Global economy to contract by 4.9% in 2020

Global economy to contract by 4.9% in 2020

WASHINGTON (Reuters) - the Pandemic of coronavirus causes a more extensive and profound damage to the economic activity than originally anticipated, said on Wednesday the worldwide monetary Fund again lowered the forecast for global GDP in 2020.

"With the relentless spread of the pandemic, prospects of long-lasting negative consequences for livelihoods, job security and inequality have grown more daunting", the lender said in its update to the World Economic Outlook.

On the positive side, International Monetary Fund noted that the recovery is benefiting from exceptional policy support, particularly in advanced economies, and to a lesser extent in emerging market and developing economies that are more constrained by fiscal space.

In the Fund's report said that although many economies have started to re-open, the unique features of quarantine and social distancing, along struck as investment and consumption.

If the revised outlook materializes, it would leave global GDP in 2021 some 6.5 percentage points lower than in the pre-COVID-19 projections of January 2020.

Advanced economies are projected to contract 8 per cent this year, 1.9 percentage points lower than the forecast in the April WEO. Where lockdowns are needed, it said, economic policy must continue to cushion income losses, and where economies are reopening, more targeted support should be gradually unwound.

The fraction of the world's population living in extreme poverty - defined as living on less than $1.90 a day - had fallen in recent years, but "with more than 90 percent of emerging market and developing economies projected to register negative per capita income growth in 2020", this progress in imperiled, said the fund.

The report said that the Indian economy will bounce back in 2021-'22 with a growth rate of around 6%. China will still manage to expand 1 per cent, supported by policy stimulus.

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The IMF stated it might take two years for world output to return to ranges on the finish of 2019 and warned that governments needs to be cautious about eradicating monetary assist to their fragile economies.

Latin American economies, where infections are still rising, saw some of the largest downgrades, with the Brazil economy now expected to shrink 9.1 per cent, Mexico's 10.5 per cent and Argentina's 9.9 per cent in 2020.

In the second scenario, with a faster-than-expected recovery, global output would be about a half percentage point better than the baseline this year and 3 per cent above the baseline in 2021.

The IMF chief economist noted that a high degree of uncertainty surrounds this forecast, with both upside and downside risks to the outlook.

In emerging market economies, the average fiscal response to the pandemic is now estimated at 5 per cent of GDP, sizable but less than in advanced economies.

With over 4.5 lakh cases till date, India is ranked 4th globally in the list of countries worst affected by Covid-19.

As per its report, Global trade will suffer a deep contraction in 2020 of -11.9 percent, reflecting considerably weaker demand for goods and services, including tourism.

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