Staff Report

The International Monetary Fund (IMF) on Tuesday predicted that there will be a great impact of global lockdown across the globe because of the coronavirus outbreak as the world economy will witness three per cent contraction.

The Fund in its forecast said that the global economy will bounce back in the second half of the current year, growing by 5.8 per cent as economic activity normalises and policy initiatives support the world economy.

However, it warned that there is extreme uncertainty around the global growth forecast.

“Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital flow reversals, and a collapse in commodity prices. Risks of a worse outcome predominate,” IMF said in its World Economic Outlook released on Tuesday.

China and India are the only bright spot in IMF’s 2020 forecast, growing by 1.2 per cent and 1.9 per cent, respectively. Helped by these two Asian giants, emerging and developing Asia region will be the only region to see a positive growth of one per cent this year.

The advanced economies group – where several countries are experiencing widespread outbreaks and deploying containment measures – is projected to contract 6.1 per cent in 2020. Most economies in the group are forecast to contract this year, including the US (-5.9 per cent), Japan (-5.2 per cent), the UK (-6.5 percent), Germany (-7.0 percent), France (-7.2 percent), Italy (-9.1 percent), and Spain (-8.0 percent).

“In parts of Europe, the outbreak has been as severe as in China’s Hubei province. Although essential to contain the virus, lockdowns and restrictions on mobility are extracting a sizable toll on economic activity. Adverse confidence effects are likely to further weigh on economic prospects,” the Fund said.

The Middle East and Central Asia region will contract by 2.8 per cent with Saudi Arabia’s growth forecast at -2.3 per cent

With global rebounding to 5.8 per cent next year, the advanced economy group is forecast to grow at 4.5 per cent, while growth for the emerging market and developing economy group is forecast at 6.6 per cent.

“The rebound in 2021 depends critically on the pandemic fading in the second half of 2020, allowing containment efforts to be gradually scaled back and restoring consumer and investor confidence. Nonetheless, the level of GDP at the end of 2021 in both advanced and emerging market and developing economies is expected to remain below the pre-virus baseline,” IMF said.