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IMF downgrades global growth forecast to 4.9% decline amid pandemic

IMF logo (Anadolu Agency/Getty/Kyodo)

WASHINGTON (Kyodo) -- The International Monetary Fund said Wednesday it expects the global economy to decline by 4.9 percent in 2020 from a year before, downgrading its April estimate by 1.9 percentage points due to a larger-than-expected economic fallout from the coronavirus pandemic.

    With the pandemic triggering the worst global recession since the Great Depression in the 1930s, the IMF projected in its update of the World Economic Outlook that the Japanese economy will slump by 5.8 percent, 0.6 point lower than the earlier forecast and a sharper fall than seen in 2009 at the height of the global financial crisis.

    The United States, one of the hardest hit countries by the coronavirus pandemic that was first detected in China late last year, will see its economy shrink 8.0 percent in 2020, a 2.1 point downgrade from the earlier estimate and its worst contraction since 1946.

    "The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast," the IMF said in the report.

    First-quarter gross domestic product was generally worse than expected, although the few exceptions include countries such as China, India and Japan. Economic indicators point to a more severe contraction in the second quarter, except in China, where most of the country reopened by early April, the IMF said.

    Consumption growth, in particular, has been downgraded for most economies, as demand shock has been triggered by social distancing measures and lockdowns to slow the spread of the virus, as well as a rise in precautionary savings.

    Global activity is expected to trough in the second quarter of 2020, with growth in 2021 projected to strengthen to 5.4 percent, 0.4 point lower than the April estimate, according to the report.

    The world trade of goods and services was also revised downward by 0.9 point to a contraction of 11.9 percent in 2020, reflecting considerably weaker demand in areas including tourism. A gradual pickup in domestic demand is expected to push up the trade growth to 8.0 percent in 2021, according to the IMF.

    Japan and the United States are expected to see their economy post growth of 2.4 percent and 4.5 percent, respectively, in 2021, but the estimates were lowered from the earlier figures.

    China's economic growth forecast was revised downward by 0.2 point to 1.0 percent in 2020, and by 1.0 point to 8.2 percent in 2021.

    The euro area was forecast this year to log a 10.2 percent contraction, a downgrade of 2.7 points from April. But the outlook for the region's economy was upgraded by 1.3 points to 6.0 percent growth in the following year.

    Based on the latest projections, the cumulative output loss to the global economy across 2020 and 2021 from the pandemic will be over $12 trillion, the Washington-based institution said, while warning of the "pervasive uncertainty" remaining around the forecast, such as the length of the pandemic.

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