In its Global Economic Outlook Report, released on Wednesday, the International Monetary Fund said that economic growth in emerging markets and developing economies is projected to slow down to three percent, down by two percent from 5April forecast, and to increase to 5.9 percent, down by 0.7 percent compared to the April forecast.
The IMF slashed its 2020 global growth forecast by 1.9 percent to -4.9 percent. Given the unprecedented nature of this crisis, as is the case for nearly all countries, this projected contraction is a historic low, Indian-American Gita Gopinath, IMF's Chief Economist, told PTI as she released the World Economic Outlook Update here.
Several economic forecasts have predicted that the Middle East and North African countries could lose hundreds of billions of dollars in income as oil prices sag amid a global slowdown caused by the pandemic.
"For the first time, all regions are projected to experience negative growth in 2020".
"Spain has a large service sector dominated by small- and medium-sized enterprises, strong reliance on tourism, which has been hit very hard, and widespread use of temporary employment", said Gerry Rice, director of the IMF's Communications department, when asked why Spain's economy was so vulnerable at a news conference last week. In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1.0 per cent in 2020, supported in part by policy stimulus.
Advanced economies are seen contracting 8 percent in 2020, before growth picks up to 4.8 percent in 2021.
With the updated forecast IMF joins other worldwide agencies in projecting a negative growth for India for the current fiscal.
The grim forecast for Britain is significantly worse than the Fund suggested as recently as April - although not as bad as for some other European countries.
As per the IMF WEO, in 2021 global growth is projected at 5.4 per cent, which will be about 6.5 percentage points lower than the pre-Covid projections of January 2020.
Its World Economic Outlook on Wednesday forecasts a 4.9% decline in global output this year, in a far steeper downturn than the Great Depression of the 1930s. The IMF warned that such financial turbulence could tip vulnerable countries into debt crises that would further hamper efforts to recover.
It forecast that more than 90 per cent of developing and emerging market economies will suffer declines in per-capita income growth this year.
Gopinath said the novel coronavirus crisis is not over and the world could potentially face an increase in the number of infections.
Among emerging markets and developing economies, the hit to activity from domestic disruptions is projected closer to the downside scenario envisaged in April, more than offsetting the improvement in financial market sentiment.
According to a report by the International Monetary Fund, governments and Central banks will have to take more steps to support labour market and companies to limit further damage and lay the Foundation for recovery.
In her blog, she noted that a high degree of uncertainty surrounds this forecast, with both upside and downside risks to the outlook.