The IMF slashed its estimates for global growth again earlier this week, now estimating that global GDP will fall 4.9% in 2020, almost 2% below its April 2020 World Economic Outlook forecast. In what the IMF now thinks is more in keeping with its worst-case scenario, the current economic downturn, due to the ongoing pandemic, ‘has had a more negative impact on activity in the first half of 2020 than anticipated’. Gita Gopinath, the IMF’s chief economist said at the press briefing that we are not ‘out of the woods yet’ and that unsurprisingly ‘this is a crisis like no other and will have a recovery like no other’. Global trade will contract by nearly 12% this year and inflation pressures remain muted, she added.
So far over USD10.5tn in fiscal measures have been announced worldwide to fight the pandemic, however, more will be needed. As a result of this emergency spending, public debt globally is expected to reach an all-time high of 101% of GDP in 2020-21. That is an enormous 19% higher than it was a year ago. However, Gopinath warned against governments thinking they had no debt constraints. ‘We are in this world because of very strong monetary policy frameworks and fiscal frameworks that have helped countries be able to borrow at very low rates but if we give up on that, we can certainly move to a different state of the world where borrowing costs can go up quite dramatically for countries’ she said.
Looking further forward the outlook for 2021 has also been revised down. Now the fund believes next year global growth will come in at 5.4%, down from 5.8% in April’s estimate. The fund did note that ‘adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty in the world since the 1990’s’.
Amongst the world’s biggest economies there are some massive projections on not only the depth of the recession this year but also the size of the recovery in 2021. The IMF project that growth in the US will fall by 8% this year, with a recovery of 4.5% next year. For the EU growth comes in at -10.2 this year, the same as the UK, with their economies bouncing back by 6% in 2021 (The UK sees a 6.3% uplift in 2021). Japan is seen as fairing slightly better with -5.8% this year and +2.4% next.
And talking of big numbers, it has taken nearly GBP1.5bn spent on 239 players and 9 managers for Liverpool FC to end 30 years of hurt by winning the Premier League title last night. It is Liverpool's 19th top-flight title. Congratulations.