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IMF Downgrades Global Economic Forecast

by Karen Faulkner, Worthy News Correspondent

(Worthy News) – As governments around the world battle the economic fallout of the COVID-19 pandemic, the International Monetary Fund (IMF) has published a further grim forecast, predicting a 4.9% contraction in global GDP (gross domestic product) for 2020, a lower figure than the 3% forecast in April, CNBC reports. The IMF also downgraded its GDP prediction for 2021, lowering it to 5.4% from the 5.8% forecast in April.

In its World Economy Outlook update Wednesday, the IMF said: “The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.”

Projecting global public debt to reach over 100% of GDP in 2020, the IMF said the decline in activity has been accompanied by, a “catastrophic hit to the global labor market.” This hit has been “particularly acute for low-skilled workers who do not have the option of working from home,” the IMF said. The global reduction in working hours in the second quarter of the year is likely to be equivalent to a loss of more than 300 million jobs, the fund added.

In regard to individual countries, the US economy is now forecast to contract by 8% this year: the IMF had predicted a contraction of 5.9% in April. The economies of Brazil, Mexico, and South Africa are forecast to contract by 9.1%, 10.5%, and 8%, respectively, CNBC reported.

The IMF also downgraded its forecasts for the eurozone, predicting a contraction of 10.2% this year.