International Monetary Fund raises expectation for Egyptian economy growth to 3.5% in 2020

International Monetary Fund raises expectation for Egyptian economy growth to 3.5% in 2020

The contraction would still be the deepest since the Great Depression, with Covid-19 having killed more than 1 million people and shut down large swaths of business. "This crisis is however far from over".

The Fund said: "Except for China, where output is expected to exceed 2019 levels this year, output in both advanced economies and emerging market and developing economies is projected to remain below 2019 levels even next year".

The multilateral lending body, however, said global growth may see less severe contraction at -4.4% in 2020 than it envisaged in June (-5.2%), reflecting better-than anticipated June-quarter GDP growth in advanced economies, where activity began to improve sooner than expected, indicating a stronger recovery in the September quarter.

The upward revision in the IMF's 2020 growth forecast reflects in particular better-than-projected second-quarter growth in the USA and the euro area, a stronger-than-anticipated return to growth in China and signs of a more rapid recovery in the third quarter.

"While the global economy is coming back, the ascent will be long, uneven and uncertain", Gita Gopinath, the IMF's chief economist, wrote in the new outlook.

For the recovery process, the report asserted the need for continued monetary policy accommodation and targeted liquidity support in order to sustain the recovery.

Gopinath warned that nations should not yet withdraw support. But next year's United States rebound will be somewhat smaller at 3.1 per cent, assuming no new federal aid beyond US$3 trillion approved in March.

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"Indeed, compared with our forecast in June, prospects have worsened significantly in some emerging market and developing economies where infections are rising rapidly". Last year, the US economy grew 2.2%.

The IMF in its report said that revisions to the forecast are particularly large for India, where Gross Domestic Product (GDP) contracted much more severely than expected in the second quarter.

Extreme poverty is set to rise for the first time in more than two decades, and persistent output losses imply a major setback to living standards versus the pre-pandemic days, the International Monetary Fund said.

Concerning global financial stability, the report said that near-term risks have been contained so far, as the unprecedented and timely policy response has contributed to maintaining the flow of credit to the economy and avoiding adverse macro-financial feedback loops, which is actually creating bridges to recovery. She even pointed out that countries like India and Indonesia will also feel the contraction in their economy.

After the rebound in 2021, International Monetary Fund said global growth is expected to slow to about 3.5 percent in the medium term, implying the growth till 2025 would be less than expected.

This support, Gopinath explained, could be in terms of concessionary financing, aid and debt relief and restructuring.

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