The IMF’s latest World Economic Outlook sums up the challenges ahead in the report’s title: ‘A long and difficult ascent’. The Fund’s economists have gamely sought to make forecasts for world output through 2020, 2021, and into the medium term. While the global economy is projected to shrink 4.4% this year, reflecting a less severe contraction than the 5.2% drop estimated in June, the output is seen rebounding at a marginally slower 5.2% pace in 2021.
Pointing out that the pandemic is set to leave scars well into the medium term as labour markets take time to heal, investment is held back by uncertainty and balance sheet problems, and lost schooling impairs human capital, IMF Chief Economist Gita Gopinath contends that global growth will gradually slow to about 3.5% in the medium term.
With the cumulative loss in output relative to the pre-pandemic projected path estimated to more than double to $28 trillion over 2020–25, efforts to improve average living standards are certain to be severely set back. It is imperative for all countries to work closely to ensure that new treatments and vaccines are made available to all since wider and faster availability of medical solutions could boost global income by almost $9 trillion by end-2025, reducing income divergence.
Meanwhile, the United States economy is set to fall by 4.3% this year, but the economic contractions in the U.K., France, Italy, and Spain are around 10%. The recovery is not assured while the pandemic continues to spread, the IMF said in its latest economic analysis. The IMF has advised governments to keep some degree of accommodative policies to prevent a wider gap in income distribution, despite growing levels of public debt. In addition, the IMF mentioned that geopolitical tensions, trade friction, natural disasters, changes to financing conditions and further outbreaks remain downside risks to its projections.