The International Monetary Fund downgraded its outlook for the coronavirus-ravaged world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
The fund said Wednesday it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, the fund sees growth of 5.4%, down from 5.8%.
Having already warned of the biggest slump since the Great Depression, the IMF said its increased pessimism reflected scarring from a larger-than-anticipated supply shock during the earlier lockdown, in addition to the continued hit to demand from social distancing and other safety measures. For nations struggling to control the virus spread, a longer lockdown also will take a toll on growth, the IMF said.
IMF Chief Economist Gita Gopinath said that the cumulative loss for the world economy this year and next as a result of the recession is expected to reach $12.5 trillion.
"A high degree of uncertainty surrounds this forecast with both upside and downside risks," Ms. Gopinath said in a virtual press conference for the update to the World Economic Outlook. "On the upside, better news on vaccines and treatments and further policy support could trigger a faster recovery. On the downside, further waves of infections can reverse increased mobility in spending and rapidly tighten financial conditions, triggering debt distress."
The current downturn compares with a loss of about 10% of global economic output in the 1930s, Ms. Gopinath said.