The International Monetary Fund (IMF) on Wednesday warned that the global economy may suffer worse impact than previously anticipated this year, going by the events of the first six months, as the Coronavirus (COVID-19) pandemic continues to ravage nations of the world.
According to an update of the World Economic Outlook (WEO), the IMF says the world’s Gross Domestic Product could fall by 4.9% in 2020, with the shutdowns imposed to check the spread of the virus expected to cost the global economy over $12tr over a two-year period. The new forecast is worse than the 3% decline projected in April, before a strong 5.4% rebound next year.
While the GDP of Sub-Saharan Africa could contract by 3.2% this year due to the impact of the COVID-19 pandemic, as against the previous 1.6%, the WEO now sees Nigeria, the continent’s largest economy significantly contracting by 5.4% this year. This is worse than the earlier 3.4% forecast fall on the impact of the virus outbreak, for an economy that rose 2.2% in 2019, and has been hit by the sharp fall in crude prices, the country’s mainstay, at a time the nation’s non-oil revenue remains seriously weak. The IMF now foresees Nigeria’s economy recovering by 2.6% in 2021.
The nation’s economic contraction rate is even better than the 8.9% worst-case scenario forecast last month by Mrs. Zainab Ahmed, her Minister of Finance, Budget and National Planning.
Nigeria’s forecast economic contraction may not be as severe as South Africa’s 8% decline in 2020, bigger than the 5.8% projected in April.
The advanced economies of the US and Europe, particularly France, just as emerging economies, the IMF warned, will be badly hit. While the GDP of France is seen contracting by as much as 12.5%, Italy and Spain, two economies that have been badly ravaged by the pandemic are expected to slow down 12.8% each and recover by 6.3% last year; while the UK which could see its GDP crashing by 10.2% this year, will only recover by 6.3%; ahead of Germany’s 7.8% dip and 5.4% growth next year. Japan’s economy, the IMF says in its WEO, may slide 5.8% down and only recover 2.4% in 2021.
Interestingly, China’s GDP is projected to shrink by a marginal 1%, but soar by 8.2% next year; just like India’s 4.5% slowdown that will be followed by the 6.0% rebound in 2021.
In Latin America, the economy of Brazil is forecast to loss all of 9.1% and Mexico, 10.5% before recovering by 3.6% and 3.3% next year; just as Saudi Arabia, which has waived observance of the annual pilgrimages to Mecca and Medina for Muslims from outside its territory, could suffer a 6.8% contraction this year and only recover 3.1% next year.
According to IMF chief economist Gita Gopinath was quoted as noting in an article also on Wednesday that the “pandemic pushed economies into a great lockdown, which helped contain the virus and saved lives, but also triggered the worst recession since the Great Depression.
“Over 75% of countries are now reopening at the same time as the pandemic is intensifying in many emerging markets and developing economies. Several countries have started to recover. However, in the absence of a medical solution, the strength of the recovery is highly uncertain and the impact on sectors and countries uneven,” she wrote.