IMF cuts its economic forecasts due to COVID-19

The International Monetary Fund (IMF) reduced its forecast for global growth in 2020 because it expects a stronger economic damage from the coronavirus than earlier.

According to the IMF, the global economy will shrink by 4.9% this year, which is much worse than a 3% drop expected in its April report. In case the forecast comes true, it would be the worst annual decline since right after the Second World War.

In the U.S., the IMF expect the GDP to go down by 8% in 2020, while it predicted 5.9% in April.  It could also be the worst annual decrease since the Second World War.

IMF says the pandemic was disproportionately damaging low-income households, destroying the significant progress made in decreasing extreme world poverty since 1990.

During the previous years, the proportion of the world’s population living in extreme poverty (earning less than $1.90 US a day) went down to less than 10% from 35% seen in 1990. However, the IMF says the COVID-19 crisis may reverse this progress. It expects more than 90% of developing market economies to face drops in per-capita income growth in 2020.

In case of the next year, the IMF predicts a growth rebound, if the pandemic doesn’t strike with a second wave. It expects the global economy to grow by 5.4% in 2021, which is 0.4% less than in April’s report.

IMF believes the U.S. economic growth will go up by 4.5% next year, but it’s still 0.2% lower than in April. Moreover, it wouldn’t be enough to rebound the U.S. economy to its pre-pandemic level. According to the association of economists who track recessions in the U.S., the economy entered a recession in February, as tens of millions of people lost their jobs because of the shutdowns.

In its new forecast, the IMF cut the growth for all major countries. For instance, in 19 European nations that use the euro currency, it expects a growth drop by 10.7% in 2020, followed by a recovery to 6% next year.