MNI POLICY: IMF Sees 2020 GDP Record -4.9%, -300M Jobs in Q2

By Greg Quinn

     WASHINGTON (MNI) - The IMF reduced its 2020 global GDP forecast to -4.9%

from -3% and said every region will contract for the first time ever as the

Covid-19 pandemic continues adding damage to the deepest slump since the Great

Depression.

     Output next year will only recover to around 2019 levels or 6.5pp less than

what the IMF expected at the start of this year, according to a report

Wednesday. Consumption has fallen far more than in other recessions, investment

has tumbled, and a "catastrophic hit to the global labor market" will hobble the

recovery. 

     "Downside risks, however, remain significant," the Washington-based fund

said, including a second wave of the virus that could reduce GDP another 4.9pp

next year. 

     Governments must keep spending on health and relief checks even as global

public debt jumps 19pp to a record 101% of GDP in 2020-21, though low interest

rates will make that rise easier, the IMF said. The report also assumes central

banks maintain their stimulus through next year.

     --UNWIND STIMULUS GRADUALLY

     "The sizable policy response following the initial sudden stop in activity

may end up being prematurely withdrawn or improperly targeted," the IMF said.

"Where economies are reopening, targeted support should be gradually unwound."

     The IMF projection compares with OECD and World Bank forecasts earlier this

month for respective contractions of 6% and 5.2%. The OECD said it's the worst

slump since the Great Depression, and the IMF chief said the same in an April

speech. 

     U.S. GDP is seen -8% or 2.1pp less than the IMF's April forecast, the euro

area -10.2%, Japan -5.8% while China is +1.0%.

     "For the first time, all regions are projected to experience negative

growth in 2020," the IMF said. 

     Employment fell the equivalent of 130 million full-time jobs in Q1 and will

likely fall 300 million in Q2.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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