WASHINGTON -- The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damage from the coronavirus than it did just two months ago.
The international lending organization predicts that the global economy will shrink 4.9% this year, significantly worse than the 3% drop it had estimated in its previous report in April. It would be the worst annual contraction since immediately after World War II.
The organization has forecast that the global economic damage from the recession will be worse than from any other downturn since the Great Depression of the 1930s.
For the United States, it predicts that the nation's gross domestic product -- the value of all goods and services produced in the United States -- will plummet 8% this year, even more than its April estimate of a 5.9% drop. That would be the worst such annual decline since the U.S. economy demobilized in the aftermath of World War II.
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The organization issued its bleaker forecasts Wednesday in an update to the World Economic Outlook it released in April. The update is generally in line with other recent major forecasts. Earlier this month, for example, the World Bank projected that the global economy would shrink 5.2% this year.
"This is the worst recession since the Great Depression," Gita Gopinath, the organization's chief economist, said at a briefing. "No country has been spared."
The organization noted that the pandemic was disproportionately hurting low-income households, "imperiling the significant progress made in reducing extreme poverty in the world since 1990."
LATIN AMERICA OUTLOOK
The organization is forecasting a nearly double-digit recession for Latin America and the Caribbean in 2020 -- a contraction of 9.4% -- as the region is dragged down by its two largest economies, which continue to suffer from the coronavirus.
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The updated outlook for the region, released Wednesday, is down sharply from the 5.2% recession forecast in April, which already would have been the worst performance since at least 1980, the first year in the organization's World Economic Outlook database.
The new forecast includes a 10.5% dive for Mexico, which has lost about 1 million jobs during the pandemic.
The country's industrial activity plunged nearly 30% in April compared with a year earlier.
The organization predicts a 9.1% plunge for Brazil, which is Latin America's biggest economy and most populous nation. That would be the deepest single-year tumble since at least 1901.
In recent years, the proportion of the world's population living in extreme poverty -- equivalent to less than $1.90 a day -- had fallen below 10% from more than 35% in 1990. But the International Monetary Fund said the coronavirus crisis threatens to reverse this progress. It forecast that more than 90% of developing and emerging market economies will suffer declines in per-capita income growth this year.
For 2021, the IMF envisions a rebound in growth, so long as the viral pandemic doesn't produce a second major wave. It expects the global economy to expand 5.4% next year, 0.4 percentage point less than it did in April.
For the United States, the International Monetary Fund predicts growth of 4.5% next year, 0.2 percentage point weaker than in its April forecast. But that gain wouldn't be enough to restore the U.S. economy to its level before the pandemic struck. The association of economists who officially date recessions in the United States determined that the economy entered a recession in February, with tens of millions of people thrown out of work from the shutdowns that were imposed to contain the virus.
The U.S. government has estimated that the nation's gross domestic product shrank at a 5% annual rate in the January-March quarter, and it is widely expected to plunge at a 30% rate or worse in the current April-June period.
GLOBAL DOWNGRADE
In its updated forecast, the lending organization downgraded growth for all major countries. For the 19 European nations that use the euro currency, it envisions a decline in growth this year of 10.7% -- more than the 8% drop it predicted in April -- followed by a rebound to growth of 6% in 2021.
In China, the world's second-largest economy, growth this year is projected at 1%. India's economy is expected to shrink 4.5% after a longer period of lockdown and a slower recovery than was envisioned in April.
A steep fall in oil prices has triggered deep recessions in oil-producing countries, with the Russian economy expected to contract 6.6% this year and Saudi Arabia's 6.8%.
The International Monetary Fund cautioned that downside risks to the forecast remain significant. It said the virus could surge back, forcing renewed shutdowns and possibly renewed turmoil in financial markets similar to what occurred in January through March. The organization warned that such financial turbulence could tip vulnerable countries into debt crises that would further hamper efforts to recover.
Its updated forecast included a downside scenario that envisions a second major outbreak occurring in early 2021. Under this scenario, the global economy would contract again next year by 4.9%, it estimates.
Information for this article was contributed by David Biller and Mark Stevenson of The Associated Press
