The global economy is likely to contract less severely this year as a result of the Covid-19 pandemic than previously expected, the IMF said today.
But nearly every major economy next year will still be below 2019 levels, the IMF said in its latest World Economic Outlook report, which projects that the global economy will shrink by 4.4pc this year.
The IMF in June was anticipating a sharper contraction of 4.9pc this year, but it has since changed the metrics it uses to evaluate economic activity. Under the new metrics, the revised projection is an upgrade of 0.8 percentage points from its previous forecast. The IMF forecasts the global economy to grow by 5.2pc in 2021.
The less downbeat forecast reflects a lower than forecast contraction in the US economy and the eurozone during the second quarter, which the IMF attributes to trillion-dollar stimulus packages that helped consumer demand rebound following relaxation in travel and economic activity imposed to contain the pandemic.
China's emergence from the economic downturn also proved stronger than expected. The report projects China's economic growth at 1.9pc this year and 8.2pc next year, marking the country as an outlier with a combined growth of more than 10pc in 2020-21. By contrast, every other major advanced and emerging economy is projected to shrink or record zero growth this year. IMF forecasts are widely used in modeling for key oil demand projections, including those of the IEA.
The IMF attributes China's fast recovery to a rebound in its exports, including of medical devices and equipment to support the shift to remote working.
The IMF expects the US economy to contract by 4.3pc this year and expand by 3.1pc in 2021. Almost every other economy in Europe, the western hemisphere, Asia Pacific and Africa is expected to follow a similar pattern — a sharp contraction this year followed by a recovery in 2021 that still leaves the economy smaller than in 2019.
The eurozone is expected to shrink by 8.3pc this year and grow by 5.2pc next year. India's economy is forecast to contract by 10pc this year and expand by 8.8pc next year.
The projected economic contraction for oil exporters in the Middle East and north Africa is 6pc this year, followed by a 3.3pc growth in 2021.
"The ascent out of this calamity is likely to be long, uneven, and highly uncertain," IMF director of research Gita Gopinath said.
As in its previous forecasts earlier this year, containing the pandemic is a key uncertain variable behind the forecast. "The virus is resurging, with localized lockdowns being re-instituted," Gopinath said. "If this worsens and prospects for treatments and vaccines deteriorate, the toll on economic activity would be severe."
An alternative outlook scenario, which assumes renewed lockdown measures to contain the pandemic, would result in a sharper global contraction this year and keep next year's growth to just above 2pc. An upside alternative scenario, which assumes early advances in treating the coronavirus and widespread availability of a vaccine, would add an additional 0.5 percentage points of growth in 2021.
