Second quarter 2020 global macroeconomic outlook

August 20, 2020

The lock-down of the global economy to slow the spread of the COVID-19 pandemic led the IMF to materially alter expectations for economic growth.

  • The IMF now forecasts a decline in global GDP of 4.9% in 2020, followed by a sharp recovery of 5.4% in 2021.
  • In advanced economies, GDP is projected to decline by 8.0% for 2020, and recover by 4.8% in 2021,as economies reopen and progress is potentially made on a vaccine. The US is expected to fare similarly, declining 8.0% in 2020 and recovering by 4.5%in 2021.
  • The euro-area is forecasted to take the greatest hit to growth, declining 10.2% in 2020 and recovering 6.0%in 2021. Expectations for Spain and Italy, which implemented some of the most stringent and aggressive quarantine and containment measures, are heavily influencing weakness across the broader region; both economies are anticipated to decline by 12.8%this year. The Japanese economy is expected to decline by 5.8% in 2020 but only recover by 2.4% in 2021.
  • Growth projections are also weak for emerging economies, although China is expected to post positive growth of 1.0%for 2020, and a significant 8.2% in 2021. The growth expectations are due primarily to the Chinese government’s ability to quickly impose aggressive distancing measures, largely isolate and contain the virus, and then quickly move to re-open their economy.
  • Inflation is projected to decline,consistent with decreased economic activity, with inflation in most developed economies expected below 1.0%; in some countries, such as Japan, deflation is expected.