The International Monetary Fund forecast that the global economy will contract by 3 per cent this year, and advanced economies by more than 6 per cent – and warned that the damage will be even worse if COVID-19 persists longer than expected.
The IMF’s new World Economic Outlook, published Tuesday, projected that Canada’s economy would shrink by 6.2 per cent this year, before rebounding by 4.2 per cent in 2021. It predicted that the global economy would grow by 5.8 per cent next year – based on an assumption that “the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound.”
“There is extreme uncertainty around the global growth forecast,” the report said. “The economic fallout depends on factors that interact in ways that are hard to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, the extent of supply disruptions, the repercussions of the dramatic tightening in global financial market conditions, shifts in spending patterns, behavioral changes (such as people avoiding shopping malls and public transportation), confidence effects, and volatile commodity prices.”
The international finance agency calculated that if the COVID-19 measures taken around the world linger for 50 per cent longer than assumed in its base-case forecast, global GDP would be another 3 per cent lower this year.
And it estimated that if there were a second breakout of the virus in 2021 – similar to what occurred with the Spanish Influenza pandemic in 1918 and 1919 – then global GDP would be nearly 5 per cent below the base-case forecast in 2021.