International Monetary Fund and its Global GDP Forecast

On Tuesday, the International Monetary Fund (IMF) changed its global gross domestic product (GDP) forecast. Hopefully, the IMF turned slightly positive on the global economy for this year. According to the updated forecast, the IMF expects the global economy to contract by 4.4% in 2020. As a reminder, several months ago in June, the fund expected the global economy to contract by 4.9%.

It is worth noting that, the IMF warned of a long, uneven, and uncertain recovery. Interestingly, the IMF’s projection assumes that social distancing due to the coronavirus pandemic will continue into 2021. Moreover, the fund expects that local transmission will fall everywhere by end of 2022.

According to the IMF’s Chief Economist Gita Gopinath, they are projecting a less severe though still deep recession in 2020. Interestingly, better-than-expected growth in advanced economies as well as China during the second quarter influenced its latest forecast. Moreover, signs of a more rapid recovery in the third quarter also helped to change the global GDP forecast. 

International Monetary Fund and its forecast regarding 2021

Hopefully, the IMF revised its global GDP forecast, but the fund downgraded its forecast for 2021. Importantly, the IMF projected only limited progress and curt its GDP growth expectations for next year to 5.2%, form an estimate of 5.4% made in June. 

Let’s get back to 2020. Emerging market and developing economies are expected to contract by 3.3% in 2020. Moreover, in the case of India, the GDP is expected to contract by more than 10%.

Importantly, the fund expects the U.S. economy to decline by 4.3% in 2020. However, the situation is more difficult in the case of the U.K., France, Italy, and Spain. The fund expects its economies to fall by around 10%. 

Last but not least, the International Monetary Fund mentioned several factors, that have the potential to have a negative impact on its projections. The geopolitical tensions, trade friction, natural disasters, further outbreaks, and changes to financing conditions.