenario.

Conversely, the rapid arrival of a vaccine would allow global growth to gradually accelerate, with a GDP increase of about 0.5 percentage point higher in 2021, or 5.7%.

Who is going to pay the hundreds of billions of dollars that states are releasing against the recession?

Help the most vulnerable

In this context, putting the world economy back on the path predicted before the pandemic is compromised. The IMF has also made its calculations: the cumulative loss of GDP for the period 2020-2025 is estimated at 28 trillion dollars, including 11 trillion for 2020-2021.

“It is a serious setback to improving the standard of living” in all countries, reacted Gita Gopinath.

Like the World Bank, the IMF regrets that this crisis has destroyed the progress made since the 1990s in reducing global poverty and the fact that it is increasing inequalities. School closures, ” a sacrifice “ for entire generations, pose “An additional challenge”, he said.

While waiting for a vaccine, Fund officials recommend that governments maintain their aid to the most vulnerable and increase public investment by focusing on projects “Green”, generators of more jobs.

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