International Monetary Fund revises up 2020 global economy forecast to contraction of 4.4 pct

International Monetary Fund revises up 2020 global economy forecast to contraction of 4.4 pct”

The global economic crisis will not be quite as grim as feared this year, but gross domestic product (GDP) will still contract 4.4 percent and the damage inflicted by the pandemic will be felt for years, the International Monetary Fund (IMF) said Tuesday.

The result "would have been much weaker if it weren't for sizable, swift and unprecedented" response from governments and central banks, she said, again warning of the dangers of removing support too quickly.

IMF Director of Research Gita Gopinath suggested that the coronavirus situation and its economic impact need to be monitored, while the virus is rebounding and localized lockdowns are being reinstated.

Lastly, policies should be designed with an eye toward placing economies on paths of stronger, equitable, and sustainable growth, Gopinath said. India saw the steepest forecast reduction, with a 10.3 per cent contraction seen for this year, compared with just 4.5 per cent previously, after a larger-than expected second-quarter contraction. "Global growth is projected to be -4.4 percent, an upward revision of 0.8 percentage points compared to our June update".

She told AFP that another USA stimulus package on the order of the $2.2 trillion CARES Act approved in March would increase growth in the world's biggest economy by two percentage points next year, over the 3.1 percent GDP rise now forecast.

China remains the lone major economy estimated to expand, with 1.9 per cent projected growth this year and an 8.2 per cent boom in 2021.

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Bangladesh's GDP growth in last few years has averaged around 8%, according to reports, at a time when economic growth in rest of the world was slowing down. The IMF report has also forecast that Pakistan's GDP would recover a slow pace of 1% in 2021.

"Expanding in public investments in digital transformation, green economy, education and health is also crucial to reach global recovery, which is expected to add millions of jobs and support workers in the transition phase from the ongoing crisis up until reaching the recovery", said Georgieva.

The prevention of further setbacks will require that policy support is not prematurely withdrawn.

The downbeat assessment came even as the International Monetary Fund upgraded its outlook for the global economy. Some will require additional help from creditors and donors through debt restructuring, grants and concessional financing, building on important initiatives under way. It noted that "prospects have worsened significantly in some developing countries where where infections are rising rapidly" and that in India and in poorer nations in Africa and Asia, the pandemic has continued to spread and in some areas even accelerate.

The minister pointed out that Egypt is the only country in the Middle East and Africa that has preserved the confidence of all three global rating institutions: "Standard & Poor's", "Moody's" and "Fitch" during one of the most hard periods in the global economy in light of the coronavirus pandemic.

"In the future, governments will likely need to raise the progressivity of their taxes while ensuring that corporations pay their fair share of taxes, alongside eliminating wasteful spending".

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