By Tom Burnett CFA
On October 13, 2020, the International Monetary Fund (“IMF”) issued its latest report on the global economic condition. The October report is an update of the June 2020 report. The October report is somewhat more optimistic about the chances for global growth than the June forecast which was issued during the most restrictive policies of the Covid-19 lockdowns. The October report revises upwards many of the important June forecasts. We present the highlights as follows.
Global growth overall is now expected to decline by 4.4% in 2020, compared to positive growth of 2.8% in 2019. In the June Report, global growth was projected to decline by more than 5.0%. World growth is now expected to recover in 2021 with an overall growth rate of 5.2%. The October report takes comfort from the recoveries experienced in many of the major economic regions.
The U.S. economy is now thought to decline by 4.3% in 2020, much improved from the 8.0% decline projected in the June report. The U. S. economic growth is targeted at a positive 3.1% in 2021. In the EU, the economy is expected to decline by 8.3%, but that decline is less than the 10.0% decline that was forecast in the June report. As for 2021, the October report expects growth of 5.2%.
China is the best performer in the October report. China is now projected to show economic growth of 1.9% this year and 8.2% next year. By comparison, China reported growth of 6.1% in 2019.
The negative impact of Covid-19 is obvious as world trade volumes are expected to decline by 10.4% this year before recovering with growth of 8.3% in 2021. Global inflation is now thought to fall to 0.8% this year from 1.4% in 2019, before increasing to 1.6% in 2021
On balance, the October report offers a more positive view of the global economies than was evident in the June report. It does not deny, however, that the global economies have suffered a massive loss of output and trade volume as a result of the Covid-19 pandemic.
Tom Burnett CFA is Director of Research