International Monetary Fund projects $28tn COVID-19 losses in five years

Andrew Cummings
October 17, 2020

Speaking Tuesday at the IMF's World Economic Outlook Forum in Boston, IMF chief economist Gita Gopinath said the pandemic shut down business and industry throughout the world.

"The recovery is partial, uneven, and marked by significant uncertainty, with the pandemic continuing to spread in places", said the International Monetary and Financial Committee (IMFC).

In 2021, growth is projected to rebound to 5.2 percent, 0.2 percentage point below the June projection.

Finance ministers and central bank presidents from the Group of Seven wealthy industrial countries - the United States, Japan, Germany, France, Britain, Italy and Canada - held a videoconference led by U.S. Treasury Secretary Steven Mnuchin to discuss debt relief proposals for poor nations and their efforts to support the global economy, the Treasury said.

In comments to the French news agency, Gopinath said if the United States passed another stimulus package similar to the $2.2 trillion measure passed earlier this year, it would significantly help the USA economy recover, as well as the world.

China, which saw a strong early reopening and rebound from the pandemic, will be the only economy to show positive growth in 2020, of 1.9% - almost double the rate predicted in June - and reach 8.2% growth in 2021, its highest rate in almost a decade, the International Monetary Fund said.

"The virus is resurging with localized lockdowns being re-instituted".

The minister pointed out that Egypt is the only country in the Middle East and Africa that has preserved the confidence of all three global rating institutions: "Standard & Poor's", "Moody's" and "Fitch" during one of the most hard periods in the global economy in light of the coronavirus pandemic.

Countries like India, Spain and Italy will suffer double digit economic declines in 2020, while Britain just misses that threshold with a 9.8 percent contraction, the International Monetary Fund said.

Gopinath again hammered home the IMF's message that governments must continue to provide support given the depth of the damage from the virus, which caused massive unemployment as well as more than a million deaths.

"We need strong worldwide cooperation and this is most urgent today for vaccine development and distribution", she said.

And that could have "significant benefits for the world" as well.

By 2025, the cumulative loss in output relative to the pre-pandemic projected path is projected to grow to $28 trillion.

"The revision is driven by second quarter GDP outturns in large, advanced economies, which were not as negative as we had projected; China's return to growth, which was stronger than expected; and signs of a more rapid recovery in the third quarter", it said.

But its stability varies by region, with emerging markets home to more institutions that could face capital challenges should the downturn intensify, and European banks generally more vulnerable than North American ones, he said.

And with debt on the rise, policymakers may need to increase taxes on the highest earners, cut out loopholes and deductions, "and ensure that corporations pay their fair share of taxes while eliminating wasteful spending".

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