IMF to Cut Global Economic Forecast as Crisis Shows ‘Profound Uncertainty’ in Recovery

The International Monetary Fund (IMF) said the ongoing global economic crisis caused by the coronavirus crisis is somehow playing out differently from past crises and “unlike anything the world has seen before”, which hit severely on services sector than manufacturing in both advanced and emerging markets and leaving an uncertainty solution for economy worldwide to recover.

 

IMF pointed out that most countries are now under phase 2 of the Great Lockdown, as economy activities began to resume after the effort on outbreak containment showing positivity, but with risks of second waves of infections.  

 

Past crises such as during the 1980s in Latin America and Asia, or even the financial crisis 10 years ago, were like less affected on services sector, as well as had more modest effects on global output, unlike this 2020 health crisis. 

 

For the first time since the Great Depression that both advanced and emerging market economies will be in recession in 2020., said IMF on the report posted on Tuesday.

 

Therefore, in the forthcoming June World Economic Outlook Update, IMF seems to slash its economic forecast after global growth rate is likely to result even worse than previously expected.

 

“It is possible that with pent-up consumer demand there will be a quicker rebound, unlike after previous crises. However, this is not guaranteed in a health crisis as consumers may change spending behavior to minimize social interaction,” Gita Gopinath, the IMF’s chief economist said on the Great Lockdown through a Global Lens report.

 

Gopinath also addressed a concern over tourism-dependent economies as such services as hospitality and travel could struggle to regain demand, which able to provoke a long-term impact on economies.

 

“A key challenge in escaping the Great Lockdown will be to ensure adequate production and distribution of vaccines and treatments when they become available—and this will require a global effort. For individual countries, minimizing the health uncertainty by using the least economically disruptive approaches such as testing, tracing, and isolation, tailored to country-specific circumstances with clear communication about the path of policies, should remain a priority to strengthen confidence in the recovery. As the recovery progresses, policies should support the reallocation of workers from shrinking sectors to sectors with stronger prospects.” she added.