Third quarter 2020 global macroeconomic outlook

November 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 4.4% decline in global GDP in 2020, followed by a sharp 5.2% recovery in 2021.
  • In advanced economies, GDP is projected to decline by 5.8% for 2020, and recover by 3.9% in 2021, as economies reopen and vaccine progress is potentially made.  The US is expected to fare similarly, declining 4.3% in 2020 and recovering by 3.1% in 2021.
  • The euro-area is forecasted to take the greatest hit to growth, declining 8.3% in 2020 and recovering 5.2% 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 double digits this year.  The Japanese economy is expected to decline by 5.3% in 2020, but only recover by 2.3% in 2021.
  • Growth projections are also weak for emerging economies, although China is expected to post 1.9% growth for 2020, and significant 8.2% growth 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 be low, consistent with decreased economic activity, with inflation in most developed economies expected below 1.0%; in some countries, notably Japan, deflation is expected.