The International Monetary Fund said that the damage caused by the Corona pandemic to economic activity in the world is wider and deeper than its previous estimates, prompting the International Foundation to reduce its forecast for global output in 2020 again.
The chief economist of the fund, Gita Gopinath, pointed out that the expected losses to the economy due to the pandemic exceed 12 trillion US dollars during the current and next two years.
This came at a press conference held on Wednesday to update the forecasts of the World Economic Outlook in April.
A new report by the International Monetary Fund warned that it expected the global economy to shrink by 4.9%, compared to 3% in last April's forecasts when it used available data at a time when large-scale closures of economic activities were still in their infancy.
The IMF describes the current recession as the worst since the Great Depression of the 1930s, when global output shrank 10%, but Gopinath said that the $ 10 trillion in financial support and massive monetary easing provided by central banks have so far prevented large-scale bankruptcies. She added that more support is needed.
The fund also indicated that recovery from deflation will be slower than previously expected, as lower-income families are more likely to suffer. The Fund expected that the economy in 2021 will grow by 5.4%, not 5.8%, as in previous estimates, in light of the economy's inability to fully recover from the damage it suffered during the outbreak of the Corona virus.
However, the Fund pointed out that a new large outbreak of the virus in 2021 may reduce growth to no more than 0.5%.
The fund warned of "more ambiguity than usual" surrounding expectations, as economic production will depend on infection rates, closures and financial market conditions.
The developed economies have been particularly hard hit, with 8% of the US output and the eurozone output expected to shrink 10.2% in 2021, which is more than two percentage points worse than expected in April, according to the IMF.
Latin America - where casualties are still increasing - has witnessed some of the largest cuts, with Brazil's economy expected to shrink 9.1%, Mexico 10.5% and Argentina 9.9% in 2020.
As for China - where companies started resuming activity last April and new infections are still limited - it is the only major economy expected to achieve growth in 2020, at 1% compared to 1.2% in April's forecast.
In its new report, the Fund indicated that there are significant losses in consumption, adding that the labor market has been severely affected.
According to the British Guardian newspaper, quoting the International Monetary Fund, it will take two years for global production to return to the levels set at the end of 2019, warning that governments should be careful not to remove financial support for their fragile economies.