WORLD ECONOMIC OUTLOOK (IMF)

The COVID-19 pandemic has wreaked havoc on the world economy and cast a staggering gloom over growth prospects far and wide, incurring a short-term collapse in global output and widening tolls on various industries and the masses.

Global growth will turn "sharply negative" in 2020, as COVID-19 has disrupted the world's social and economic order at lightning speed and on a scale that we have not seen in living memory. In fact, the IMF anticipates the worst economic fallout since the Great Depression.

Economies around the world have been suffering internal and external shocks on both supply and demand sides with production chains disrupted, global trade almost put on hold, as well as consumer and investor sentiment gravely dampened. Consequently, unemployment rates worldwide have reached new heights. The World Trade Organization has recently projected that goods trade would contract much more in 2020 than in the 2008-09 global financial crisis, with a downside range of 13-32 percent due to high uncertainty over the economic impact of the pandemic.

The pandemic has hit the manufacturing industry particularly hard. In both the automotive industry and mechanical engineering, production is practically at a standstill, partly because important parts are missing due to the interruption of global supply chains, thus lowering companies' sales.

Moreover, retail companies, especially smaller companies, see sales almost completely collapsing. Due to uncertainties over the pandemic, people spend less. Short-time work means that many people have less money at their disposal.

As a consequence, employees were laid off massively. The United States, in particular, saw nearly 17 million people losing their jobs since mid-March.

It is likely that recovery could take a long time, first because the pandemic looks unlikely to disappear quickly. And secondly because the collateral damage to many businesses and to governments' borrowing positions means that we will have to start from a badly damaged base

In its new World Economic Outlook, the Fund has slashed its growth forecasts dramatically, predicting painful contractions in all advanced economies, and most emerging countries too.

A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely.

Projected Economic Growth in 2020

The IMF now expects the global economy to shrink by 3% this year.

1. USA: -5.9%
2. Germany: -7.0%
3. France: - 8.0%
4. Italy: -9.1%
5. Spain: -8.0%
6. Japan: -5.2%
7. United Kingdom: -6.5%
8. Canada: -6.2%
9. Russia: -5.5%
10. Brazil: -5.3%
11. Mexico: -6.6 %
12. Saudi Arabia: -2.3%
13. Nigeria: -4.4%
14. South Africa: -5.8%

Note:

1. THE coronavirus crisis is set to lead to a mountain of public debt in the eurozone, leading economists have warned. On rough estimates, the increase of public debt in the euro area taken as a single entity is likely to lie between 10 percent and 35 percent of GDP by the end of 2023, i.e. between €1.2Tn and €4.2Tn, depending on the duration and depth of the recession and the recovery path.
2. Most of the increase will come from automatic stabilisers such as lower tax receipts or higher expenditure on unemployment benefits, and discretionary spending to improve the efficiency and the resilience of healthcare systems.
3. Not all euro area members will be equal since some of them will experience deeper or softer downturns.
4. Another factor which will play a vital part is the state of each economy. It will also crucially hinge on their public finance starting positions, with gross public debts spanning from 49 % of GDP for the Netherlands, 64 % for Germany, 115% for France  to 140 % of GDP for Italy.